re sub-article 12b, the prepay or purchase by the nominated bank which is not a confirming bank to a draft accepted or a deferred payment undertaking be with or without recourse to the benef.
rgds.
sub-article 12b
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jmitra
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without recourse
i would consider the discounting of nominated bank as without recourse. a discount occurs when the nominated bank honors a presentation and a honor is without recourse. though there is a chance that the nominated bank is bound to pay at maturity, discounting a deferred payment undertaking is a sort of honor.
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rania
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without recourse
jmitra,
Thank you very much for your reply, I've 3 more inquires about this point:
first, why a nominated bank which is not a confirming one takes this risk, does it has a cover for that?
second, why do we open l/cs available by negotiation when beneficiaries can obtain funds immediatly by discounting deferred payments undertaking or drafts accepted under l/cs available by deferred payment or acceptance?
last, Is the sitiuation will differ if that nominated bank prepays or purchases deferred payment undertakings incurred or drafts accepted by an issuing or a confirming bank?
rgds
Thank you very much for your reply, I've 3 more inquires about this point:
first, why a nominated bank which is not a confirming one takes this risk, does it has a cover for that?
second, why do we open l/cs available by negotiation when beneficiaries can obtain funds immediatly by discounting deferred payments undertaking or drafts accepted under l/cs available by deferred payment or acceptance?
last, Is the sitiuation will differ if that nominated bank prepays or purchases deferred payment undertakings incurred or drafts accepted by an issuing or a confirming bank?
rgds
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shahriar
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without recourse
agree with the opinion given. however just like to add that its even possible to honor a document with recourse. since the nominated bank has no liability or undertaking to honor, it can reach to any decision depending on the negotiation between the nominated bank and the beneficiary.
about the subsequent queries -
1. you will do almost every thing for a valued client :!: :?: :lol:
2. i didnt get your question very well. LC available by negotiation is closely related to LC available by payment with the issuing bank. i guess you are asking about a situation where the issuing bank will pay in future but wants the nominated bank to pay at sight. am i correct? if yes, then there may be two possible reasons; 1. the issuing bank dont know what they are doing. :lol: 2. a bit tricky one; the issuing bank wants to make sure that the nominated bank pays in advance and the interest is on beneficiary's account.
3. article 12b is only effective if the nominated bank incur a deferred payment undertaking / accept a draft. there have already been discussion on this issue. if the LC is available by negotiation, then there is no use article 12b since the nominated bank will be paying in advance for sure (if acts on its nomination). however to be protected under a article 7, a nominated bank must act on its nomination.
about the subsequent queries -
1. you will do almost every thing for a valued client :!: :?: :lol:
2. i didnt get your question very well. LC available by negotiation is closely related to LC available by payment with the issuing bank. i guess you are asking about a situation where the issuing bank will pay in future but wants the nominated bank to pay at sight. am i correct? if yes, then there may be two possible reasons; 1. the issuing bank dont know what they are doing. :lol: 2. a bit tricky one; the issuing bank wants to make sure that the nominated bank pays in advance and the interest is on beneficiary's account.
3. article 12b is only effective if the nominated bank incur a deferred payment undertaking / accept a draft. there have already been discussion on this issue. if the LC is available by negotiation, then there is no use article 12b since the nominated bank will be paying in advance for sure (if acts on its nomination). however to be protected under a article 7, a nominated bank must act on its nomination.