WHETHER THE NOMINATED BANK IS PROTECTED BY ARTICLE 12 IF IT PURCHASES A DEFERRED PAYMENT UNDERTAKING INCURRED BY THE ISSUING BANK

QUESTION

Dear expert,

I have one question. Could you give me your professional answer?

If the nominated bank does not incur a deferred payment undertaking on presentation of complying documents and forwards them to issuing bank.

Subsequently can the nominated bank a purchases a deferred payment undertaking from the issuing bank and seek protection under UCP 600 article 12

Regards

TF

——

ANSWER

Hi,

UCP 600 sub-article 12 (b) provides that by nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deferred payment undertaking incurred by that nominated bank.

The nominated bank in question did not act on its nomination, namely it did not incur its deferred payment undertaking. Therefore, it is not fully protected by UCP 600 article 12 in the event it purchases the issuing bank’s deferred payment undertaking and is not reimbursed for some legal reason.

To be legally protected, before purchasing the issuing bank’s deferred payment undertaking, the nominated bank should ask for the issuing bank’s authorization.

Best regards,

Mr. Old Man