WHETHER A CONFIRMING BANK IS A NOMINATED BANK — AND WHAT HAPPENS WHEN THERE ARE TWO CONFIRMING BANKS

INTRODUCTION

Questions about whether a confirming bank is also a nominated bank may sound academic at first glance, but in practice they can become critically important — especially when a credit involves more than one confirming bank, a specific place of expiry, and documents moving across several borders.

This Q&A examines a real-life scenario involving two confirming banks and explores how UCP 600 addresses the roles of confirming and nominated banks, the significance of the place of expiry for presentation, and the treatment of documents that are delayed or even lost in transit. It serves as a reminder that, in documentary credits, the place of presentation matters more than the physical location of the documents.

QUESTION

Dear Mr. Old Man,

Based on your comment that “a confirming bank is certainly a nominated bank”, I would be grateful if you could elaborate further, particularly in relation to the place of expiry of the credit and the existence of two confirming banks (commonly referred to as first and second confirming banks).

Suppose a credit is issued in Baghdad by an Iraqi bank and transmitted to ABC Bank in Beirut, with a request for ABC Bank to add its confirmation and further advise the credit to XYZ Bank in Bangkok, requesting XYZ Bank also to add its confirmation. The credit is available with XYZ Bank, and the place of expiry for presentation of documents is XYZ Bank’s counter in Bangkok.

Both ABC Bank and XYZ Bank are confirming banks. In this case:

• Which bank should be regarded as the nominated bank?
• How can there be two nominated banks when there is only one place of expiry?
• From a practical perspective, where does the credit “end”?
• If XYZ Bank is to obtain payment from ABC Bank, how does this reconcile with the UCP 600 requirement that a confirming bank pays only against a complying presentation at its counter?
• What happens if the documents forwarded by XYZ Bank do not reach ABC Bank?
• If the beneficiary presents the documents to XYZ Bank on the last day of expiry, how long does ABC Bank have to honour or reimburse?
• For how long is courier delay acceptable after expiry, and when can documents reasonably be regarded as “lost in transit”?

Any insights on these issues would be greatly appreciated.

Best regards,

T.T

_____

ANSWER

Dear T.T,

Thank you for raising this thoughtful and rather sophisticated question. It touches on several concepts under UCP 600 that are often misunderstood: the status of a confirming bank, the place of expiry, and the handling of documents when more than one confirming bank is involved.

1. Is a Confirming Bank a Nominated Bank?

Although Article 2 of UCP 600 does not expressly state that a confirming bank is a nominated bank, a combined reading of Articles 2, 8, and 35 leads to a clear conclusion: a confirming bank is to be regarded as a nominated bank.

Article 8 repeatedly refers to situations involving “the confirming bank” and “another nominated bank” or “other nominated bank”. This wording necessarily implies that the confirming bank itself falls within the category of nominated banks. Accordingly, a confirming bank may properly be described as a nominated confirming bank, irrespective of whether the credit is stated to be available with it or with another bank.

For this reason, a confirming bank should be regarded as always and certainly a nominated bank under UCP 600.

2. Two Confirming Banks in One Credit

In the scenario described:

• The credit is issued by an Iraqi bank,
• ABC Bank in Beirut adds its confirmation,
• XYZ Bank in Bangkok also adds its confirmation,
• The credit is available with XYZ Bank,
• The place of expiry for presentation is XYZ Bank’s counter.

Although the involvement of two confirming banks is uncommon, it does not change the basic principles of UCP 600. In this structure:

• Both ABC Bank and XYZ Bank are confirming banks, and therefore both are nominated banks.
• Functionally, XYZ Bank acts as the presentation and negotiating bank, as the credit is available with it and the place of expiry is its counter.
• ABC Bank acts as an upstream confirming bank, responsible for honouring or reimbursing XYZ Bank upon a complying presentation.

3. Place of Expiry and Late Arrival of Documents

Since the place of expiry for presentation is XYZ Bank’s counter, a presentation made there on or before the expiry date — and within the period for presentation — is a valid and timely presentation, even if the documents reach ABC Bank after the expiry date.

Accordingly, ABC Bank cannot raise a discrepancy based on expiry merely because the documents arrive at its counter after the credit has expired. The expiry date governs presentation at the stated place of expiry, not the physical receipt of documents by an upstream confirming bank.

4. Documents Lost in Transit

This issue is addressed directly by Article 35 of UCP 600, which provides that if a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, the issuing bank or confirming bank must honour or reimburse, even if the documents are lost in transit.

Accordingly, if XYZ Bank has determined the presentation to be complying and has forwarded the documents to ABC Bank, ABC Bank remains obliged to honour or reimburse, even where the documents are lost in transit.

In practice, ABC Bank may reasonably require XYZ Bank to provide:

• Evidence that the presentation was complying,
• Proof of dispatch (such as a courier receipt), and
• Copies of the documents that were sent.

5. Examination Period

Under sub-article 14(b) of UCP 600, each bank has a maximum of five banking days following the day of presentation to it to determine whether a presentation is complying.

Accordingly:

• XYZ Bank’s five banking days run from the date of presentation at its counter.
• ABC Bank’s five banking days run from the date it receives the documents, or, in the case of loss in transit, from the date it receives sufficient evidence in accordance with Article 35.

The expiry date of the credit does not affect these examination periods, provided that presentation was validly made at the stated place of expiry.

6. Practical Considerations on Courier Delay

In modern practice, courier delivery is fast and traceable. Where payment or reimbursement is not received within a reasonable period after dispatch, the presenting or negotiating bank would normally verify delivery status with the courier company and follow up with the issuing or confirming bank.

Documents may only be regarded as “lost in transit” once courier tracking confirms non-delivery.

CONCLUSION

In summary:

• A confirming bank is a nominated bank under UCP 600.
• Where two confirming banks are involved, both retain that status.
• The place of expiry governs the timeliness of presentation, not the physical arrival of documents at an upstream bank.
• Loss of documents in transit does not relieve a confirming bank of its obligation, provided the conditions of Article 35 are met.

I hope this rather long answer helps clarify your thoughtful question.

Kind regards,

Mr. Old Man