THE UNIFORM RULES FOR THE UNIFORM RULES FOR BANK-TO-BANK BANK-TO-BANK

REIMBURSEMENTS UNDER REIMBURSEMENTS UNDER DOCUMENTARY CREDITS (URR DOCUMENTARY CREDITS (URR

725)725)

Dr. Shah Md. Ahsan HabibDr. Shah Md. Ahsan HabibDirector [Training], BIBMDirector [Training], BIBM

ICC UNIFORM RULES FOR BANK-TO-ICC UNIFORM RULES FOR BANK-TO-BANK REIMBURSEMENTS (URR 725)BANK REIMBURSEMENTS (URR 725)

Direct Reimbursement Direct Reimbursement Bank to Bank Reimbursement Bank to Bank Reimbursement URR 725 and UCP 600URR 725 and UCP 600 Effective Date: October 01, Effective Date: October 01,

20082008

LC Procedure and LC Procedure and ReimbursementReimbursement

Importer

Exporter

AdvisingBank

Issuing Bank

NominatedBank

ReimbursingBank

Article 1: Application of URRArticle 1: Application of URR

The Uniform Rules for Bank-to-Bank The Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits, Reimbursements under Documentary Credits, ICC Publication No. 725, shall apply to any ICC Publication No. 725, shall apply to any bank-to-bank reimbursement when the text of bank-to-bank reimbursement when the text of the reimbursement authorization expressly the reimbursement authorization expressly indicates that it is subject to these rules. indicates that it is subject to these rules. They They are binding on all parties thereto, unless are binding on all parties thereto, unless expressly modified or excluded by the expressly modified or excluded by the reimbursement authorization.reimbursement authorization.

The issuing bank is responsible for indicating in The issuing bank is responsible for indicating in the credit that reimbursement is subject to the credit that reimbursement is subject to these rules. And then , the reimbursing bank these rules. And then , the reimbursing bank acts on the instructions and under the authority acts on the instructions and under the authority of the issuing bank.of the issuing bank.

These rules are not intended to override or These rules are not intended to override or change the provisions of the UCPDCchange the provisions of the UCPDC

Article 2: DefinitionsArticle 2: Definitions

•Issuing Bank Issuing Bank •Reimbursing Bank Reimbursing Bank •Reimbursement Authorisation Reimbursement Authorisation •Reimbursement Amendment Reimbursement Amendment •Claiming Bank Claiming Bank •Reimbursement Claim Reimbursement Claim •Reimbursement Undertaking Reimbursement Undertaking •Reimbursement Undertaking Reimbursement Undertaking AmendmentAmendment

For the purposes of these Rules For the purposes of these Rules branches of a bank in different countries branches of a bank in different countries are considered to be separate banksare considered to be separate banks

Article 3: Reimbursement Authorisations Versus Article 3: Reimbursement Authorisations Versus CreditsCredits

•Reimbursement Authorisation is Reimbursement Authorisation is separate from the Credit separate from the Credit

•Reimbursing Bank is not concerned with Reimbursing Bank is not concerned with or bound by the terms and conditions of or bound by the terms and conditions of the Credit, even if any reference the Credit, even if any reference whatsoever is included in the whatsoever is included in the Reimbursement AuthorisationReimbursement Authorisation

Article 4: Honour of a Reimbursement Article 4: Honour of a Reimbursement ClaimClaim

•Except as provided by the terms of Except as provided by the terms of Reimbursement Undertaking a Reimbursement Undertaking a Reimbursing Bank is not obligated to Reimbursing Bank is not obligated to honour a Reimbursement Claimhonour a Reimbursement Claim

Article 5: Responsibilities of the Issuing Article 5: Responsibilities of the Issuing BankBank

•The Issuing Bank is responsible for The Issuing Bank is responsible for providing the information required in both providing the information required in both the Reimbursement Authorisation and the Reimbursement Authorisation and Credit, and is responsible for any Credit, and is responsible for any consequences resulting from non-consequences resulting from non-compliance with this provisioncompliance with this provision

Article 6: Issuance and Receipt of a Article 6: Issuance and Receipt of a Reimbursement Authorisation or Reimbursement Reimbursement Authorisation or Reimbursement

AmendmentAmendment

• All reimbursement authorizations and All reimbursement authorizations and reimbursement amendments must be reimbursement amendments must be issued in the form of an authenticated issued in the form of an authenticated teletransmission or a signed letterteletransmission or a signed letter

• An issuing bank must not send to RB :An issuing bank must not send to RB :• A copy of the credit or any part thereof, A copy of the credit or any part thereof, or a copy of an amendment to the credit in or a copy of an amendment to the credit in place of or multiple reimbursement place of or multiple reimbursement authorization [if not agreed].authorization [if not agreed].

Article 6: Issuance and Receipt of a Reimburse ment Article 6: Issuance and Receipt of a Reimburse ment Authorisation or Reimbursement AmendmentAuthorisation or Reimbursement Amendment

• An issuing bank shall not require a certificate An issuing bank shall not require a certificate of compliance with the terms and conditions of of compliance with the terms and conditions of the credit in the reimbursement authorizationthe credit in the reimbursement authorization

• A reimbursement authorization must state :A reimbursement authorization must state :credit number; currency and amount; credit number; currency and amount; additional amounts payable and tolerance, if additional amounts payable and tolerance, if any; claiming bank or, in the case of a any; claiming bank or, in the case of a freely freely available credit,available credit, that claims can be made by that claims can be made by any bank. In the absence of any such any bank. In the absence of any such indication, the reimbursing bank is authorized indication, the reimbursing bank is authorized to pay any claiming bank; parties responsible to pay any claiming bank; parties responsible for charges. A reimbursement amendment for charges. A reimbursement amendment must state only the relative changes to the must state only the relative changes to the above and the credit number.above and the credit number.

Article 6: Issuance and Receipt of a Reimburse ment Article 6: Issuance and Receipt of a Reimburse ment Authorisation or Reimbursement AmendmentAuthorisation or Reimbursement Amendment

• If the Reimbursing Bank is requested to If the Reimbursing Bank is requested to accept and pay a time draft(s), the accept and pay a time draft(s), the Reimbursement Authorisation must also Reimbursement Authorisation must also indicate: Tenor of draft(s) to be drawn; Drawer indicate: Tenor of draft(s) to be drawn; Drawer Party responsible for acceptance and discount Party responsible for acceptance and discount charges, if anycharges, if any

• An issuing bank should not require a sight An issuing bank should not require a sight draft to be drawn on the reimbursing bankdraft to be drawn on the reimbursing bank

Article 6: Issuance and Receipt of a Reimburse ment Article 6: Issuance and Receipt of a Reimburse ment Authorisation or Reimbursement AmendmentAuthorisation or Reimbursement Amendment

• Any requirement for: Any requirement for:

Pre-notification of a reimbursement claimPre-notification of a reimbursement claim to to the issuing bank must be included in the the issuing bank must be included in the credit and not in the reimbursement credit and not in the reimbursement AuthorizationAuthorization

Pre-debitPre-debit notification to the issuing bank notification to the issuing bank must be indicated in the creditmust be indicated in the credit

When RB is not ready to act as per the When RB is not ready to act as per the instructions of issuing bank it must inform instructions of issuing bank it must inform without delaywithout delay

Article 7:Expiry of a Reimbursement Article 7:Expiry of a Reimbursement AuthorisationAuthorisation

• The reimbursement authorization The reimbursement authorization should should notnot be subject to an expiry date or latest be subject to an expiry date or latest date for presentation of a claim, except as date for presentation of a claim, except as indicated in article 9.indicated in article 9.

• The issuing bank must cancel its The issuing bank must cancel its reimbursement authorization for any reimbursement authorization for any unutilized portion of the credit to which it unutilized portion of the credit to which it refers, informing the reimbursing bank refers, informing the reimbursing bank without delay.without delay.

Article 8: Amendment or Cancellation of Article 8: Amendment or Cancellation of Reimbursement AuthorisationsReimbursement Authorisations

• The issuing bank may issue a reimbursement The issuing bank may issue a reimbursement amendment or cancel a reimbursement amendment or cancel a reimbursement authorization at any time upon sending notice authorization at any time upon sending notice to RBto RB

•The issuing bank must send notice of any The issuing bank must send notice of any amendment to the nominated bank or, in the amendment to the nominated bank or, in the case of a freely available credit, the advising case of a freely available credit, the advising bank. In case of cancellation of the bank. In case of cancellation of the reimbursement authorization, the issuing bank reimbursement authorization, the issuing bank must provide the nominated bank or the must provide the nominated bank or the advising bank with new reimbursement advising bank with new reimbursement instructionsinstructions

•The issuing bank must reimburse the RB for The issuing bank must reimburse the RB for any reimbursement claims honoured or draft any reimbursement claims honoured or draft accepted by the RB prior to the receipt by it of accepted by the RB prior to the receipt by it of a notice of cancellation or amendmenta notice of cancellation or amendment

Article 9: Reimbursement UndertakingsArticle 9: Reimbursement Undertakings

An authorization or request by the issuing An authorization or request by the issuing bank to the reimbursing bank to issue a bank to the reimbursing bank to issue a reimbursement undertaking is irrevocable reimbursement undertaking is irrevocable and must contain theand must contain the following: credit following: credit number; currency and amount; additional number; currency and amount; additional amounts payable and tolerance, if any; full amounts payable and tolerance, if any; full name and address of the claiming bank to name and address of the claiming bank to which the reimbursement undertaking which the reimbursement undertaking should be issued; should be issued; latest date for latest date for presentation of a claim,presentation of a claim, including any including any usance period; parties responsible for usance period; parties responsible for charges (claiming bank's and reimbursing charges (claiming bank's and reimbursing bank's charges and reimbursement bank's charges and reimbursement undertaking fee) in accordance with article undertaking fee) in accordance with article 16 of these rules16 of these rules

Article 9: Reimbursement UndertakingsArticle 9: Reimbursement Undertakings

• A Reimbursement Undertaking must A Reimbursement Undertaking must indicate the terms and conditions of the indicate the terms and conditions of the undertaking and: Credit number and Issuing undertaking and: Credit number and Issuing Bank; Currency and amount of the Bank; Currency and amount of the Reimbursement Authorization; Additional Reimbursement Authorization; Additional amounts payable and tolerance; Currency amounts payable and tolerance; Currency and amount ; Latest date for presentation of and amount ; Latest date for presentation of a claim; the party to pay the fee, if other a claim; the party to pay the fee, if other than the issuing bank. than the issuing bank. The reimbursing bank The reimbursing bank must also include its charges, if any, that will must also include its charges, if any, that will be deducted from the amount claimedbe deducted from the amount claimed

• If the latest date for presentation of a claim If the latest date for presentation of a claim falls on a day when the reimbursing bank is falls on a day when the reimbursing bank is closed, the latest date for presentation of a closed, the latest date for presentation of a claim will be extended to the first following claim will be extended to the first following banking daybanking day

Article 9: Reimbursement UndertakingsArticle 9: Reimbursement Undertakings

• A reimbursing bank is irrevocably bound to A reimbursing bank is irrevocably bound to honour a reimbursement claim as of the time honour a reimbursement claim as of the time it issues the reimbursement undertakingit issues the reimbursement undertaking

• An irrevocable reimbursement An irrevocable reimbursement authorization cannot be amended or authorization cannot be amended or cancelled without the agreement of the cancelled without the agreement of the reimbursing bankreimbursing bank

Article 10: Standards for Reimbursement Article 10: Standards for Reimbursement ClaimsClaims

•The claiming bank's claim for The claiming bank's claim for reimbursement: must be in the form of a reimbursement: must be in the form of a teletransmission, unless specifically teletransmission, unless specifically prohibited by the reimbursement prohibited by the reimbursement authorization or an original letterauthorization or an original letter

•Must clearly indicate the credit number and Must clearly indicate the credit number and the issuing bank; must separately stipulate the issuing bank; must separately stipulate the principal amount claimed, any additional the principal amount claimed, any additional amount due and charges; must not include amount due and charges; must not include multiple reimbursement claims under one multiple reimbursement claims under one teletransmission or letterteletransmission or letter

•Must, in the case of a reimbursement Must, in the case of a reimbursement undertaking, comply with the terms and undertaking, comply with the terms and conditions of the reimbursement undertakingconditions of the reimbursement undertaking

Article 10: Standards for Reimbursement Article 10: Standards for Reimbursement ClaimsClaims

• When a time draft is to be drawn on the When a time draft is to be drawn on the reimbursing bank, the claiming bank must reimbursing bank, the claiming bank must forward the draft with the reimbursement forward the draft with the reimbursement claim to the reimbursing bank for processing claim to the reimbursing bank for processing and include, where appropriate, the and include, where appropriate, the following : general description of the goods, following : general description of the goods, services or performance; country of origin; services or performance; country of origin; place of destination or performanceplace of destination or performance

•If the transaction covers the shipment of If the transaction covers the shipment of merchandise: date of shipment; place of merchandise: date of shipment; place of shipmentshipment

Quary

Issuing bank issued its credit in the amount of USD25000, and in its reimbursement authorization asked to reimburse negotiating bank for the amount of USD25000 plus charges. After negotiation of documents, the negotiating bank presented a claim of USD25500. The reimbursing bank did not honor the claim because it exceeded the amount of reimbursement authorization.

QUARY

An issuing bank in its reimbursement instructions advised negotiating bank to claim reimbursement on Bank R, and issued a reimbursement authorization to bank R requiring a 3-day pre debit notification. Though claim was reimbursed by R, the negotiating bank sent a message requesting interest for three days stating that under URR bank R had exceeded three day processing period for its reimbursement claim.

QUARY….

•What should bank R’s response to the request for interest be?

•Who is at fault in this situation?

Article 11: Processing Reimbursement Article 11: Processing Reimbursement ClaimsClaims

• A reimbursing bank shall A reimbursing bank shall have a maximum have a maximum of three banking daysof three banking days following the day of following the day of receipt of the reimbursement claim to receipt of the reimbursement claim to process the claimprocess the claim

•A reimbursement claim received outside A reimbursement claim received outside bankingbankinghours will be deemed to be received on the hours will be deemed to be received on the next following banking daynext following banking day

• If a pre-debit notification is required by If a pre-debit notification is required by the issuing bank, this predebit notification the issuing bank, this predebit notification period shall be in addition to the processing period shall be in addition to the processing periodperiod

Article 11: Processing Reimbursement Article 11: Processing Reimbursement ClaimsClaims

When a reimbursing bank has not issued a When a reimbursing bank has not issued a reimbursement undertaking : the reimbursement undertaking : the reimbursement claim must specify the reimbursement claim must specify the predetermined reimbursement date; the predetermined reimbursement date; the reimbursement claim should not be reimbursement claim should not be presented to the reimbursing bank more presented to the reimbursing bank more than ten banking days prior to such than ten banking days prior to such predetermined date. If a reimbursement predetermined date. If a reimbursement claim is presented more than ten banking claim is presented more than ten banking days prior to the predetermined date, the days prior to the predetermined date, the reimbursing bank may disregard the reimbursing bank may disregard the reimbursement claim. If the reimbursing reimbursement claim. If the reimbursing bank disregards the reimbursement claim, it bank disregards the reimbursement claim, it must so inform the claiming bank by must so inform the claiming bank by teletransmission or other expeditious means teletransmission or other expeditious means without delaywithout delay

QUARY-2

Upon received the documents, the Negotiating Bank found several discrepancies and negotiated under reserve. It forwarded them to issuing bank, claim reimbursement from reimbursing bank stating’ we have negotiated documents ….. under guarantee from the beneficiary and have forwarded documents to the issuing bank’. The reimbursing bank responded, ‘we are not able to provide reimbursement until authorized by issuing bank’.

Article 12: Duplications of Article 12: Duplications of Reimbursement AuthorisationsReimbursement Authorisations

An issuing bank must not, upon receipt of An issuing bank must not, upon receipt of documents, give a new reimbursement documents, give a new reimbursement authorization or additional instructions authorization or additional instructions unless they constitute an amendment to, or unless they constitute an amendment to, or a cancellation of, an existing a cancellation of, an existing reimbursement authorization. The reimbursement authorization. The reimbursing bank assumes no liability or reimbursing bank assumes no liability or responsibility for any consequences that responsibility for any consequences that may arise from any such duplicationmay arise from any such duplication

Article 13: Foreign Laws and UsagesArticle 13: Foreign Laws and Usages

The Issuing Bank shall be bound by and The Issuing Bank shall be bound by and shall indemnify the Reimbursing Bank shall indemnify the Reimbursing Bank against all obligations and responsibilities against all obligations and responsibilities imposed by foreign laws and usagesimposed by foreign laws and usages

Article 14: Disclaimer on the Article 14: Disclaimer on the Transmission of MessagesTransmission of Messages

Article 15: Force MajeureArticle 15: Force Majeure

Article 16: ChargesArticle 16: Charges

•A reimbursing bank's charges are for the A reimbursing bank's charges are for the account of the issuing bank. If a account of the issuing bank. If a reimbursement authorization states that reimbursement authorization states that the reimbursing bank's charges are for the the reimbursing bank's charges are for the account of the beneficiary, they shall be account of the beneficiary, they shall be deducted from the amount due to a deducted from the amount due to a claiming bank when reimbursement is claiming bank when reimbursement is made. When a reimbursing bank follows the made. When a reimbursing bank follows the instructions of the issuing bank regarding instructions of the issuing bank regarding charges and these charges are not paid, or charges and these charges are not paid, or a reimbursement claim is never presented a reimbursement claim is never presented to the reimbursing bank, theto the reimbursing bank, theissuing bank remains liable for such issuing bank remains liable for such chargescharges

Article 17: Interest Claims/Loss of ValueArticle 17: Interest Claims/Loss of Value

Any claim for loss of interest, loss of value Any claim for loss of interest, loss of value due to any exchange rate fluctuations, due to any exchange rate fluctuations, revaluations or devaluations are between revaluations or devaluations are between the claiming bank and the issuing bank, the claiming bank and the issuing bank, unless such losses result from the non-unless such losses result from the non-performance of the reimbursing bank performance of the reimbursing bank under a reimbursement undertakingunder a reimbursement undertaking

Thank YouThank You