UNIFORM RULES FOR BANK-TO-BANK REIMBURSEMNETS UNDER D/C
07-09-2012
UNIFORM RULES FOR BANK-TO-BANK REIMBURSEMENTS UNDER DOCUMENTARY CREDIT
An overview of URR-725 for basic elements and utilities

URR 725
(UNIFORM RULES FOR BANK-TO-BANK REIMBURSEMNETS UNDER D/C)

BACKGROUND TO URR AND ITS PURPOSE

The Uniform Rules for Bank-to-Bank Reimbursements ("URR") were first published by
ICC in November 1995 and came into force on July 1, 1996 as ICC Publication No.525. At the time, reimbursement authorizations had begun to be issued in currencies other than what had been the more common currency i.e., US Dollars and an international set of rules were deemed necessary. It should be noted that there had been Bank-to-Bank Reimbursement rules operating in the US for many years and these formed the basis for the establishment of the principles to be considered in drafting URR 525.

From July 1, 1996 issuing banks were faced with the decision as to whether their reimbursement authorizations should be made subject to URR 525 or UCP 500 article 19 (currently article 13 in UCP-600). To encourage usage of the URR and reduce the possibility of any ambiguity as to the applicable rules, SWIFT modified their handbook to reflect that the issuance of an MT740 (Authorization to Reimburse) would automatically apply to URR 525, unless otherwise stated. It is true to say that the usage of URR varies from country to country and will, no doubt, continue to do so with the updated version (URR 725) when it comes into effect on October 1, 2008. Today, the majority of credits are issued available by negotiation and the issuing bank provides reimbursement of a complying presentation at sight or on a future due date. This form of issuance negates the need for any Bank-to-Bank reimbursement instructions to appear in a credit. However, there is still scope for more Bank-to-Bank reimbursements to be subject to URR.

BASIC ELEMENTS

URR 725 was written due to deficiency of article 13 when applied to more complicated issue. It is more detailed brochure arranging bank to bank reimbursements. It comprises shortly;
* all definitions,
* liabilities and responsibilities of all parts;
* forms of reimbursement authorizations, amendments and claims
* maturities, amendments, cancellations,
* details of reimbursement undertaking (not explained in article 13 OF UCP-600)
* charges, Interests etc.

Further all articles in this publication have been grouped into four separate heads for the purpose of ease of understanding. These groups are named as: A. General provisions and definitions (Article 1- 3 ) B. Liabilities and responsibilities (Article 4- 5 ) C. Form and notification of authorizations, amendments and claims (Article 6 - 12 ) D. Miscellaneous provisions (Article 13 -17 ) A. General provisions and definitions: * Article 1 deal with the applicability of URR-725. It states that URR are only applicable when it’s clearly mentioned in reimbursement authorization being subject to these rules and it’s not intended to override UCP. * Article 2 gives definitions to specific terms under URR * Article 3 states that reimbursement authorizations are separate form D/Cs and reimbursing bank isn’t bound to terms and conditions of D/Cs. B. Liabilities and responsibilities: * Article 4 says that reimbursing bank isn’t bound to honor a reimbursement claim unless it issued such undertaking. * Article 5 directs issuing bank to refer these rules in both the reimbursement authorization as well as credit if it wants applicability of these rules. C. Form and notification of authorizations, amendments and claims: Article 6 how to issue reimbursement authorization and amendments, not to issues multiple authorizations under one letter. Issuing bank can only issue time draft on reimbursing bank not sight draft. In case of any non acceptance in any regard, issuing bank be informed without delay * Article 7 there is no Expiry date of a Reimbursement Authorization unless otherwise agreed by reimbursing bank. If authorization is partially cancelled then issuing bank has to inform reimbursing bank. * Article 8 issuing bank may issue Amendment or Cancellation of Reimbursement Authorization and have to inform reimbursing bank for such amendment and in case of any delay issuing bank is responsible for any reimbursement made prior to informing reimbursement bank

* Article 9 Reimbursement Undertaking once issued by reimbursing bank is irrevocable. If issuing bank has to make any amendment in reimbursement undertaking, it has to get it accepted by reimbursing bank first and reimbursing bank has to take acceptance of claiming bank * Article 10 Standards for a Reimbursement Claim includes that multiple reimbursement claims shall not be included in single letter or tele-transmission. * Article 11 while processing a Reimbursement claim, payment of claim is to be made in 3 banking days prior to claim lodgment days. In case of pre determined reimbursement date, claiming bank may send claim for more than 10 days prior to date. * Article 12 in case duplications of a Reimbursement Authorization issued by issuing bank, issuing bank shall be responsible for double claim paid

D. Miscellaneous provisions: * Article 13 reimbursing bank shall be safeguarded from Foreign Laws and Usages by issuing bank * Article 14 Disclaimer on the Transmission of Messages * Article 15 In case of acts of Force Majeure reimbursing bank is not responsible * Article 16 Charges shall be claimed by issuing bank and in case to charge from exporter, and nonpayment issuing bank shall be the bank to pay charges * Article 17 is about interest losses or any exchange losses arose due to market or exchange rate fluctuations and reimbursing bank is not concerned or responsible unless its because of some non compliance of reimbursement undertaking

UTILITIES

Utilities of URR are not much different from its purpose. URR have provided protection to all banks (unless otherwise modified or excluded). As it deals to bank-to-bank reimbursements (under documentary credits) therefore it has helped streamline possible issues, which may be probable in any reimbursement claim settlement, due to misunderstanding regarding reimbursement authorization instructions, undertakings, or claims.
Thus it helps enhance mutual confidence between banks for payments and helps foster international trade and strengthens worldwide financial mechanism for correspondent banking as well.

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