Articles Q&A WHETHER A CONFIRMING BANK IS A NOMINATED BANK AND… By Mr Old Man Posted on December 13, 2013 10 min read 16 0 9,795 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUESTION Based on your comment ”confirming bank is certainly a nominated bank” (http://my.opera.com/mroldmanvcb/blog/2010/03/06/is-the-confirming-bank-a-nominated-bank#comments ) I would be grateful if you could elaborate further on the issue, especially when we link it to the place of expiry of the credit and to the existence of two confirming banks (commonly called first and second confirming banks. Supposedly, a credit is issued in Baghdad by an Iraqi bank, sent to a Lebanese bank called ABC Bank in Beirut, asking the Lebanese bank to transmit it with its confirmation to, let us say, a Thai bank called XYZ Bank in Bangkok. Further, the credit requests XYZ Bank to add its confirmation. Place of expiry for presentation of documents is XYZ Bank’s counter in Bangkok. Both are confirming banks but which bank you consider here as nominated bank, ABC Bank or XYZ Bank. How can both be nominated bank with one place of expiry? Where this credit ends? Supposedly, XYZ Bank is to obtain payment from ABC Bank but, according to UCP 600, ABC Bank will pay only against complying presentation. What happens if the documents are sent by XYZ bank and do not reach ABC Bank for payment? How can ABC Bank, as confirming bank, pay without a complying presentation at its counter? Further, The L/C expires at a given date at XYZ Bank’s counter. Supposedly, the beneficiary presents the documents to XYZ Bank on the last day. XYZ Bank sends documents to ABC Bank. How many days will ABC Bank have to pay and for how long would the delay courier between XYZ Bank and ABC Bank (which come after credit expiry) will remain acceptable? After how long will you define those documents are ”lost in transit’’? Any ideas on these issues? Thanks ——– ANSWER Hi, The definition of the term “nominated bank’ in Article 2 UCP 600 makes me think that if a credit is available with a nominated bank other than the confirming bank, the confirming bank will not be regarded as a nominated bank. Yet, the phrases “other nominated bank” and “another nominated bank” in Article 8 UCP 600 makes me think that a confirming bank is also a nominated bank notwithstanding whether the credit is available with the confirming bank or with another nominated bank. This is the reason why I tend to support the view that a confirming bank is always and certainly a nominated bank or a nominated confirming bank. Your case is a bit different because there are two confirming banks (ABC Bank and XYZ Bank) involved. However, this does not change my view that both confirming banks are nominated banks of which (I guess) ABC Bank could be a nominated paying bank and XYZ Bank could be a nominated negotiating bank. As the place of expiry for presentation is XYZ Bank’s counter, provided the complying documents are presented to XYZ Bank within the specified period for presentation and with the credit validity, XYZ Bank must negotiate the documents without recourse and forward the documents to ABC Bank for payment/reimbursement. As the place of expiry for presentation is XYZ Bank’s counter and not ABC Bank’s counter, ABC Bank cannot raise the discrepancy if the complying documents reach its counter after the expiry date. How about the documents lost in transit? Article 35 says “If a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank”. So, in accordance with this article, ABC Bank must pay even when the complying documents forwarded to ABC Bank are lost in transit. Yet, XYZ Bank, if required, must provide ABC Bank with proofs evidencing that the documents lost in transit are complying and that XYZ Bank has forwarded the complying documents to ABC Bank. In this case, ABC Bank may require XYZ Bank to provide it with a set of photocopied documents lost in transit and its courier receipt. According to sub-article 14 (b) each bank involved has a maximum of five banking days following the day of presentation to determine if the presentation is complying. However, it is not encouraged that banks try to make full use of this five banking day rule. It should honour when it determines the documents are complying and give notice of dishonour when it determines the documents are discrepant. Nowadays shipment by courier service is extremely fast. For example, it takes only 3 days for a set of documents sent via DHL from Da Nang, Vietnam to be delivered to a recipient in New York, USA. Delivery status can be checked via Courier Company to know whether and when the documents have been received by the recipient. The presenting/negotiating bank would contact the issuing bank or the confirming bank where applicable to inquire the status of the documents if no payment is received after 8 or 10 days from the date of dispatch of the documents. If the issuing bank or the confirming bank answer that it has not yet received the documents, then the presenting bank can check with the courier company to determine whether the documents are delivered to the recipient or lost in transit. Kind regards, Mr. Old Man
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?