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DISCOUNT UNDER TRANSFERRED CREDIT

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QUERY

Hi;

As per sub-article 38-j of UCP 600 it is possible to make the transferred credit available at the place to which a documentary credit is transferred.

Sub-article 12-b of UCP 600 provides for discount authorization simply by the issuing bank nominating a bank to accept a draft or incur a deferred payment undertaking.

Taking into consideration of the above sub-articles and sub-articles 7-c and 8-c of UCP 600, could you please provide me with your comments for the below detailed issue:

Under a confirmed transferable credit, the confirming transferring bank has transferred the credit to the 2nd beneficiary by making the credit available with the 2nd beneficiary’s local bank. Does the 2nd beneficiary’s local bank has the right to prepay or purcahse a draft accepted by it or a deferred payment undertaking incurred by it on “without recourse” basis under the protection of UCP?

I am waiting for your comments…

——————–

ANSWER
Hi,

The second beneficiary’s bank is the bank nominated under the transferred L/C to accept a draft or incur a deferred payment undertaking, hence, in accordance with Article 12 (b) it may, at its own option, discount its own deferred payment undertaking or acceptance on without recourse basis.

Best regards,
N.H.Duc …

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2 Comments

  1. anonymous

    January 24, 2013 at 11:01 am

    Anonymous writes:Nominated is not obligated to honor/nego, why is it 2nd bene's bank pays without recourse given above scenario? I thought only nominated bank which also confirming bank pays without recourse? Thank you for your opinion.

    Reply

  2. mroldmanvcb

    January 24, 2013 at 4:01 pm

    The question is talking about sub-article 12 (b) that allows the nominated bank to prepay its own deferred payment undertaking or the term draft accepted by the nominated bank.The answer is based on the assumption that the transferred L/C is available with the second beneficiary’s bank by acceptance or deferred payment and that this bank has acted on its nomination. So, it can prepay its own deferred payment undertaking or the accepted draft without recourse.The nominated confirming bank under usance L/C must honour complying documents (i.e., accept the term draft or incur its deferred payment undertaking and pay at maturity). It is not obliged prepay its own deferred payment undertaking notwithstanding sub-article 12(b). However, if it agrees to prepay, it should pay without recourse.

    Reply

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