Letter of Credit Forum

'Available with Credit Issuing Office at sight by payment' means that the documents can be handled only by the LC issuing bank.

Therefore, you'd  have to ensure that complying documents reach the issuing bank on or before the expiry of the LC. (I have seen some comments stating otherwise/differently, but those views are incorrect.)

For reasons that I need not go into here, you should ask for an amendment to make it available with a bank in your city.

Dear all:

As we all know an L/C can be issued available with another nominated bank (i really don't know why some bankers insist to name that bank as the negotiating bank even under a sight or deferred or acceptance payment terms) .

if the nominated bank receives complying docs within validity of the credit and later on the issuing bank receives them after the expire date, then the issuing bank must honor if docs were found compliant, because the nominated bank is authorized by the credit to represent the issuing bank in the beneficiary's country.(when an L/C is available with another nominated bank it's also available with the issuing bank as well).

an L/C can be issued without stipulating a nominated bank, in this case this L/C is only available with the issuing bank, and any bank mentioned in this L/C such as an advising bank will play the role of advising the L/C only, without being authorized to receive or check docs or having a reimbursement authorization by the credit terms , so the beneficiary in this case will send his docs directly to the issuing bank address or through another bank for mailing purposes only,  when these docs reaches the counters of the issuing bank, it decides if the docs are in compliance or not (no other bank have this authority).

if docs were compliant , the issuing bank must honor and make settlement to beneficiary according to the schedule or covering letter attached with the docs.

dear all:

plz note a very important case:

if the L/C is available only with the issuing bank, and beneficiary presented his docs directly to the issuing bank or through another bank for mailing purposes , but these docs reached the issuing bank counter after L/C validity, is that a discrepancy???

answer:  NO, because a discrepancy is valid where  docs are presentede to the nominated or issuing bank within L/C validity, but if docs(despite their situation) reaches the nominated or issuing or confirming bank after validity, then there is no L/C.   

accordingly the issuing/nominated/confirming bank need not to reply within 5 working days, because this period of time only applies where docs are presented to nominated/confirming/issuing bank  within L/C validity , if docs in the case of being presented within validity were found not correct, we call that a discrepancy and must reply within 5 working days.

regards.

dear all

i,ll be glad to give a brief definition to the payment terms and drafting,,, by the way i am fully respnsible for any word i write here because this information has been approved by the head of drafting committee of UCP 600 MR. gary collyer who used to work at CITI bank then ABN amro, and now is owns his consultancy office in UK.

if any colleague finds any difficulty to understand or accept these information plz let's contact in this forum for further explanations.

i would like to express my great thanks for the owner of this website for making it possible to spread L/C knowledge among pariticipants which will facilitate business among banks in this regards.

- SIGHT PAYMENT:

it's where the beneficiary requests payment as soon as possible after a complying presentation, the issuing bank authorizes another nominated bank to(receive and check the documents) , the L/C must stiplulate a conditioned reimbursement instructions to that nominated bank to enable him debit/reimburse on the account of the issuing bank provided that the presentation is compliant, so the nominated bank pays the beneficiary after collecting funds NOT before,, if the nominated bank decides to pay before collecting funds then it's his own decision and responsibilty and this action is out of the scope of UCP.

because he might face the possibility of paying funds without getting the reimbursement due to lack of funds in the account of the issuing bank.

ofcourse this i applicable only when the nominated bank is not a confirming bank, otherwise he will pay the beneficiary despite being reimbursed or not.

sight payment MAY require draft among required docs, but most commonly no sight payment L/C require that, because the beneficiary will be paid soon, before being able to use the draft .

DEFERRED PAYMENY:

it's where a beneficiary agrees to receive funds a period after presentation(60, 90,120,...etc.) days.

according to UCP500 no nominated bank will discount funds to beneficiary before maturity because the issuing bank is only undertaking to pay BENEFICIARY on due date, so if a nominated bank discounted funds to beneficiary and later on the issuing bank fails to pay on maturity, that nominated bank has no legal position to trial or sue the issuing bank,  but according to UCP600 the issuing bank undertakes to pay either the beneficiary or the nominated bank , which means the nominated bank can now discount funds to beneficiary and the issuing bank is liable to reimburse that nominated bank on due date.

no DRAFTS to be used in deferred payment, which means that the only bank that can discount funds to beneficiary is the nominated bank in the credit.

if you don't want the nominated bank to discount funds you have to clearly stipulate that condition in your L/C.

otherwise the nominated bank under a deferred payment L/C is automaticaly authorized to discount funds.

- ACCEPTANCE:

similar to deferred payment , that issung bank undertakes to pay at maturity, but this term of payment MUST include a time draft among presented docs even if the L/C did not require clearly  a time draft, if no time draft is presented it's a discrepancy, the reason is that an acceptance L/C always authorizes the nominated bank to accept the draft , so if no time draft is presented then what will that nominated bank do, and where did his authorization go? so it's a discrepancy.

this time draft must always be drawn BY the beneficiary , so there is no need for the L/C to indicate the drawer party, but the L/C must always indicate the drawee party which is variable, in acceptance it has be the nominated bank.

many issuing bank wrongly require a time draft drawn on them selves if the l/c is unconfirmed, and wrongly take the signature of the applicant on that draft as an acceptance instead of putting the bank's signatures on it for acceptance then obtain another bill of exchange from applicant to the issuing bank order to guarantee payment on maturity.

so, if the L/C is confirmed or unconfirmed the time draft must always be drawn on the nominated bank who is obliged to accept it if that bank is a confirming bank , but not obliged to accept it if that bank is non confirming bank , then the nominated bank must ask the issuing bank for amendment to make the term of payment NEGOTIATION instead of ACCEPTANCE.

I THINK I CAN NOT PROCEED WITH EXPLAINING THE TERM NEGOTIATION IN THIS COMMENT, BUT I PROMISE TO GIVE THAT TERM WHAT IT DESERVE IN A SOONLY POSTED COMMENT.

REGARDS.

art. 35 explains a specific old case study called(lost in transit), it handles responsibilities where complying docs are lost after being sent by the nominated bank(even if purchased) and before reaching the issuing bank counters. then the issuing bank will bear the responsibility of payment if the nominated bank certifies that the presentation was compliant, and the issuing bank must pay (but may ask for copies) before payment.

this has nothing to do with defining the payment term NEGOTIATION as this art. handles a case study.

regards.

Dear Frammi

please be informed that what i explained here is considered to be the true negotiation mentioned in UCP600, as negotiation means to purchase docs from the nominated bank own funds without having a reimbursement instructions enabling him to collect funds, but settlement is made to that nominated bank after an event decided by the issuing bank as a term in the credit such as (after the issuing bank receive complying docs on his counters).

regards.