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Dear All,

Does negotiation involves any risk for the nominated bank? in the days of UCP 500, i used to hear that the nominated bank takes a risk of non payment while negotiating a document and thus earns the negotiation commission. i never agree though since i feel that negotiation is always for a complying presentation and may be without recourse. so there is no such risk involved. therefore negotiation commission is for a early payment and hence closely related to discounting. when i look at the UCP 600, I find it similar to my ideas. whats your opinion?

Dear ILC
Art. 12 a states: Unless a nominated bank is the confirming bank, an authorization to honour or negotiate does not impose any obligation on that nominated bank to honour or negotiate, except when expressly agreed to by that nominated bank and so communicated to the beneficiary.
It goes without saying that negotiating bank will insert in its communication letter to beneficiary that negotiation will be made on recourse basis and the like.... It is for each bank to establish such forms of wording because the negotiation (unless it is a confirming bank) convey no irrevocable undertaking of nominated bank to pay beneficiary.
regards
Cristian

dear ilc,

in my country, we dont charge commission for a negotiation. rather we charge interest; similar to discounting.