QUESTION
Dear Mr. Old Man,
Is there a possibility that LC is available by negotiation with advising bank who also adds its confirmation, but drafts drawn on issuing bank?
Any UCP article/opinion dealing with this matter?
Thanks in advance for yr reply
Shirki
——-
ANSWER
Hi,
Where LC is available by negotiation with the confirming bank, drafts SHOULD and MUST be drawn on the issuing bank or on another nominated bank other than the confirming bank.
Please refer to the definition of negotiation in UCP 600 Article 2, which says: “Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) …”. The confirming bank cannot negotiate drafts drawn on itself. Where drafts are drawn on the confirming bank, it must pay and not negotiate.
Drafts can be drawn on the confirming bank under LC available by acceptance.
Notwithstanding the above analysis, in practice some confirming banks would insist drafts be drawn on themselves irrespective of whether LCs are available by negotiation or by acceptance.
Kind regards,
Mr. Old Man
Naima Dakki
October 31, 2016 at 5:58 pm
Please does an L/C available by payment with the confirming bank require drafts drawn on the confirming bank
mroldman
November 1, 2016 at 2:13 pm
L/C available by payment does not require presentation of drafts.
For further understanding, please visit here https://nhducdng.wordpress.com/2010/03/13/lc-availability/
naima dakki
November 2, 2016 at 3:24 pm
Good Day,, Thank you for your reply ,, So an L/C available by payment with the confirming bank does not require any drafts. Please another question: For the Article 52 A which refers to the issuing bank.Is it mandatory for this article to to be shown on the swift message of the L/C which is M700. Thank you
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mroldman
November 2, 2016 at 5:40 pm
Hi,
MT 700 does not contain Field 52a because the sender of MT 700 is the issuing bank.
MT 710 is the message sent by an advising bank, which has received L/C from the issuing bank or the non-bank issuer, to the bank advising the beneficiary. MT 710 contains Field 52a – issuing bank of original L/C which is optional. In absence of this field, the sender of the message is the issuing bank of original L/C.
Kind regards,
Mr. Old Man
naima dakki
November 2, 2016 at 9:33 pm
Hi,, Thank you very much
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