Business

The responsibilities of an authorised dealer in handing an export documentary collection

One of the services rendered by a commercial bank to exporters is collection of bills drawn by the latter on importers. While rendering this service, the banker acts only as agent of customer for whom the collection is made. All his deeds required for the bill are, therefore, done on behalf of and on account of the customer. The amount of the bill is credited to the customer’s account only after realization of the bill.

Therefore, there is no risk involved for the bank. However, the work involves expenses. Further the bank has to see that the exchange control requirements are not violated. Therefore, the service is rendered only to known and worthy customers of the bank.

Collection of a foreign bill involves many parties: the exporter (principal or drawer), his banker (remitting bank), the importer (the drawee), and the bank in his country (collecting bank). To have a common code and standardized procedure and practice for the purpose, the Uniform Rules for the Collection of Commercial Paper, a publication of International Chamber of Commerce, were adopted from 1st January, 1968. The Rules were revised and the current rules entitled ‘Uniform Rules for Collection’ (Publication No. 522 of the International Chamber of Commerce) have been adopted with effect from 1st January, 1996.

They have been accepted in almost all countries and are binding on the parties involved in the collection of a foreign bill unless otherwise expressly agreed. The Rules cover comprehensively the procedures to be followed for presentation, payment, acceptance, protest, advice of fate, etc., and the responsibilities of the banks involved. In the discussion that follows the provisions of the Rules have been taken into account; the Articles referred to are of the Uniform Rules for Collection.

Drawer’s Instructions. When approached by the customer to collect a bill, the bank should get from him a ‘collection order’ giving complete and precise instructions. The collection order should cover, inter alga, the following points:

1. If the exporter would like the documents to be presented to the drawee through any specified bank in the drawee’s country. Where no indication is made in the collection order, the bank can utilise the services of any bank of its own or another bank’s choice. The utilisation of the services of other banks would be for the account of and at the risk of the drawer (Article 5). Normally, the bills are sent to the bank with whom the remitting bank has correspondent relationship.

2. In case of usance bills, if the documents are to be delivered against acceptance( (D/A) or against payment (D/P,). In the case of D/A bills, the bill of Wass and other documents would be handed over to the drawee when he accepts the bill on presentation to him. The drawee is free to get the goods released and deal with them in any manner he likes. The payment will be made on the due date of the bill. The drawer, therefore, loses his hold on the goods before payment is received.

In the case of D/P bills the documents arc released to the drawee only when payment is made. In the absence of instructions on this point in the collection order, the documents will be released only against payment (Article 7).

3. The place at which the documents are to be presented. Full address of the drawee should be given to enable the collecting bank to contact the drawee.

4. Currency and amount to be collected from the drawee. In case the collection order requires collection of interest from the drawee, and no provision is made in the bill of exchange to this effect, it should be specifically stated that the interest should not be waived. In the absence of such prohibition the collecting bank will deliver the documents without collecting such interest if the drawee refuses to pay the interest (Article 20).

Similarly, if the collection charges and other expenses are to be recovered from the drawee, the collection ordershould expressly state that such charges and expenses should not be waived. In the absence of specific prohibition, the collecting bank may deliver documents to the drawee without collecting the charges and expenses, if he refuses to pay such charges and expenses. When the charges and expenses are refused by the drawee, they would be deducted from the proceeds to the drawer (Article 20).

5. If the advice of payment and other matters such as non-payment or non-acceptance is to be sent by mail or cable. In the absence of specific instructions, the collecting bank would send the advice by the method of its choice at the cost of the remitting bank (and ultimately the drawer) (Article 26).

6. In the case of non-payment/non-acceptanie by the drawee, the manner in which the bill is to be dealt with. If the drawer nominates a representative to act as case-of-need, in such an event the collection order should clearly and fully indi-cate the powers of such case-of-need. In the absence of such indication banks will not accept any instructions from the case-of-need (Article 25).

7. Care of goods in the case of non-payment/non-acceptance by drawee; if the goods should be cleared; insured and stored at the expense of the drawer. Banks have no obligation to take any action in respect of goods. Nevertheless, in case the banks take action for the protection of goods, whether instructed or not, they are not liable or responsible for the condition or fate of the goods. Any charges and expenses incurred by banks for the protection of the goods will be for the account of the drawee (Article 10).

8. In case of non-payment/non-acceptance, if protest is to be made. In the absence of specific instructions, banks have no obligation to have the documents protested. Any charges incurred by banks in connection with such protest will be for the account of the drawer (Article 26).

9. In the case of usance bills, if any rebate is to be allowed for early payment.

Procedure at the bank.

The bank which receives the bill for collection should verify that the collection order gives complete instructions as required. It should verify all documents as listed in the collection order are received. In the case of any discrepancy it should immediately be brought to the notice of the drawer. The bill should be sent without delay to a bank in the drawee’s country. In its covering letter, all the instructions of the drawer should be clearly incorporated.

All advices received from the collecting banker should be promptly intimated to the drawer. Similarly, when intimation of payment is received from the collecting bank, the proceeds of the bill should be forthwith placed to the credit of the customer’s account, subject, of course, to the advances, if any, made by the bank to the drawer against the bill. If the bill is drawn in foreign currency, the bank may advise the drawer to book a forward contract to avoid exchange risk.

Along with the documents the drawer should submit to the bank the duplicate copy of GR form relative to the export. The details of the export bill taken up for collection should be furnished by the bank in Statement of ENC, along with R returns. The duplicate copy of GR form should be submitted to the Reserve Bank along with R returns, when the bill amount is realised in full.

Tags
Show More

Related Articles

Close