Riding up to the peak of Hai Van Pass
QUESTION
Dear Mr. Old Man,
The beneficiary presents to our bank the documents under an LC available with the issuing bank by deferred payment and asks us to negotiate the documents.
What are the risks if we agree to negotiate?
Thank you.
Best regards,
PMB
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ANSWER
Hi,
Where the LC is available with the issuing bank by deferred payment, the issuing bank does not authorize any bank to negotiate or discount the documents. If the negotiating/discounting bank has negotiated/discounted the documents, it cannot bring a legal action in its name against the issuing bank in case the issuing bank fails to reimburse the negotiating/discounting bank.
However, you may accept to negotiate/discount the documents on with recourse basis and what you need to do is to assess the beneficiary’s ability to repay the funds in the event the issuing bank, for some reason, fails to reimburse/to pay.
Kind regards,
Mr. Old Man
