Home Uncategorized WHETHER A NOMINATED BANK IS A CONFIRMING BANK

WHETHER A NOMINATED BANK IS A CONFIRMING BANK

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The road up to Hai Van Pass, Vietnam. I rode along this road yesterday morning.

QUESTION

Dear Mr. Old Man,

Appreciate your comment to the following:

Sub-article 12b) of UCP 600: “By nominating a bank to accept a draft or incur a deferred payment undertaking…”

I understand it intends to confirming bank only. Am I correct?

Thanks in advance

Shirki

——————–

ANSWER

Hi,

My answer is NO.

According to Article 3 UCP 600, a nominated bank means the bank with which the credit is available or any bank in case of a credit available with any bank. So, a nominated bank may be a confirming bank, a named bank or any bank other than the confirming bank.

The issuing bank may nominate a bank to honour or negotiate by stipulating in Field 41a of MT700 as in one of the following ways, as the case may be:

(i) available with any bank by negotiation/by payment/by acceptance/by deferred payment; or

(ii) available with, e.g., Bank ABC (a named bank) …

(iii) available with confirming bank …

However, please note that unless the nominated bank is the confirming bank, such a nomination does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary (see sub-article 12 (a) UCP 600). That is to say, the nominated bank may refuse to act on its nomination.

Last but not least, I have come across some LCs available by payment or by deferred payment or by acceptance with ANY BANK (in the country of the beneficiary). The purpose of such a stipulation is to allow the beneficiary to present the documents to his bank within the expiry date rather than for payment or acceptance (as the nominated bank in these LC would refuse to act on its nomination). It is noted that the date and place of expiry of these LCs is in the country of the beneficiary.

Kind regards,

Mr. Old Man

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