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i often find LCs which says that the nominated bank must endorse on the reverse side of the original letter of credit. if a LC is presented to a bank which is not a nominated bank, is that bank bound by this clause? is a nominated bank bound by this clause. can the nominated bank forward the document without endorsing on the reverse side of the document?

the clause is written for a nominated bank. so in no way the presenting bank which is not a nominated bank is bound by the clause. if a presentation is made to a bank which is not a nominated bank, then the issuing bank should inquire with the nominated bank to ensure that no other presentation is made. personally i would not depend on the declaration of the bank that is not a nominated bank. in fact it is as good as a direct presentation. asking a nominated bank to endorse on the back of the original letter of credit is like adding an additional job to a bank which acts on its nomination. a nomination does not bind a bank. hence this endorse thing has no reason to bind the nominated bank.

Hi Pals,

Swift stated in the MT700 Usage Rules that, in case of freely negotiable L/C, the advising bank must insert in the advice "....that negotiating bank must endorse the presentation amount on the reverse .......", So IMHO, this refers only to freely negotiable l/c "Available with any bank by negotiation". However UCP 600 allow l/c by payment, def. payment and acceptance to be "Available with any bank" and Swift has not yet changed these Usage Rules.

Other comments appreciated

Ciao

i usually insert these clauses as "instruction to negotiating bank". since these clauses are not the part of the credit and does not affect the undertaking of the issuing bank towards the beneficiary, i think i doesnt bind any party.

if the credit specify a nominated bank and the documents presented to another bank then there is no commitment to this bank to endorse any presentation on the reserve side of the l/c . the only obligation to the issuing bank is to ensurse that there is no any presentation done at the end of the nominated bank