When Reimbursement Authorization Should Be Issued?
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When Reimbursement Authorization Should Be Issued?
Will reimbursement authorization will be issued by Issuing Bank after receiving complying docs from nominated bank or just after issuance of LC. if later case is applicable, will Reimbursing bank pay just after receiving claim from nominated bank or will it confirm from Issuing bank whether the presentation was complying or not.
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When Reimbursement Authorization Should Be Issued?
In my opinion, at the time of issuance of LC and advising, the issuing bank will inform about the reimbursing bank to the advising bank and also to the bank for which the LC is available. The reimbursing bank after receiving the claim from the nominated bank will have to honor the reimbursement without the certificate of compliance with LC terms and conditions.
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Two options
Issuing Reimbursement Authorization (RA) by MT740 to Reim bank after issuing LC is the best practice. However, if issuing bank would like to protect itself, it shall send MT740 after receiving complying docs. Because, If Reim bank effected payment to nominated bank but Issuing bank found dics docs, after that, return paid amount from nominated bank is more difficult and so long time if nominated bank is not honest bank