Dear All ,
For Payment my seller is quoting terms as : " 100% LC WITH TT REIMBURSEMENT ALLOWED AND CONFIRMATION MAY ADD ON BENEFICIARYS ACCOUNT.
Can any one explain to me what is the meaning of T T Reimbursement clause in L/C .
I think that we have already spoken, in this forum, about TT reimbursement, however TT means tele trasmission, in few words the nominated bank is authorized to request reimbursement by telex or Swift instead of to transmit a draft to the reimbursing bank. A reason: today courier services are so fast that in two/three days the draft is ON THE TABLE of the drawee bank, a Swift MT 742 normally is issued on spot value basis (2 working days), and with TT in some countries no stamp duties are necessary on drafts.
That' all , but other comments appreciated
What I know is as under:
TT reimbursement for beneficiary :: After verifying the documents, negotiating bank will issue SWIFT msg to the opening bank confirming receipt of compliance documents and claim reimbursement. On receipt of claim from negotiating bank and confirmation reg receipt of compliance documents, opening bank will reimburse to the negotiating bank (even before receipt of original documents). This mode is much faster.
In normal course, opening bank will release payment to the negotiating bank only after they receive the documents and verify the same (for which UCP provides 5 banking days). This takes much more time as compared to TT reimbursement clause.
As beneficiary, one should prefer TT reimbursement clause.
I REQUEST MR CIAO TO CONFIRM (IF ABOVE IS TRUE) OR CORRECT ME.
Thanks & regards,
IMHO, TT reimbursement is used when URR is indicated in the proper field 40 e in MT700(UCPURR), and the l/c is available by payment at sight with the nominated bank. L/c available by negotiation doesn't indicate reimbursing bank or other instructions of paymentbut only a general promise to reimburse the negotiating bank.
Please read many posts in this forum, under TT reimbursement
After your reply, I searched for clarifications. I got one post by Mr Abrar on 12/09/2009 which is as under:
" It simply means "Telegraphic transfer" (or in some cases "tested telex"). Either way, it allows reimbursement claims to be made to the issuing bank/confirming/reimbursing bank, by the negotiating bank, usually requiring the negotiating bank to certify that it has checked the documents to be in order and has despatched them to the issuing/confirming bank.
The issuing/confirming/reimbursing bank is obliged to pay on receipt of the "TT" claim and this may be before the issuing/confirming bank has received the original documents from the negotiating bank.
This means that payment is received much quicker than instances where the issuing/confirming bank will only pay on receipt and examination of documents at its own counters.
All in all, a favourable position for the beneficiary. "
I want some more clarifications abt it:
1) Is it not allowed if L/c is available by negotiation with any bank?
2) Is it mandatory to mention it in field 40e of the L/c?
3) Pl read 2nd para of post by Mr Abrar - "The issuing/confirming/reimbursing bank .................from the negotiating bank." Is is not applicable ?
"TT" reimbursement is simply a method of reimbursement, and has no connection with the mode of availability of the LC, i.e whether by acceptance, negotiation or payment. So, this method of reimbursement can be applied to a restricted LC, or a freely available LC, and depending on the LC terms, may be used to claim funds from an issuing bank, or a reimbursing bank.
However, it's worth noting that an LC which is available by payment with a nominated bank must provide for the nominated bank to debit an account in its books, i.e that of the issuing bank, or claim reimbursement from a reimbursing bank.
An LC available by negotiation with a nominated bank, means that the bank (if it chooses to act on its nomination) must settle from its own funds, prior to receiving reimbursement from the issuing bank. Such reimbursement may be effected by the issuing bank, either on receipt of conforming documents by it, or in advance, by honouring a "TT" claim submitted by the negotiating bank. That such funds may be received "immediately" has no bearing on the concept of "negotiation, and in any case, the issuing bank still reserves the right of recourse to refund, should the documents not be found compliant by the issuing bank.
Field 40E can contain reference to UCP, or UCPURR ( if a reimbursing bank is stipulated in the LC), but it would not be true to state that for an LC to contain a "TT" clause, Field 40E must refer to "UCPURR LATEST VERSION".
I will try to an swer to your queries:
1) IMHO it could be used with payment with any bank;
2) Yes it is mandatory to link it to ICC URR 725
3) Negoitiating bank that receives immediately funds, does not negotiate.
Other comments appreciated