UNDERSTANDING THE ROLE AND OBLIGATIONS OF A NOMINATED BANK UNDER A NEGOTIATION CREDIT QUESTION Dear Sir, If I receive a Letter of Credit (LC) advised to me with the clause “Available by negotiation at any bank; At Sight,” is my next step to ask my bank whether it will act as the negotiating bank, and request a written confirmation if it agrees? I understand that a nominated bank has no obligation to negotiate … Read More
IS ASSIGNMENT OF PROCEEDS UNDER A DOCUMENTARY CREDIT SUBJECT TO THE EXPIRY DATE? QUESTION Dear My Friend, We hope my email finds you well. I need your opinion regarding the assignment of proceeds under a documentary credit. Is it subject to the expiry date? Thanks for your support. Firas Jawad ________ ANSWER Hi Firas, Thank you for your interesting question. Article 39 of the UCP 600 deals with the assignment of proceeds. It … Read More
WHERE THE PRESENTING/COLLECTING BANK DOES NOT ACT IN GOOD FAITH OR EXERCISE REASONABLE CARE QUESTION Dear Mr. Old Man, I have a case to seek your advice. Our bank has forwarded 6 sets of D/P(s) for USD525,000 to a bank in Egypt with the instructions “Release Documents against Payment”. After many payment tracers, the collecting bank replied that all sets of D/P have been released against 30 days, 60 days, 120 days…from health approval … Read More
PAYMENT OBLIGATION OF THE TRANSFERRING BANK QUESTION Dear Mr. Old Man, I have two questions regarding transferable LCs: When the second beneficiary presents complying documents to the transferring bank, is that bank obligated to pay the second beneficiary immediately? Or must it wait until the documents are forwarded to the issuing bank and payment is received before settling with the second beneficiary? Are the sets of … Read More
SHOULD A FINANCE COMPANY BE ACCEPTED AS A COLLECTING BANK IN A DOCUMENTARY COLLECTION TRANSACTION? QUESTION Dear Mr. Old Man, I have an exporter client who wishes to proceed with a documentary collection (D/P – Documents against Payment) transaction. However, the buyer only maintains an account with a finance company—not a bank. I’m unsure whether a finance company can legally or practically act as a collecting bank under URC 522. If it can, on what … Read More
BUYING SCRAP ON LC: HOW TO PAY ONLY FOR WHAT YOU GET QUESTION Dear Mr. Old Man, I’m new to international trade and arranging Letters of Credit (L/C). My previous transactions were either local or based on strong personal recommendations with overseas partners. Now, I’m looking to import used car batteries (scrap metal) through a contact I found online, and I want to ensure that payment is arranged in the most secure … Read More
ENDORSEMENT OF DRAFTS UNDER A LETTER OF CREDIT – WHO OWNS THE PROCEEDS QUESTION Dear Mr. Old Man, I have 2 questions that need your expertise clarification: 1/ Does the act of endorsement of drafts by the LC beneficiary to presenting bank mean the transfer of beneficial right? 2/ Must the beneficiary endorse the draft to the presenting bank to authorize it to claim reimbursement/payment from the issuing bank? Thank you so much … Read More
DOCUMENTS PRESENTED UNDER AN EXPIRED L/C QUESTION Hi Mr. Old Man, Our bank presented documents under a Letter of Credit that had already expired. The issuing bank replied, saying that since the L/C had expired, they would treat the documents as a collection. Two weeks later, they messaged again to say they had released the documents to the applicant upon acceptance, and payment would be made … Read More
WHO PAYS THE DISCOUNTING CHARGES IN A DEFERRED PAYMENT LC? QUESTION Hi, An LC for USD 1,000,000 is issued with these key terms: Usance LC: 180 days from date of negotiation 41D: Available with any bank in the beneficiary’s country by negotiation 71D: All charges are on account of the applicant The beneficiary asks the negotiating bank to discount the bill at 3% per annum. Who is responsible for paying … Read More
COURT INJUNCTION TO SUSPEND L/C PAYMENT QUESTION Dear Mr. Old Man, Our bank issued a deferred payment L/C. The documents presented were fully compliant. Upon confirming compliance, our bank incurred its deferred payment undertaking and notified the foreign bank accordingly. The buyer accepted the obligation to pay on the due date and received the documents to collect the goods. However, when the goods were received, they … Read More