Documentary Collections & Remitting Bank Instructions

The following scenario was widely discussed during a recent meeting among bankers. The relevant details:

Outgoing collection documents were sent to a non-US bank on 9 March 2022 subject to URC522 with instructions to:

• Deliver documents against payment.
• Advise payment/non-payment by SWIFT.
• Waive charges if refused.

On 24 March 2022, the remitting bank received instructions from the drawer to change payment terms from D/P to documents against acceptance, 60 days after B/L date. A SWIFT was sent to the collecting bank, authorizing release of the documents to drawee against a Letter of Undertaking to pay.

Documents including the full set of B/Ls were released to the drawee against its Letter of Undertaking to pay 60 days after B/L date.

When the payment due date arrived, no payment or SWIFT message was received. The remitting bank sent SWIFT message tracing payment with no response and reached out to the drawer, who indicated that it was trying to work with the drawee to remit payment. Additional SWIFT messages were sent to the collecting bank and went unanswered.

The remitting bank left the collection open and received periodic updates from the drawer through the rest of 2022 and 2023.