Answer:
I contacted Bill Saffici, a friend who has been very involved in the check payment business since before the 9/11 disaster spurred the U.S. move toward electronic collection, and has contacts with colleagues in the Canadian banking system. Here's what he told me, after he posed the question to his Canadian sources:
"I received responses from three Canadian organizations regarding the explanation for use of the “Domicile Error” Return Reason. It is not a frequently used return reason.
1. MICR Incorrect or Missing – usually refers to the Transit field (high order 5 digits of the RT field).
2. Domicile Incorrect generally means the Bank Transit & Address is incorrect. It may be an invalid transit and the FI isn't able to determine where the item should be directed.
3. The return reason Incorrect Domicile is used when the routing transit (specifically, the 5 digit transit number) is invalid/does not exist.
"In Canada, each branch has its own Transit number (high order 5 digits of RT) and when posting items, they are applied not only to the account holder’s account but also its domicile branch. Each bank processes cheques against a national FI (Financial Institution) table to validate the RT field.
"With respect to the depositor, I think the bank should explain the probable cause and have the depositor go back to the maker and have the maker speak to its bank before issuing another cheque, otherwise, the same condition could result. [Canadian cheques cannot be represented.]"
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