WHERE THE NOMINATED BANK DOES NOT NEGOTIATE THE DOCUMENTS

QUESTION

Hi Mr. Old Man,

I feel confused with the following case:

We as advising bank received a letter of credit available with any bank by negotiation and advised the same to the beneficiary.

After shipment the beneficiary presented the documents to our bank and we  forwarded the documents to the issuing bank without negotiation. I understand that in this case our bank acted as a presenting bank only.

My questions:

Is our bank still regarded as the nominated negotiating bank?

Where no negotiation is made by the nominated bank, the letter of credit available by negotiation is actually the same as the letter of credit available by payment. Is my understanding correct?

Thank you for your help.

Best regards,

Lan224

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ANSWER

Hi,

1) Nominated bank is defined in Article 2 UCP 600 as the bank with which the LC is available or any bank in the case of LC available with any bank (by negotiation, by payment, by acceptance or by deferred payment).

LC available with any bank by negotiation allows any bank (including your bank) to negotiate the documents presented under the LC.

The nominated bank that has acted on its nomination, i.e., has negotiated the complying documents, is entitled to the reimbursement from the issuing bank.

The nominated bank that forwards the documents without negotiation to the issuing bank does not act on its nomination, and therefore, is not deemed to be the nominated bank. In this case, it acts as the presenter that presents the documents on behalf of the beneficiary to the issuing bank for payment.

By the way, please note that unless a nominated bank is the confirming bank, it is not obliged to negotiate except when expressly agreed to by that nominated bank and so communicated to the benficiary (see sub-article 12 (a) UCP 600).

2) I agree with you that where LC is available by negotation and the nominated bank forwards the documents without negotiation to the issuing bank for payment, LC available by negotiation is, to some extent, the same as LC available by payment.

Kind regards,

Mr. Old Man