NEGOTIATION OF DOCUMENTS NOT INCLUDING ORIGINAL TRANSPORT DOCUMENT

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QUERY FROM Q.
Re: Negotiation of documents not including original transport document
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I would like to hear your opinion on the following case:

LC payable 60 days after shipment date issued by Bank A in country A by order and for account of Applicant in country A. Goods are to be delivered to a consignee other than Applicant against a Delivery Note. (Consignee and Beneficiary are in Country B). Documents required include: Invoice, Packing List and Delivery Note.

Delivery Note is not a document of title under UCP 600. Can my bank negotiate the said documents?

Looking forward to receiving your comment soon.
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COMMENT
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Hi Q.

Negotiation is understood as the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. Negotiation is not restricted only to a presentation that must include a document of title like an original bill of lading. Banks can negotiate a set of documents including an AWB which is not a document of title. The following should be considered before agreeing to negotiate the documents presented under the L/C:

– Compliance of documents: Do the documents presented constitutes a complying presentation? Is the presentation made before the last day for presentation and/or within the validity of the L/C? Please note that as per UCP 600 sub-article 14(c) a presentation including one or more original transport documents subject to articles 19, 20, 21, 22, 23, 24 or 25 must be made by or on behalf of the beneficiary not later than 21 calendar days after the date of shipment as described in these rules, but in any event not later than the expiry date of the L/C. As to your particular case, a delivery note is presented instead of original transport document, therefore, L/C must stipulate how to determine the last day for presentation, e.g., based on the date of the delivery note but within the validity of the L/C or just within the validity of the L/C.
– Creditworthiness of the issuing bank;
– Country’s risks: Political and economic risks of the issuing bank’s and importer’s country;
– Has the issuing bank accepted the draft or incurred its deferred payment undertaking?
– Is your bank nominated or authorized by the issuing bank to negotiate/discount the document? This is to ensure your bank’s legal title to the issuing bank’s reimbursement or to ensure your bank’s legal position where there is any dispute with the issuing bank with regard to the reimbursement.
– Negotiation with recourse or without recourse?

If your bank intends to negotiate on a without recourse basis, these above prerequisites should be considered before decision is made.

Negotiation on a with recourse basis is much the same as bank advances or lending against the security of export documents. Your bank must ensure the right of recourse to the beneficiary in the case where no reimbursement is received from the issuing bank. Financial standing and creditworthiness of the beneficiary are prerequisites to be considered.

Best regards,
Mr. Old Man