Article 12b And Deferred Payment Undertaking Under UCP600

[jmitra]

friends,

with the UCP 600 article 12b in place, i was wondering whether any real difference remains between a 90 days sight LC available by negotiation / available by deferred payment undertaking. whats your opinion.

[cristiand969]

Dear Mitra
I assume your wording should be read available by acceptance at 90 days sight rather than 'by negotiation' as negotiation is always at sight.
Therefore the difference between two is that the acceptance always involves a draft while deferred payment will not.
regards
cristian

[jmitra]

dear cristain,

actually i meant what i wrote. i must be out of mind since im not sure what im talking about. anyway, actually the tenor is 90 days while the issuing bank wants the nominated bank to negotiate. but as per article 12b, the issuing bank authorizes the nominated bank to discount its own deferred payment undertaking. so..... :?

mitra

[cristiand969]

Dear Mitra,
This is another story and I've seen such clauses in L/C coming in from Korea. Actually, they require a draft at xxx days after B/L but at additional conditions as well as at instructions for payment they always states: Usance draft to be negotiated on sight basis which means that such LC is on sight basis and xxx days represent just a relation between applicant and issuing bank (when issuing bank wil be reimbursed from applicant). This is most likely the way the trade finance transactions are working in Far East.
regards
Cristian

[berry]

what will be the maturity date in this case? will it be counted from the date of presentation at the counter of the nominated bank?

berry

[picant]

Hi Pals,

Negotiation could be at certain days too.
Usance paid at sight (UPAS) is, probably used in Countries where it is possible to discount draft, but not to finance import. In Germany, a transaction called "Refinanzierungswechsel", let the german bankers to consider eligible for discount a Bill of exchange by XXX, accepted by YYY, endorsed by XXX, in favour of YYY. XXX received proceeds by YYY cheque.
So all is possible.

If someone needs details, please let me know.


Ciao

[ofei]

First, negotiation lc can be either sight or usance.
Second, what makes difference between at 90 days sight by negotiation lc and deferred payment lc lies in the role of the nominated banks.
If it is a negotiation lc, then the negotiating bank retains the right of recourse to the beneficiary even it advances funds to the beneficiary but fails to claims from the issuing bank.
If it is a deferred payment lc, the nominated bank may advance funds to the beneficiay at his request but without recourse to it even if the issuing bank refuses to reimburse. That is from the stipulations of UCP600 instead of practice. I do agree that in practice, when the nominated bank gives finance to the beneficiary before maturity under deferred payment lc, he will sign an agreement with the beneficiary which stipulates that the bank has the right of recource.
Hope my poor English would be clear. :oops:
ofei

[berry]

dear ofei,

Nice English indeed.

i have a question. if there is a confirming bank in this transaction and the nominated bank refuse to negotiate, must the confirming bank negotiate as per UCP 600 article 8a i e?

regards
berry

[ofei]

Dear berry,
Tks for your compliment.
As per your question, yes, the confirming bank must pay if the negotiating bank refuses to negotiate according to UCP600 Art8 a.

Regards

Ofei

[berry]

dear ofei,

actually i was trying to know whether the confirming bank will negotiate or honor the presentation

[ofei]

Dear berry,
I don't think it's a question whether the confirming bank wants to negotiate or not.
We know that confirming bank bears the same undertaking of payment as issing bank. Provided the beneficiary presents complying documents, confirming bank must honour even negotiating bank refuses to negotiate.

[iLC]

dear berry,

while you have quoted the right article, there should have been no further question. anyway,

Provided that the stipulated documents are presented to the confirming bank or to any other nominated bank and that they constitute a complying presentation, the confirming bank must:
i. honor if the credit is available by
e) negotiation with another nominated bank and that nominated bank does not negotiate.

i think this make clear that he confirming bank will honor and hence the beneficiary will be paid at maturity unless discounted.