Nominated bank and prepaymnet (Article 12 UCP 600)

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Nomination means that the issuing bank request the help from a secondary bank which in turn does not enter into an obligation to honour or negotiate (unless it expressly agrees to doing so). The task undertaken by the nominated bank typically are the acceptance of drafts or incurring a deferred payment undertaking.

Regarding its substance Article 12 a and c UCP 600 are idential with Article 10 c UCP 500. Article 12 c UCP 600 clarifies that a nominated bank is not liable for payment or honour even if it received and examined the documents.

Article 12 b provides that by designating a bank as nominated bank the issuing bank implicitly authorizes the nominated bank to prepay drafts accepted:
"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 authors believe that this authorisation to prepay is void as a violation of the instructions received from the issuing bank.
However, instead of relying on legal opinions, it is recommended that the issuing bank explicitly exclude the application of Article 12 b UCP 600.


Seeking copy of UCPDC 600 ICC 2007 Revised and ISBP 2007

Hi dear,

We shall be greatfull to you if you please send me a free copy of UCPDC 600 ICC publication 2007 Revised and ISBP 2007 by attach to my mail (PDF file) or any of member has the above books please send us. Our email id is [email protected]

Thanking you,

Mohd. Kamruzzman
Chittagong, Bangladesh. 

The task undertaken by the

The task undertaken by the nominated bank typically are the acceptance of drafts or incurring a deferred payment undertaking. thanks for sharing the info.
Jack - Inward investment

a nominated bank is liable for payment

According to Article 12 a of UCP 600

"Unless a nominated bank is the confirming bank, an

authorization to honour or negotiate 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."

therefore a nominated bank is  liable for payment or honour if received and examined the documents. " provided that bank accept to act with that nomination"



Do we need a agreement with the collecting bank in order to send the documents on DP terms. In one occation the collecting bank has given the original documents to the buyer including original BL without collecting the payment from the buyer.

Now the collecting bank says that they have delivered the documents to the buyer since they dont have an agreement with the exporter bank.

Whether the explanation given by the collecting bank holds good. As it is explicit that, if they dont have an agreement they should have returned the documents to the exporter bank or they should have notified the exporter bank. 

Will anyone let me know..

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An entity whose income

An entity whose income exceeds its expenditure can lend or invest the
excess income. On the other hand, an entity whose income is less than
its expenditure can raise capital by borrowing or selling equity
claims, decreasing its expenses, or increasing its income.



Investment in the

Documents on Collection

The collecting bank may be saying they have no agreement with the exporting bank because the documents are not accompanied by a collection schedule with delivery and payment instructions. 

You must ensure that you instruct your bank to send the documents under a "Documentary Collection" with instructions to the buyers bank that documents may only be released in the event of full payment by the buyer.  Further instructions may include to release documents against payment, in the event of non-payment either (a) hold documents to our order and notify us by SWIFT or (b) return documents to us, also note and protest for non-payment.

It is also a good idea to work with your bank to identify the main international business centre for the buyers bank and NOT send the documents to their branch - bank branches are not that sophisticated and may just release the documents without understanding the implications.

Hope that helps. 



Our bank has clearly given a covering note with the instructions on the delivery against payment, Bill of exchange etc., inspite of that Buyer has released the documents to the buyer.

Payment has not been received. Can any one suggest what can be done....


Release of Documents

Your bank must contact the buyers bank and request immediate payment from them if the documents have been released and no payment has been made.  The buyers bank are in contravention of their responsibilities and leave themselves open to legal action if they do not pay.  Banks do not have to have any kind of arrangement to be able to handle a documentary collection.

D/P not DAP


I think that we are mixing up URC 522 with UCP 600, there is no breviation known is DAP, it is D/P and it is used for Bills for collections only. Please refer to Article 7 of the Uniform Rules For Collections

documents against payment (D/P) Definition is:

Arrangement under documentary collection in which an exporter instructs the presenting bank to hand over shipping and title documents (see document of title) to the importer only if the importer fully pays the accompanying bill of exchange or draft. Also called cash against documents.

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i got a book which mentions

i got a book which mentions LIM and PAD

LIM stands for loan against payment while PAD means payment against PAD same as DAP?


Dear friend,

Are you sure D/P means  cash against  document. In article 7 of URC states that

Documents Against Payment (D/P)
a. Collection should not contain bills of exchange payable at a future date with instruction that commercial documents are to be delivered against payment.

b. If a collection contains a bill of exchange payable at a future date, the collection instruction should state whether the commercial documents are to be released to the drawee against acceptance (D/A) or against payment (D/P).
In the absence of such statement commercial documents will be released only against payment and the collecting bank will not be responsible for any consequences arising out of any delay in the delivery of documents.

c. If a collection contains a bill of exchange payable at a future date and the collection instruction indicates that commercial documents are to be released against payment, documents will be released only against such payment and the collecting bank will not be responsible for any consequences arising out of any delay in the delivery of documents.

its all about the process of collecting payments through D/P but my question is how it starts ?   can we import the goods through D/P without opening the L/C ?

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you are right nirendra

you are right nirendra the abbreviation D/P means Documents Against Payment as I have mentioned in the definition in my 1st reply, where as the abbreviation of cash against document is CAD in which both are giving the same meaning, however, no CAD or DAP to be used under L/Cs or Bills for Collections, C/D only to be used for documents subject to Bills for Collections under URC 522.


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documents against payment (DAP)

dear all,


will you advise me, what does mean DAP? and how it works or what is the flow of DAP


Hello Nirendra

Firstly, your question should have been placed as a new topic under the main forum rather than here - it may not get seen and you would not get the answer you need.

Secondly - Documents against payment is just as it sounds.  The documents covering the shipment are presented by the sellers bank to the buyers bank under a Documentary Collection with instructions that the documents may only be released to the buyer against payment of the full invoice amount.

For further information on this subject please review the Bank Training guide found under the Articles link above.


Thanks  Peter, still I have some confusion.

how importer will bind by the importer relating to DAP services if any disputes arises in documents or delivery terms?

there is any standard format or application form for this DAP service ?


You have no security

By shipping the goods to the buyer and presenting the documents for payment at sight (CAD or DP or DAP - it's all the same thing) you have no undertaking from any other party to pay you in the event that the buyer does not.  This is not a letter of credit, it is just a method of ensuring that the buyer cannot get the documents from his bank without paying for them first.

If there is a dispute, or the buyer simply refuses to accept the goods you have the goods in a foreign country with no buyer.  This type of sale is know as "Open Account" and, if you do not know your buyer very well and trust them implicitly, it is a very dangerous way of doing business.