Mr Old Man Q&A WHAT ARE DISADVANTAGES IF THE BENEFICIARY PRESENTS THE DOCUMENTS TO A BANK OTHER THAN THE NOMINATED BANK By Mr Old Man Posted on December 17, 2018 4 min read 2 0 3,561 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUESTION Dear Mr. Old Man, I have some questions for you as follows: LC is available with Bank Y in Country X by negotiation . However, the beneficiary presents the documents to Bank Z in Country X. My questions: 1/ Can the beneficiary present the documents to Bank Z? 2/ What are disadvantages if the beneficiary does not present the documents to Bank Z? Thanks and best regards, T.V ——– ANSWER Hi, Where the LC is available restrictedly with a named nominated bank by negotiation, the beneficiary should make presentation to that nominated bank for negotiation. The nominated bank may agree to negotiate the documents as it is authorized by the issuing bank to do so and is entitled to the reimbursement from the issuing bank. (Please note that unless the nominated bank is the confirming bank, it is not obliged to negotiate the documents except when it agrees and so communicates to the beneficiary). If the beneficiary makes presentation to a bank other than the bank nominated in the LC, the non-nominated bank would not agree to negotiate the documents as it is not authorized by the issuing bank to do so. In this case, it is acting as a presenting bank which makes presentation to the issuing bank on behalf of the beneficiary. Here are my answers to your questions: 1/ Yes, the beneficiary may present the documents to Bank Z which will forward the documents to the issuing bank for payment. Bank Z is acting as a presenting bank only. The issuing bank must honour if it has received a compliant presentation prior to the expiry date stated in the LC as attached to the place of presentation. 2/ Bank Z is not the nominated bank, hence, it may not be ready to purchase the documents. This may be a disadvantage for the beneficiary who needs early money for his business. Another disadvantage is that the beneficiary will not be protected by Article 35, i.e., not be paid by the issuing bank, in the event the documents sent by the non-nominated bank to the issuing bank have been lost in transit. For your reference, here is Article 35: … If a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank. … Kind regards, Mr. Old Man
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?