CHAPTER 18 - PARTIES IN BANK TO BANK REIMBURSEMENTS

Reimbursing Bank

·         A bank which is given a Reimbursement Authorization by the Issuing Bank in the LC.

·         The Reimbursing bank is the bank that, at the Instruction of the issuing bank, is authorized to Honour the payment when the Negotiating or Confirming bank Claims for the value of documents negotiated or presented by them.

·         An issuing bank is not relieved of any of its obligations to provide reimbursement if reimbursement is not made by a reimbursing bank to the Negotiating bank or Confirming .Bank on first demand.

·         It is normally the bank where the issuing bank is maintaining their foreign currency nostro account.

Claiming Bank:

·         As per the Issuing Bank’s Instruction on Reimbursement mentioned in the LC, the Negotiating Bank or Confirming Bank Claims the money from Reimbursing Bank, so from Reimbursing Bank’s view the bank which claims the Payment will be seen as Claiming Bank. 

·         "Claiming bank" is a bank which is authorized to present a reimbursement claim to the reimbursing bank.

Chapter 17 - GENERAL - BANK TO BANK REIMBURSEMENTS

URR 725 governs the operation of Bank to Bank Reimbursements

·         Although only one bank (an issuing bank) is necessary for the operation of a documentary credit, in many cases an issuing bank will give Payment Authorization (Reimbursement) to an another bank to make settlement on its behalf. These banks are known as reimbursing banks.

·         The URR 725 under Documentary Credits shall apply to any bank-to-bank reimbursement. The issuing bank is responsible for indicating while issuing the documentary credit (LC) that reimbursement is subject to these rules.

·         UCP600, article 13 covers the basic arrangements for bank-to-bank reimbursements. URR725 provides additional clarification and more detailed rules to be followed in such circumstances.

CHAPTER 16 - PARTIES TO DOCUMENTARY CREDIT

Applicant

·         The Person who makes the application to the bank for opening the letter of credit.

·         Normally the importer / buyer of the goods or his agent.

Beneficiary

·         Person in whose favour the letter of credit has been established.

·         Normally the exporter / seller of the goods.

Issuing Bank ( Opening Bank )

·         Bank which establishes (opens / issues) the letter of credit. So also known as Opening Bank.

·         Normally the buyer’s / importer's bank.

·         Normally based in the country of residence of the importer.

Advising Bank

·         Bank which advises the letter of credit to the beneficiary.

·         Normally the bank located in the country of the beneficiary (exporter).

·         Validate the genuineness (authenticity) of the LC before advising the same to the beneficiary.

Advice Through Bank:

·         If different from the Receiver, through which the documentary credit is to be advised to the beneficiary.

An L/C is Advised Through the Second Advising Bank in the following cases:

·         If the issuing bank does not maintain correspondent relationship or test key/swift arrangement (BKE - Bilateral Key Exchange) with the beneficiary’s bank. Therefore, it has to issue the L/C to the bank with which it has relationship and instructs this bank to advise the L/C through the beneficiary’s bank. This instruction, if any, can be found in MT 700 Field 57a (Advise Through Bank).

·         The beneficiary is located far from the advising bank and/or does not maintain any banking relationship with the advising bank, therefore, the advising bank may utilize the service  of  another bank (the second advising bank) to advise the L/C to the beneficiary (Article 9 (c) UCP 600).

Nominated Bank

·         A bank which is nominated by the Issuing Bank in the letter of credit for advising the credit and for receiving documents for payment, acceptance or negotiation.

·         Usually the Beneficiary will inform the Applicant during the Contract to include his bank as a Advising Bank and Negotiating (Nominated) Bank in Issuance of Letter of Credit, If no Bank has been nominated or Requested by the Beneficiary to be Included in the LC, then the Issuing bank will Nominate a Bank for Advising and Negotiation, to whom the Issuing bank maintains a good relationship.

·         So when a specific bank is indicated or Nominated in the LC, then the credit is restricted to that particular bank and is known as Restricted Letter of Credit.

Confirming Bank

·         Is the bank which adds its confirmation to the letter of credit at the Instruction of the issuing bank (adding of Confirming Bank in LC is usually requested by the Beneficiary to the applicant during their Contract, since he is the party ultimately getting Benefited).

·         Is normally a bank located in the country of the residence of the beneficiary (exporter).

·         Provides additional comfort to the beneficiary regarding payment.

Negotiating Bank

·         It is the bank which is authorized to negotiate documents presented by the beneficiary.

·         If no specific bank is nominated in the letter of credit, any bank can negotiate documents (unrestricted LC).

·         In case a specific bank is nominated in the letter of credit as the negotiating bank, only that bank is authorized to negotiate the documents (Restricted LC - Nominated Bank).

·         When the Negotiating bank forwards (Courier) the Documents to the Issuing Bank, now the Negotiating Bank is seen as the Presenting Bank in the view of Issuing Bank.

·         Normally is located in the country of residence of the beneficiary.

Chapter 15 - PARTIES OF DOCUMENTARY COLLECTION

In this chapter we have described the various parties involved in the process of collection, their main duties and responsibilities etc.

The Seller: ( Drawer )

·         This is the party who is the initiator of the collection process.

·         In most of the cases he is the supplier / exporter / drawer of the bill of exchange.

Remitting Bank:

·         It is the Bank (normally the Principal’s banker) that sends the collection and collect the amount from the drawee on behalf of the drawer.

Collecting Bank:

·         Generally the Bank in the buyer’s country.

·         Receive the collection from the remitting bank and informs the drawee of the respect of the collection with a request to make payment as per the terms and conditions of the collection.

·         Undertake the responsibility for remitting the amount collected from the drawee to the remitting bank.

Presenting Bank:

·         It is the Bank that makes documents available to the buyer (the drawee) in terms of the instructions received from the remitting bank.

·         In case the drawee do not maintain an account with the collecting bank, the collecting bank forwards the documents / collection to the buyer’s bank, which assumes the role of the presenting bank.

·         As per URC Presenting bank is also the Collecting bank.

The Buyer: ( Drawee )

·         The person or entity named as the Drawee or Importer under the collection.

·         In most of the cases he is the person / entity who has imported / bought the goods / services and is responsible for making the payment under the collection.