URC 522: key concepts
The Uniform Rules for Collections (URC) were originally introduced in January 1979, under ICC Publication No. 322.
The latest revision, Publication No. 522, came into effect on 1 January 1996.
As with all revisions of international rules, changes were introduced in order to keep abreast with commercial developments and practices.
URC 522 is divided into 26 articles under 7 distinct sections:
Article 1 outlines that the rules will apply when incorporated into the text of a collection instruction. This follows the principle in all ICC rules that they only apply if the transaction is made subject to their application.
Article 2 defines the meaning of 'Collection' and outlines the concept of 'financial' and 'commercial' documents.
Article 3 lists the parties involved. Although five are mentioned, there may often only be four parties involved because there may or may not be a separate presenting bank.
Whenever documents are sent on a collection basis, they are to be accompanied by a collection instruction as stated in article 4. This is, in essence, a schedule outlining full instructions (i.e., terms and conditions) that are to apply to the collection. If a bank is willing to handle the collection instruction, it must fully comply with these instructions.
Article 5 describes 'presentation' as the act of a presenting bank making documents available to the drawee (importer).
As outlined in article 6, for documents payable at sight, a presenting bank must make payment without delay. If the collection is payable at a future date, then the presenting bank must obtain acceptance without delay, and make presentation of the accepted draft to the drawee (importer) not later than the maturity date.
Article 7 addresses the release of commercial documents. If commercial documents are to be delivered against payment, a collection instruction is not to include a draft payable at a future date. In the event that a collection instruction nevertheless includes a draft payable at a future date, there should be an indication as to whether the commercial documents are to be released against payment or acceptance.
As expounded upon in article 8, it can, on occasion, be the case that a remitting bank instructs either the collecting bank or the drawee to create its own documents.
Article 9 addresses the issue that, as to be expected in a commercial transaction, and in order to preserve reputational profiles, banks must always act in good faith and with reasonable care. In the event of any dispute, it would be a court that would determine whether a bank acted in such a manner or not.
Article 10 clarifies that a bank is not concerned with the underlying goods to a transaction (except to the extent that such goods do not infringe any bank policy or local regulations) and, as such, goods should not be delivered to a bank, and neither should a transport document indicate that the goods are consigned to, or to the order of, that bank, unless otherwise agreed in advance.
Articles 11-14 cover disclaimers: acts of an instructed party; documents received; effectiveness of documents; and delays, loss in transit and translation.
As would be expected, the rules include a generic article (15) in respect of delays that may arise due to the occurrence of a force majeure event.
Articles 16-19 focus upon various aspects of payment: without delay; local and foreign currencies; and partial payments.
Interest, charges and expenses are addressed in articles 20 and 21.
As stated in article 22, the collecting or presenting bank is to ensure that the acceptance of any draft appears to be complete and correct. However, it is not responsible for determining the status of the person(s) signing the draft.
Similarly, and according to article 23, the collecting or presenting bank is not responsible for the genuineness of the signature(s) that appear(s) on a promissory note or other form of payment instrument that forms part of the collection instruction, or that has been issued as a result of a request in the collection instruction for the drawee (importer), or collecting or presenting bank, to create a specific document.
Article 24 clarifies that collection instructions should always provide guidance as to the procedure to be followed in the event of protest (or similar legal procedure) for non-payment or non-acceptance. If no guidance is provided, then banks have no responsibility to pursue such redress.
On occasion, a collection instruction will mention an entity that can be contacted in 'case-of-need'. Article 25 highlights that the instruction should fully define the scope and responsibility of such party.
Article 26 provides guidance as to the content and application of a number of advices.
More detailed information can be found in the module ‘Overview of URC 522' at www.tradefinance.training