(Source: Quoted from DCPro Discussion Forum 9 July, 2015)
At God’s Well (Da Nang, Vietnam)
QUESTION
Bank A being an issuing bank requests Bank B to advise and confirm a term L/C to the beneficiary.
L/C is available with Bank B by acceptable and draft drawn on Bank B (the Confirming Bank).
Is there any problem with this structure, especially drawee is not an issuing bank?
Can Bank B discount the bill presented by the beneficiary, before sending it to the issuing bank?
Shahed
Toronto
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ANSWER
Hi Shahed,
Sub-article 12 (b) allows the nominated bank to discount (i.e., prepay or purchase) the draft that it has accepted or the deferred payment undertaking that it has incurred.
So, I say yes to your question. If the documents presented by the beneficiary comply, Bank B as confirming bank must accept the draft and it can discount its own accepted draft at any time, including before forwarding the documents to the issuing bank.
Kind regards,
N.H.Duc
Trang Le
October 15, 2015 at 3:30 pm
Dear Mr Old man,
After reading your response on this topic, I have raise a query about this topic. I hope you could pay some of your attenton and help me answer my question below:
Is The drawee in a draft always the issuing bank? As in the question from Shahed (Toronto), the drawee in this case is the confirming bank?
Thanks a lot and best regards,
Trangle
mroldman
October 15, 2015 at 4:53 pm
Where the LC is available with the confirming bank by negotiation, the drawee could be the issuing bank or another nominated bank (see definition of negotiation in Article 2 UCP 600).
The drawee could be the confirming bank if the LC is available with the confirming bank (i) by payment; (ii) deferred payment; or (iii) by acceptance.
If the LC is available with the confirming bank by negotiation, the LC should not require the draft to be drawn on the confirming bank.
Trang Le
October 15, 2015 at 5:06 pm
Thanks a lot for your prompt reply. It’s all my pleasure to know your blog ^^