IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?

QUESTION

Dear Mr. Old Man,

I hope you’re doing well.

Could you please help clarify the following questions regarding the LC collection procedure between the beneficiary and the presenting bank?

1. Is the beneficiary required to complete any authorization process with the presenting bank when instructing them to forward documents to the issuing bank for payment or to the nominated bank for negotiation?
2. As a nominated bank in an LC transaction, how can we confirm that the presenting bank is acting based on the beneficiary’s instructions? Is there any specific documentation that serves as proof?

I truly appreciate your time and insights on this matter.

Best regards,

LKL

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ANSWER

Hi,

According to UCP 600, Article 2, the presenter refers to the beneficiary, a bank, or any other party making a presentation. Therefore, the presenting bank is understood as the bank that presents documents on behalf of the beneficiary.

When the beneficiary submits documents to the presenting bank for forwarding to the issuing bank for payment or to the nominated bank for negotiation, they typically provide a written document containing:

• Key details of the L/C and document set
• Instructions for the bank on whether to check the documents before forwarding or to send them without checking.

The presenting bank usually has an established correspondent relationship with the issuing or nominated bank. As a result, the issuing/nominated bank does not need to verify whether the beneficiary has  authorized the presenting bank to send the documents. Instead, they only need to authenticate the signatures on the cover letter that accompanies the documents.

Best regards,

Mr. Old Man