Dear all,
Could you please clarify me the difference in the usage of codes ‘BY ACCEPTANCE’, ‘BY NEGOTIATION’ and ‘BY PAYMENT’ in field, 41a: (Available With ... By ...) of MT 700 Swift message.
Thanks,
John
Usage of indicating of how the credit is available
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johndr
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- Joined: Mon Mar 23, 2009 1:04 pm
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iLC
- Posts: 504
- Joined: Thu Jun 26, 2008 10:33 pm
availablity of the credit
this topic has been discussed so many times. a little search will reveal a lot. anyway, UCP allows 4 types of availability.
1. available by payment (sight) - the nominated bank / issuing bank will pay as sight on presentation of a complying document
2. available by deferred payment undertaking - the nominated bank / issuing bank will pay but not at sight. it will be some future date determined by the terms of LC. i.e 90 days from the bill of lading date
3. available by acceptance - similar to deferred payment undertaking except there will be a time draft drawn on the issuing bank or nominated bank. there is hardly any practical differences between these two under UCP600
4. available by negotiation - applies only when the LC is available with nominated bank. the nominated bank will pay the beneficiary at sight bearing the risk of no reimbursement. the essential difference between LC available by payment and negotiation is that LC available by payment contains a reimbursement clause. the nominated bank just debit the account of the issuing bank and pay. hence the beneficiary gets the full LC value. but under negotiation the nominated bank charge interest to the beneficiary for the time till it get reimbursed from the issuing bank. please note a sight LC available by negotiation with the nominated bank is always available by payment with the issuing bank.
1. available by payment (sight) - the nominated bank / issuing bank will pay as sight on presentation of a complying document
2. available by deferred payment undertaking - the nominated bank / issuing bank will pay but not at sight. it will be some future date determined by the terms of LC. i.e 90 days from the bill of lading date
3. available by acceptance - similar to deferred payment undertaking except there will be a time draft drawn on the issuing bank or nominated bank. there is hardly any practical differences between these two under UCP600
4. available by negotiation - applies only when the LC is available with nominated bank. the nominated bank will pay the beneficiary at sight bearing the risk of no reimbursement. the essential difference between LC available by payment and negotiation is that LC available by payment contains a reimbursement clause. the nominated bank just debit the account of the issuing bank and pay. hence the beneficiary gets the full LC value. but under negotiation the nominated bank charge interest to the beneficiary for the time till it get reimbursed from the issuing bank. please note a sight LC available by negotiation with the nominated bank is always available by payment with the issuing bank.