Roles of the Banks in Documentary Collections
The Remitting Bank (Exporter's Bank)
The remitting bank acts as the exporter's agent. Its responsibilities include:
- Receiving documents and collection instructions from the exporter (the principal)
- Forwarding documents to the collecting bank with a covering schedule (URC 522 Form)
- Transmitting payment proceeds to the exporter when received
- Following the principal's instructions on protest, warehousing, and insurance
Limitation: The remitting bank bears no responsibility if the collecting bank fails to follow instructions, provided it selected the collecting bank in good faith.
The Collecting Bank (Importer's Bank / Presenting Bank)
- Receives the documents and collection order from the remitting bank
- Presents documents to the importer (drawee) and collects payment or acceptance
- Remits funds to the remitting bank after deducting charges
- Follows URC 522 rules regarding timing of presentation
"Presenting Bank": When the collecting bank directly presents the documents to the drawee, it is also called the presenting bank. Sometimes these are different institutions.
The Principal (Exporter)
- Initiates the collection by providing documents and a Collection Order to the remitting bank
- Bears the commercial risk if the buyer defaults
- Must give clear, complete instructions (URC 522 Article 4)
The Drawee (Importer/Buyer)
- The party to whom presentation is made
- Must pay (D/P) or accept a bill of exchange (D/A) to obtain documents
- Has no obligation to the banks — their obligation is commercial, to the exporter
Key URC 522 Articles
- Article 4: Collection instructions must be complete and precise
- Article 9: Good faith and reasonable care obligations of banks
- Article 26: Case-of-need — the exporter can appoint a representative in the buyer's country