Negotiation Under LC Available By Payment

[dodo]

Hi all,
I would like to ask this case:: if LC Is available with bank A by payment, and when the beneficiary presents docs to bank A, bank A negotates that presentation. Is there any problems resulting from this action?
Thank you!

[picant]

Hi Pal,

if l/c is available by payment it must contain proper instructions to act in this way; authorization to debit, claim reimbursement instructions etc.
Negotiation, on the contrary, means to advance own funds and wait for reimbursement.
IMHO, local banking rules will play a big role, in case of payment the funds may be booked and grant to the issuing bank, in case of negotiation to the beneficiary even if guaranteed by l/c.
Other comments appreciated
Ciao

[abrar]

Picant is correct regarding the essential differences beteeen Negotiation and Payment.

If the credit is available by Payment the issue of Negotiation should not arise.

[Nahid007]

Negotiation is not possible in case of Payment is available with the issuing bank. As we know issuing bank can only honor the presentation.In this case, the beneficiary request bank A to negotiate. If the bank desire to negotiate with recourse basis, is it possible?

[picant]

Hi Pal,

a presenting bank may grant an advance against presentation of l/c documents. Being not indicated as a l/c agent, it will send documents for collection under l/c. The advance will be with recourse, but as per local law may play different role.
Other comments appreciated
Ciao

[gondem]

If the l/c available by negotiation, or, def payment, the discount (e.g. negotiation) is available for the beneficiary. Plus, if it is available by acceptance, the negotiation is also available through the bill of exchange. But if it is available by payment, this term doesn't provide negotiation and i don't think that the bank A is going to follow a route against the ICC rules.