Mr Old Man Payment Q&A Restricted UPAS LC: Can the Issuing Bank Refuse If Documents Bypass the Discounting Bank? By Mr Old Man Posted on 21 hours ago 5 min read 0 0 21 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Introduction UPAS LCs (Usance Payable at Sight) are widely used to combine supplier liquidity with buyer credit terms. However, operational questions often arise when the credit is restricted to a nominated (discounting) bank, but the beneficiary presents documents directly to the issuing bank instead. Does bypassing the restricted bank create a discrepancy? Can the issuing bank refuse the documents on that basis? Let us examine the issue strictly under UCP 600. ✅ Question Dear Mr. Old Man, I have a question that needs your expert opinion. A letter of credit is issued under a UPAS mechanism and is restricted to a nominated (discounting) bank. The beneficiary sends the documents directly to the issuing bank, bypassing the nominated bank. If all terms and conditions of the credit are complied with, can the issuing bank raise discrepancies on the ground that the documents were not forwarded through the discounting bank? Thank you. Obidur Rashid Chanchal _______ ✅ Answer Screenshot Dear Obidur, Thank you for your question. A UPAS LC (Usance Payable at Sight) is fundamentally a usance credit where: • The issuing bank undertakes to pay at maturity (deferred payment undertaking), and • The nominated bank may provide sight payment to the beneficiary under a financing arrangement agreed with the issuing bank. It is important to understand that the UPAS structure is primarily a financing mechanism between banks. It does not alter the examination or honour obligations governed by UCP 600. 1️. Availability of the Credit Under UCP 600 Article 6(a): A credit available with a nominated bank is also available with the issuing bank. Therefore, unless the credit expressly prohibits presentation to the issuing bank (which would be highly unusual and legally problematic), the beneficiary is entitled to present documents directly to the issuing bank. Restriction affects who may negotiate or discount — not the issuing bank’s availability to receive presentation. 2️. Examination and Discrepancy Rights If documents are presented directly to the issuing bank: • The issuing bank must examine the documents under UCP 600 Article 14. • The issuing bank may raise discrepancies only if the documents fail to comply with the terms and conditions of the credit. The mere fact that the documents were not routed through the nominated or discounting bank does not constitute a discrepancy, provided the credit does not expressly require such routing as a condition of presentation. 3️. Honour Obligation If the presentation complies: • The issuing bank must honour the credit. • In a UPAS structure, this means incurring its deferred payment undertaking and paying at maturity. The beneficiary may lose the benefit of early payment under the UPAS arrangement, but this does not affect the issuing bank’s obligation under UCP 600. Conclusion Bypassing the nominated (discounting) bank in a restricted UPAS LC does not, in itself, justify refusal. The issuing bank’s right to refuse depends solely on documentary compliance — not on internal financing arrangements between banks. As always in documentary credit practice, financing mechanics and honour obligations must be carefully distinguished. I hope this clarifies your question. Best regards, Mr. Old Man