Collections Rules

Uniform Rules for Collection

The seller may in international sale request his bank to collect the price which may be paid by way of acceptance and payment of the bill. The bank may collect it through its own representative branch or a correspondent bank.

The bank will require clear instructions in a form cover how it should handle the document. The documentary bill lodgment form was used historically to set out instructions to the Bank.

The Uniform Rules for Collection tare promoted by the International Chamber of Commerce. They may be incorporated into the parties’ contract.

Collection in this context refers to the handling by the bank of documents in order to

  • obtain payment and/or acceptance; or
  • delivery of documents against payment; and/or acceptance of a bill or
  • delivery of other documents on other terms and conditions.

In this context, financial documents mean bills of exchange, promissory notes, cheques and other similar instruments. Commercial documents mean invoices, transport documents, documents of title or other similar documents.


The Collection and Parties

A clean collection is the collection of financial documents not accompanied by commercial documents. A documentary collection is the collection of financial documents accompanied by commercial documents or commercial documents not accompanied by financial documents.

The commercial documents are presented to the buyer by the collecting bank with the financial documents. The principal under the rules is the party which entrusts the collection to the bank. The drawee is usually the buyer to whom presentation is made in accordance with the instructions for collection.

The collecting bank is any bank other than the remitting bank involved in the collection. The presenting bank is the collecting bank which presents the documents to the drawee.


Requirements of the Rules

The Uniform rules require that documents which are for collection are to include a collection instruction which incorporates the rules and gives complete instructions. Banks are only permitted to act upon the instructions given in such collection instruction, and in accordance with the rules.

Banks will not examine documents in order to obtain instructions. Unless otherwise authorised in the collection instruction, banks will disregard any instructions from any party/bank other than the party/bank from whom they received the collection.

Collection instructions should bear the complete address of the drawee or of the domicile at which the presentation is to be made. If the address is incomplete or incorrect, the collecting bank may, without any liability and responsibility on its part, endeavour to ascertain the proper address.


Content of Instruction

The instructions shall include

  • details of the bank from which the collection was received including full name, postal and SWIFT addresses, telex, telephone, facsimile numbers and reference;
  • details of the principal including full name, postal address, and if applicable telex, telephone and facsimile numbers.
  • details of the drawee including full name, postal address, or the domicile at which presentation is to be made and if applicable telex, telephone and facsimile numbers;
  • details of the presenting bank, if any, including full name, postal address, and if applicable telex, telephone and facsimile numbers.;
  • amount(s) and currency(ies) to be collected;
  • list of documents enclosed and the numerical count of each document.
  • terms and conditions upon which payment and/or acceptance is to be obtained;
  • terms of delivery of documents against payment and/or acceptance and other terms and conditions;
  • charges to be collected, indicating whether they may be waived or not;
  • interest to be collected, if applicable, indicating whether it may be waived or not, including the rate of interest, the interest period and the basis of calculation (for example 360 or 365 days in a year) as applicable;
  • the method of payment and form of payment advice.
  • instructions in case of non-payment, non-acceptance and/or noncompliance with other instructions.

Presentation

Presentation is the procedure whereby the presenting bank makes the documents available to the drawee as instructed. The collection instruction should state the exact period of time within which any action is to be taken by the drawee.

Documents are to be presented to the drawee in the form in which they are received, except that banks are authorised to affix any necessary stamps, at the expense of the party from whom they received the collection unless otherwise instructed, and to make any necessary endorsements or place any rubber stamps or other identifying marks or symbols customary to or required for the collection operation.

For the purpose of giving effect to the instructions of the principal, the remitting bank will utilise the bank nominated by the principal as the collecting bank. In the absence of such nomination, the remitting bank will utilise any bank of its own or another bank’s choice in the country of payment or acceptance or in the country where other terms and conditions have to be complied with.

The documents and collection instruction may be sent directly by the remitting bank to the collecting bank or through another bank as an intermediary. If the remitting bank does not nominate a specific presenting bank, the collecting bank may utilise a presenting bank of its choice.

In the case of documents payable at sight, the presenting bank must make a presentation for payment without delay. In the case of documents payable other than sight the presenting bank must, where acceptance is called for, make a presentation for acceptance without delay, and where payment is called for, make a presentation for payment not later than the appropriate maturity date.


Limited Obligations of Bank

The presenting bank is responsible for seeing that the form of the acceptance of a bill of exchange appears to be complete and correct but is not responsible for the genuineness of any signature or for the authority of any signatory to sign the acceptance. The presenting bank is not responsible for the genuineness of any signature or for the authority of any signatory to sign a promissory note, receipt, or other instrument.

Banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document(s), or  for the general and/or particular conditions stipulated in the document(s) or superimposed thereon. They assume no liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any document(s), or for the good faith or acts and/or omissions, solvency, performance or standing of the consignors, the carriers, the forwarders, the consignees or the insurers of the goods, or any other person whomsoever

Banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of any message(s), letter(s) or document(s), or for the delay, mutilation or other error(s) arising in the transmission of any telecommunication or for error(s) in translation and/or the interpretation of technical terms. Banks are not liable or responsible for any delays resulting from the need to obtain clarification of any instructions received.

Banks assume no liability or responsibility for consequences arising out of the interruption of their business by Acts of God, riots, civil commotions, insurrections, wars, or any other causes beyond their control or by strikes or lockouts.


Documents Against Acceptance or Against Payment

Collections should not contain bills of exchange payable at a future date with instructions that commercial documents are to be delivered against payment. If a collection contains a bill of exchange payable at a future date, the collection instruction should state whether the commercial documents are to be released to the drawee against acceptance (D/A) or against payment (D/P).

In the absence of such statement, the commercial documents are released only against payment and the collecting bank will not be responsible for any consequences arising out of any delay in the delivery of documents. If a collection contains a bill of exchange payable at a future date and the collection instruction indicates that the commercial documents are to be released against payment, documents will be released only against such payment. The collecting bank is not responsible for any consequences arising out of any delay in the delivery of documents.

Where the remitting bank instructs that either the collecting bank or the drawee is to create documents (bills of exchange, promissory notes, trust receipts, letters of undertaking or other documents) that were not included in the collection, the form and wording of such documents shall be provided by the remitting bank. Otherwise, the collecting bank is not liable or responsible for the form and wording of any such document provided by the collecting bank and/or the drawee.


Obligations of Collecting Bank

The seller instructs the remitting bank, and the remitting bank instructs the collecting bank as to what documents are to be delivered to the purchaser on acceptance or payment. The collecting bank is liable for breach of contract if it releases the documents in breach of the instructions.

It is the responsibility of the party preparing the collection instruction to ensure that the terms for the delivery of documents are clearly and unambiguously stated. The collecting bank is not liable for the consequences of incomplete/incorrect details being provided.

The collecting bank is obliged to ascertain whether the documents received appear to correspond with the instruction.  If this is not the case, it must immediately notify the party giving that instruction setting out what documents are missing and what are present. It must advise the instructing party (usually the remitting) bank of the position and give the appropriate details.

The bank collecting is exempted from the liability in relation to the form, sufficiency and authenticity of the documents. It is exempt from the consequences of various events such as loss of messages in transmission, delay and from losses arising from the requirement to obtain further more detailed instructions.


Payment

Amounts collected (less charges and/or disbursements and/or expenses where applicable) must be made available without delay to the party from whom the collection instruction was received in accordance with its terms and conditions.

In the case of documents payable in the currency of the country of payment (local currency), the presenting bank must, unless otherwise instructed in the collection instruction, release the documents to the drawee against payment in local currency only if such currency is immediately available for disposal in the manner specified in the collection instruction.

In the case of documents payable in a currency other than that of the country of payment (foreign currency), the presenting bank must, unless otherwise instructed in the collection instruction, release the documents to the drawee against payment in the designated foreign currency only if such foreign currency can immediately be remitted in accordance with the instructions given in the collection instruction.


Part Payments

In respect of clean collections, partial payments may be accepted if and to the extent to which and on the conditions on which partial payments are authorised by the law in force in the place of payment. The financial document(s) will be released to the drawee only when full payment thereof has been received.

In respect of documentary collections, partial payments will only be accepted if specifically, authorised in the collection instruction. However, unless otherwise instructed, the presenting bank will release the documents to the drawee only after full payment has been received, and the presenting bank will not be responsible for any consequences arising out of any delay in the delivery of documents.

In all cases partial payments will be accepted only subject to compliance with the above provisions for payment or partial payment.


Interest

If the collection instruction specifies that interest is to be collected and the drawee refuses to pay such interest, the presenting bank may deliver the document(s) against payment or acceptance or on other terms and conditions as the case may be, without collecting such interest, unless the next paragraph applies. Where such interest is to be collected, the collection instruction must specify the rate of interest, interest period and the basis of calculation.

Where the collection instruction expressly states that interest may not be waived and the drawee refuses to pay such interest the presenting bank will not deliver documents and will not be responsible for any consequences arising out of any delay in the delivery of document(s).

When payment of interest has been refused, the presenting bank must inform by telecommunication or, if that is not possible, by other expeditious means without delay the bank from which the collection instruction was received.


Charges and Expenses

If the collection instruction specifies that collection charges and/or expenses are to be for account of the drawee and the drawee refuses to pay them, the presenting bank may deliver the document(s) against payment or acceptance or on other terms and conditions as the case may be, without collecting charges and/or expenses, unless the next paragraph applies.

Whenever collection charges and/or expenses are so waived, they will be for the account of the party from whom the collection was received and may be deducted from the proceeds. Where the collection instruction expressly states that charges and/or expenses may not be waived and the drawee refuses to pay such charges and/or expenses, the presenting bank will not deliver documents and will not be responsible for any consequences arising out of any delay in the delivery of the documents.

When payment of collection charges and/or expenses has been refused the presenting bank must inform by telecommunication or, if that is not possible, by other expeditious means without delay the bank from which the collection instruction was received.  In all cases where in the express terms of a collection instruction or under the rules, disbursements and/or expenses and/or collection charges are to be borne by the principal, the collecting bank(s) shall be entitled to recover promptly outlays in respect of disbursements, expenses and charges from the bank from which the collection instruction was received, and the remitting bank shall be entitled to recover promptly from the principal any amount so paid out by it, together with its own disbursements, expenses and charges, regardless of the fate of the collection.


Notice and Protest I

There may be advice of payment, acceptance, nonpayment, nonacceptance or dishonour. An advice of payment must set out particulars of the sum collected, charges and expenses, disposal of the monies if applicable. The remitting bank must set out the method by which advice is to be given. If it fails to do so, the collecting bank may decide to the means to do so.

All advices or information from the collecting bank to the bank from which the collection instruction was received, must bear appropriate details including, in all cases, the latter bank’s reference as stated in the collection instruction.

It shall be the responsibility of the remitting bank to instruct the collecting bank regarding the method by which the advice is to be given. In the absence of such instructions, the collecting bank will send the advice by the method of its choice at the expense of the bank from which the collection instruction was received.


Notice and Protest II

The collecting bank must send without delay advice of payment to the bank from which the collection instruction was received, detailing the amount or amounts collected, charges and/or disbursements and/or expenses deducted, where appropriate, and method of disposal of the funds.

The collecting bank must send without delay advice of acceptance to the bank from which the collection instruction was received.

The presenting bank should endeavour to ascertain the reasons for nonpayment and/or non-acceptance and advise accordingly, without delay, the bank from which it received the collection instruction. The presenting bank must send without delay advice of non-payment and/or advice of non-acceptance to the bank from which it received the collection instruction.

On receipt of such advice, the remitting bank must give appropriate instructions as to the further handling of the documents. If such instructions are not received by the presenting bank within 60 days after its advice of non-payment and/or non-acceptance, the documents may be returned to the bank from which the collection instruction was received without any further responsibility on the part of the presenting bank.


Dishonour and Protest

The collections instruction should specify what the collecting bank is to do in the event of dishonour. It should include details of the protest or noting required. In the absence of a specific instruction, the bank is not required to protest the documents. They may be required to note refusal of acceptance or payment through a Notary Public. Noting is generally sufficient evidence of dishonour.

Where a bill has been noted on the day of dishonour or the next business day, a formal protest may be drawn up and backdated to the date of noting.

Any charges and/or expenses incurred by banks in connection with such protest, or other legal process, will be for the account of the party from whom the collection instruction was received.


References and Sources

Consumer Law  Long      2004

Commercial Law White  2nd ed    2012

Commercial & Economic Law in Ireland  White    2011

Commercial Law Forde  3rd ed    2005

Irish Commercial Precedents (Looseleaf)                               2004

Modern law of personal property in England and Ireland Bell 1989

Commercial & Consumer Law: Annotated Statutes O’Reilly           2000

UK Texts

Schmitthoff: The Law and Practice of International Trade 13th ed Carole Murray, David Holloway, Daren Timson-Hunt, Schmitthoffs 2018

Damages Under the Convention of Contracts for the International Sale of Goods 3rd ed Bruno Zeller 2018

International Economic Law 4th ed Asif Qureshi, Andreas Ziegler 2018

Law of International Trade: Cross Border Commercial Transactions 6th ed Jason C.T. Chuah 2018

World Trade Law: Text, Materials and Commentary 3rd ed 2018

The International Sale of Goods 4th ed Michael Bridge 2017

International Trade Law 6th ed Indira Carr, Peter Stone 2017

International Institute for the Unification of Private Law 2nd ed (UNIDROIT) 2017

Understanding the CISG Understanding the CISG 5th (Worldwide) ed 2017

The Law and Policy of the World Trade Organization: Text, Cases and Materials  2017

International Trade Law and Regulation:: Michael Blakeney, Aline Doussin, John Clarke, Mark Clough, 2017

International Sale of Goods: A Private International Law Comparative Edited by: Nicolas Nord, Gustavo Cerqueira 2017

International Sales Law Edited by: Franco Ferrari, Clayton P. Gillette 2017

The CISG Advisory Council Opinions Edited by: Ingeborg Schwenzer 2017

World Competition: Law and Economics Review – Editor in Chief: Jose Rivas 2017

Making Money with Incoterms 2010:  Strategic Use of Incoterms Rules in Purchases and Sales Arthur O’Meara 2017

World Trade Organization: Law, Practice and Policy World Trade Organization: Law, Practice and Policy 3rd ed Mitsuo Matsushita, Thomas J. Schoenbaum, Petros C. Mavroidis, Michael Hahn 2017