Mr Old Man Payment Q&A LOST IN TRANSIT: WHEN THE NOMINATED BANK ISN’T ACTING AS A NOMINATED BANK By Mr Old Man Posted on 6 seconds ago 3 min read 0 0 0 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUESTION Hi, I’d like to seek your advice on the request to “skip document checking” as described below: The LC is available with any bank by negotiation. The beneficiary submitted the documents to Bank A. At the beneficiary’s instruction, Bank A forwarded the documents to the issuing bank, stating in the covering schedule that it had not checked the documents. Questions: Is Bank A regarded as a nominated bank? Is the issuing bank obligated to honour in the event the documents are lost in transit between Bank A and the issuing bank? Who assumes the risk of non-payment in this case? What is the best way to handle the documents under this LC? Thank you for your time and response! Lise ——— ANSWER Dear Lise, Thank you for your question. Here is my response: If Bank A forwards the documents to the issuing bank and clearly states in the covering schedule that it has not examined the documents, it is not acting as a nominated bank. In this scenario, Bank A is merely functioning as a forwarding agent or presenter on behalf of the beneficiary. Since Bank A is not acting as a nominated bank under the credit, it cannot benefit from Article 35 of UCP 600. Therefore, if the documents are lost in transit between Bank A and the issuing bank, the issuing bank is not obligated to honour the credit. In this case, the beneficiary bears the risk of non-payment. Article 35 of UCP 600—regarding documents lost in transit—applies only when a nominated bank or confirming bank has forwarded the documents to the issuing bank. To indirectly benefit from this article, Bank A should forward the documents as a nominated bank, even if it does not negotiate or examine them. In that case, the covering schedule should simply state that the documents appear to comply with the credit terms, and request that the proceeds be remitted to Bank A’s account (e.g., “Please remit proceeds to our account number … with Bank …”). Bank A would then settle the proceeds with the beneficiary according to their internal arrangement. I hope this clarifies the issue. Best regards, Mr. Old Man