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LC Collection

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Sun, 07/27/2008 - 13:19
thecount
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Joined: 04/23/2008
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Dear Experts,

Please share your knowledge on this. 3 months ago we had an issue with one of our customers refusing to honour the bill of exchange since it was wrongly submitted as collection(not LC Collection.) but we sorted it out later. Since then whenever we submit documents under the LC our bank intentionally sends it as LC collection--even though they didn't find any discrepancies in the submission. This is effecting our cashflow as the payments get delayed by weeks. Could you please let me know if there is anything that we can do to avoid this?

Thanks in advance.

 Best Regards,

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Mon, 07/28/2008 - 19:36
#1
Catalyst
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Joined: 06/15/2007
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LC Collection

Make sure that the term 'collection' does not appear anywhere on your forwarding letter to the bank. Since you or someone else is paying for the LC, you have every right to expect documents to be negotiated under it, if they are otherwise in order and you have the necessary facilities with your bank.

A bank must either negotiate/accept documents under an LC (when UCP 600 is invoked) or send them for collection (under URC, ICC Publication No. 522).

Final point: Mere receipt, examination or forwarding of documents - without passing on any value - does not constitute negotiation. (Article 12.c of UCP 600).

The bank must make up its mind as to what exactly it is doing with your documents. You have a right to expect a clear answer from them.

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Author of books titled (i) An Introduction to Documentary Credits, (ii) Fundamentals of International Banking, and (iii) All About UCP 600 (Publishers: Macmillan India Ltd.). (Book on UCP 600-next). Offer workshops, training in ICC Rules, LCs, forex operations. Http://www.instituteofbankingstudies.org

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