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CDCD practice test includes one question which i cannot agree to the reference answer.
15. If a bank does not honour a presentation but purchase a deferred payment undertaking from the issuing bank, will the nominated bank be protected under UCP600?
A. The nominated bank is protected under UCP600
B. The nominated bank is not protected under UCP600
In fact, UCP600 stipulates the nominated bank is protected even if he purchases a deferred payment undertaking without authorization of the issuing bank. So I think the correct answer is A instead of B.
Awaiting your comments here. Tks.

Dear Ofei,


I find the CDCD question a bit confusing. From its wording I guess that this is about a documentary credit available by deferred payment with a nominated bank. At presentation of documents that nominated bank did not choose to act as a nominated bank hence it did not incur a deferred payment undertaking. Consequently the beneficiary asked the issuing bank to incur the deferred payment undertaking in accordance with article 7 (a) (iii).

If that's the case then answer B is in my opinion correct.

A nominated bank is protected under article 7 (c) only in case it has honoured or negotiated. This is not the case in the scenario described. The nominated bank did not honour; thus no reimbursement claim according to article 7 (c).

Article 12 (b) protects a nominated bank which prepayed or purchased a deferred payment undertaking. However, 12 (b) does only cover deferred payment undertakings incurred by that nominated bank. Thus the purchase of a deferred payment undertaking incurred by the issuing bank does not fall under article 12 (b).


Kind regards


Currer