IS THE CONFIRMING BANK A NOMINATED BANK?

4 Comments

1. 

   anonymous

   August 7, 2011 at 2:08 pm

   Anonymous writes:Could you please state points of differences between the confirming bank and nominated bank?

   Reply

2. 

   mroldmanvcb

   August 8, 2011 at 12:08 pm

   A confirming bank is certainly a nominated bank or a nominated confirming bank. But, a nominated bank is not always a confirming bank.Sub-article 12 (a) says "Unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary".A nominated bank which is also a confirming bank must hounour or negotiate the complying documents whereas a nominated bank which is a non- confirming bank is not obliged to hounour or negotiate the complying documents

   Reply

3. 

   anonymous

   December 13, 2013 at 12:12 am

   Charles writes:Based on what you above ''confirming bank is certainly a nominated bank'' I would be grateful if you could elaborate further on the issue, especially when we link it to the place of expiry of the credit and to the existence of two confirming bank (commonly called first and second confirming banks).Supposedly, an L/C is issued in Baghdad by an Iraqi bank, sent to a Lebanese bank called ABC in Beirut, asking the Lebanese bank to transmit it with its confirmation to, let us say, a Thai bank in Bangkok. Further, the L/C requests the Thai bank XYZ to add its confirmation. Place of expiry for presentation of documents is XYZ counters in Bangkok. Both are confirming banks but which bank you consider here as nominated bank ABC or XYZ. How can both be nominated bank with one place of expiry ? where this LCs ends? Supposedly, XYZ is to obtain payement from ABC but, according to UCP600, ABC will pay only against complying presentation. What happens if the documents are sent by XYZ and do not reach ABC for payment. How can ABC, as confirming bank, pay without a complying presentation at its counters. Further, The L/C expires at a given date at XYZ counters. Supposedly, beneficiary presents the documents to XYZ on the last day. XYZ send documents to ABC. How many days will ABC have to pay and for how long would the delay courier between XYZ and ABC (which come after credit expiry) will remain acceptable ? after how long will you define that documents are ''lost in transit'' ? Any ideas on these issues ?Thanks

   Reply

4. 

   mroldmanvcb

   December 13, 2013 at 10:12 am

   Hi,The definition of the term “nominated bank’ in Article 2 UCP 600 makes me think that if a credit is available with a nominated bank other than the confirming bank, the confirming bank will not be regarded as a nominated bank. Yet, the phrases “other nominated bank” and “another nominated bank” in Article 8 UCP 600 makes me think that a confirming bank is also a nominated bank notwithstanding whether the credit is available with the confirming bank or with another nominated bank. This is the reason why I tend to support the view that a confirming bank is always and certainly a nominated bank or a nominated confirming bank.Your case is a bit different because there are two confirming banks (ABC Bank and XYZ Bank) involved. However, this does not change my view that both confirming banks are nominated banks of which (I guess) ABC Bank could be a nominated paying bank and XYZ Bank could be a nominated negotiating bank. As the place of expiry for presentation is XYZ Bank’s counter, provided the complying documents are presented to XYZ Bank within the specified period for presentation and with the credit validity, XYZ Bank must negotiate the documents without recourse and forward the documents to ABC Bank for payment/reimbursement. As the place of expiry for presentation is XYZ Bank’s counter and not ABC Bank’s counter, ABC Bank cannot raise the discrepancy if the complying documents reach its counter after the expiry date.How about the documents lost in transit? Article 35 says “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”. So, in accordance with this article, ABC Bank must pay even when the complying documents forwarded to ABC Bank are lost in transit. Yet, XYZ Bank, if required, must provide ABC Bank with proofs evidencing that the documents lost in transit are complying and that XYZ Bank has forwarded the complying documents to ABC Bank. In this case, ABC Bank may require XYZ Bank to provide it with a set of photocopied documents lost in transit and its courier receipt.According to sub-article 14 (b) each bank involved has a maximum of five banking days following the day of presentation to determine if the presentation is complying. However, it is not encouraged that banks try to make full use of this five banking day rule. It should honour when it determines the documents are complying and give notice of dishonour when it determines the documents are discrepant. Nowadays shipment by courier service is extremely fast. For example, it takes only 3 days for a set of documents sent via DHL from Da Nang, Vietnam to be delivered to a recipient in New York, USA. Delivery status can be checked via Courier Company to know whether and when the documents have been received by the recipient. The presenting/negotiating bank would contact the issuing bank or the confirming bank where applicable to inquire the status of the documents if no payment is received after 8 or 10 days from the date of dispatch of the documents. If the issuing bank or the confirming bank answer that it has not yet received the documents, then the presenting bank can check with the courier company to determine whether the documents are delivered to the recipient or lost in transit.Kind regards,Mr. Old Man

   Reply