CAN A NON – NOMINATED BANK DISCOUNT A BILL?

(quoted from DCPro Discussion Forum 16 Dec 2015)

QUESTION

Bank B in Germany confirmed a L/C, issued by Bank A in Brazil.

Bank B forwarded the L/C by MT710 to the beneficiary through an advising bank in Canada. Field 40B states “Irrevocable and adding our confirmation”. The L/C is available with the confirming bank B in Germany by def. payment.

Beneficiary has submitted the credit conform documents to the advising bank in Canada, and requested them to discount/purchase the documents after receipt of an authenticated Swift from the confirming bank showing the due date of payment.

Accordingly, advising bank in Canada forwarded the documents to the confirming bank in Germany.

Confirming bank, Bank B in Germany sent a swift to the documents remitting bank in Canada indicating the due date of payment.

My question is,

if the beneficiary’s bank in Canada discount/purchase the documents based on the confirming bank’s swift, will they get any UCP protection?

It could be mentioned that beneficiary’s bank in Canada is not a nominated bank by virtue of Article 2 of the UCP600. As such Article 8 may not be applicable for them.

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ANSWER

Hi,
.
Sub-article 12 (b) allows the nominated bank to prepay or purchase a DPU incurred by that nominated bank. Since the LC is available with the confirming bank (Bank B) by deferred payment, it is only the confirming bank that is authorized to discount its own DPU.
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The beneficiary’s bank in Canada is not the nominated bank that is authorized to discount such DPU. Therefore, it is not protected by the UCP and cannot take legal action in its name against the confirming bank in the even it has discounted the DPU and is not reimbursed by the confirming bank.
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It can discount the confirming bank’s DPU when it gets the confirming bank’s approval. However, any dispute with regard to non-reimbursement by the confirming bank shall be settled based on the relevant agreement between the issuing bank and the confirming bank and not on the UCP.
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Kind regards,
Duc N.H (Mr. Old Man)