Bypassing the Nominated Bank: Shortcut or Detour?

In trade finance, the “shortest route” is not always the fastest one. When a nominated bank chooses not to act, beneficiaries often look for ways to move things along—sometimes by going directly to the confirming bank. Sounds simple enough… but is it really that straightforward?

 Let’s walk through a practical case raised by Arun.

Question

Dear Mr. Old Man,

Hope you are doing well. I would appreciate your expert opinion on the following case:

Facts of the case:

1. LC issuing bank: IB
2. Confirming bank: CB
3. Nominated bank: NB
4. The LC is available with NB by deferred payment.
5. NB is not acting on its nomination; it only dispatches documents to CB.
6. CB examines the documents and issues its Deferred Payment Undertaking (DPU).
7. The beneficiary is considering presenting documents directly to CB for certain shipments with short transit time, in order to save time.
8. The LC does not prohibit direct presentation.

 Queries:

1. Does Article 6(a) apply to the confirming bank as well?
2. If the LC is available with NB, is it also available with CB?
3. What should the beneficiary keep in mind when bypassing NB (apart from Article 35)?

Many thanks for your guidance.

Best regards,
Arun Ambar

_______

Answer

 Dear Arun,

A very practical question—and one that reflects the gap between what UCP says and how things actually work on the ground.

1. Does Article 6(a) apply to the confirming bank?

 UCP 600 Article 6(a) states that a credit available with a nominated bank is also available with the issuing bank. It does not say that it is also available with the confirming bank.

However, once a bank adds its confirmation, it takes on an independent obligation under Article 8. So, if compliant documents are presented to the confirming bank, it must honour—even if the nominated bank has chosen to sit this one out.

2. Is the credit also available with the confirming bank?

 Strictly by the wording of UCP 600—no.

But in practice—effectively yes. A confirming bank that has added its confirmation cannot refuse to receive and examine a complying presentation. So direct presentation to the confirming bank is acceptable, especially when the nominated bank is not acting on its nomination.

3. What should the beneficiary keep in mind when bypassing the nominated bank?

 Here comes the “shortcut vs detour” part:

• The confirming bank may need to carry out authentication checks if documents are presented directly, which can cause delays.
• Presenting through a bank (not necessarily the nominated bank) can help smooth the process.
• The beneficiary should make sure the documents are fully compliant, as there is no nominated bank to catch or help correct any discrepancies before they reach the confirming bank.
• In practice, bypassing the nominated bank may save a day—or cost a few more.

Mr. Old Man’s note:
In trade finance, speed is important—but certainty is priceless. A cooperative nominated bank is like a good mechanic: you may not notice them when everything runs smoothly, but you will miss them when something goes wrong.

Hope this helps clarify the situation.

Best regards,
Mr. Old Man