clean documentary letter of credit

[berry]

dear friends,

please help me to understand this one. the definition of negotiation in UCP is

Negotiation means the purchase by the nominated bank of draft (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.

this means that nominated bank can only purchase a draft. does it mean that a documentary credit may only require for a bill of exchange or draft. if that is so, then there is no definite rule for draft in UCP 600. dont you think that by allowing only a draft as a required document, UCP is moving away from its "documentary" characteristics.

[iLC]

i see no reason why an LC can not require a draft as the only required document. but i think the interpretation here is bit different. this sentence actually covers two scenario; a sight letter of credit and a credit available by acceptance. in the later case, it may be possible that the nominated bank will purchase the draft after it has been accepted by the issuing bank. so there will be no document here. please note that experts say that if the nominated bank purchase a draft or undertaking after the issuing bank has honored a presentation given that the nominated bank is taken prior permission from the issuing bank.

[cristiand969]

The following definitions of a clean Credit provide good working definitions of the
term:
CLEAN CREDIT. A credit opened by a banker under which a person abroad
may draw bills upon the banker, the banker undertaking to accept the bills if
drawn in accordance with the conditions in the credit. It is called ‘clean’ because
the bills have no documents attached. Such a credit is granted only to firms of
the highest standing, or against securities. (Source: Dictionary of Banking And
Finance. Derrick. G. Hanson (Pitman 1985))
CLEAN CREDIT. A LETTER OF CREDIT issued by a bank against which the
designated foreign seller may draw a bill without documentary support. The
issuing bank engages to accept a clean bill, if otherwise drawn in accordance
with the conditions imposed by the relative letter of credit. A clean credit is
granted only to concerns of the highest credit standing. (Source: Encyclopaedia
Of Banking And Finance. Glenn. G. Munn; F.L. Garcia; C.J Woelfel (9th Ed. 1991))
.
The distinguishing features in both definitions are that the issuer of the clean Credit is
obligated to pay against bills of exchange drawn on the issuer and that no other
documents are required for payment. Historically it has also been used as a means by
which a Paying Bank that pays a Beneficiary under a Traveller’s Letter of Credit obtains
reimbursement by drawing a bill of exchange on the bank which issued the Traveller’s
Letter of Credit. This type of arrangement can be, and is, used for a variety of commercial purposes that do not envisage either the movement of goods or an event of default. A direct pay Standby Letter of Credit is a good example of such usage.
.
Hope it helps you!