Home Uncategorized DRAFTS DRAWN ON THE CONFIRMING BANK UNDER NEGOTIATION LC

DRAFTS DRAWN ON THE CONFIRMING BANK UNDER NEGOTIATION LC

1 min read
5
0
3,685

Camera 360

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

Load More Related Articles

Check Also

WHEN A BILL OF LADING MUST INDICATE ACTUAL PORT OF DISCHARGE

QUESTION Dear Sir, My letter of credit (LC) specifies the Port of Discharge as “BAHRAIN IN…