Nominated Bank Acting On Its Nomination

[nesarul]

Deal All,
A nominated bank under a particular letter of credit transaction provided its express consent [in written] toward beneficiary to honour or negotiate a complying presentation as per sub article 12(a).
beneficiary's presentation is discrepant. does the nominated bank is obligated to provide discrepant notice if it decided to refuse the presentation?
regards
nesar

[cristiand969]

Art. 16 states interalia:
c. When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must give a single notice to that effect to the presenter.

The presenter is beneficiary of LC.
regards

[nesarul]

Dear,
Then why 16(f) hasn't started with "NOMINATED BANK ACTING ON ITS NOMINATION[EMPAHASIS ADDED]
regards
nesar

[cristiand969]

Dear Nesar,
This is another topic which has not been submitted at the beginning
Art.16 f particularly refers so because the only undertaking to pay (WITHOUT RECOURSE) rests with issuing or confirming bank.
Allow me in the same time one correction: nominated bank practically is not in the position to refuse a presentation (it's a nonsense) as it has no undertaking to pay, merely to refuse to honor or negotiate -which is a big difference.
I assume that the nominated bank engaged to negotiate provided a complying presentation is made to their counters.
Anyway, in the position of the nominated bank the respective bank must also follow the art. 14b (5 days for examination) and to provide notice to beneficiary about the discrepancy as per art 16.
Remeber also that negotiating bank must help its customer and based on a special agreement it may negotiate even under reserve.
regards
Cristian

[shahriar]

what is acting on its nomination? i think it includes -

1. must examine a presentation in 5 days
2. When determines that a presentation does not comply, it may refuse to honor or negotiate.
3. when decides to refuse to honor or negotiate, it must give a single notice to that effect to the presenter.
4. after providing notice required by sub article 16 (c) (III) (a) or (b), return the documents to the presenter at any time.

now article 12a

Unless a nominated bank is the confirming bank, an authorization to honor or negotiate does not impose any obligation on that nominated bank to honor or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary

that means if the nominated bank communicate its express agreement, it is oblige to honor or negotiate.

honor or negotiation by definition can occur only for a complying presentation and to determine the compliance, examination is must. if the nominated bank finds the document discrepant, it will at least return the document to the presenter at some point of time since its agreement was for honor or negotiation which is by definition for complying presentation only. thus the nominated bank which has communicated its agreement to honor is performing all the jobs of "acting on its nomination" so far except "refusing the document". going back to point three, if the nominated bank is to return the document, it must refuse first and thus must comply point 3. without meeting point three, point for 4 is not possible. if the nominated bank examines a document and finds discrepancies but remain silence then what is the point of examining it? to me such silence only means acceptance. this is total ridiculous that the acting nominated bank must give a notice but if it doesnt, nothing will happen. the silence period could have been very important for the beneficiary.

so i think, when the nominated bank expressly agree to honor or negotiate and communicated so to the beneficiary, it must comply 16 c and f.

dear cristian, your logic on under taking to pay without recourse with quite ok. but no where in UCP it is written that nominated bank will negotiate or honor without recourse. it says, nominated bank is not oblige to honor or negotiate. these two are not the same.

the only reference can be found in article 8 which says,"negotiate without recourse". this though give a sense that negotiation can be with recourse, but it also means honor is always without recourse.

regd

shahriar

[cristiand969]

Dear Shahriar,
I am not sure I can follow you.
You said:

dear cristian, your logic on under taking to pay without recourse with quite ok. but no where in UCP it is written that nominated bank will negotiate or honor without recourse. it says, nominated bank is not oblige to honor or negotiate. these two are not the same.

.
Will you please direct me where I said that? ...
On the other hand please pay attention what CDCS manual says:
Unless the Nominated Bank is also the Confirming Bank, payment received by the Beneficiary may well be with recourse to the beneficiary.
Non-conforming Documents:
In circumstances of documents that do not conform
● upon receipt of documents at the Nominated Bank there is no liability under the Credit in any direction.
In circumstances where documents are in apparent conformity at one point of receipt and not in conformity at the point immediately afterwards, the position in simple terms is as follows:
● Documents are in conformity on presentation at the Nominated Bank but not in conformity on presentation at the Confirming Bank.
- The Confirming Bank will not pay the Nominated Bank.
- The Nominated Bank may recover from the Beneficiary because
payment to the Beneficiary may have been made with recourse.
So I think a confusion has been made also on the terms honor.
.
I expect to review your position in the light of the above
regards
Cristian
Cristian

[shahriar]

dear cristain,

i was trying to put an argument on the following -

particularly refers so because the only undertaking to pay (WITHOUT RECOURSE) rests with issuing or confirming bank.

im not saying what you have written is wrong. its ofcourse in line with ICC. but my point is purely derived from UCP only.

regd

shahriar