Best Trade Solution

Dear All,
I'm confused about the correct answer of the following question. Could you please share your views with proper justification (UCP/ISBP) in supporting your views in regard to the following question?

Q. Among other conditions, a confirmed letter of credit mentions the following: All charges are on applicant’s account. The LC was available with SBI Bank by negotiation. The beneficiary presented the documents to SBI bank. The Bank found the documents complying and paid the beneficiary in full. The bank then forwarded the documents to the issuing bank and claimed for Documents Value + Negotiation Charges + Interest for negotiation period. How much should the issuing bank pay the SBI Bank?

A) Only the documents value
B) Documents Value + Negotiation Charge
C) Documents Value + Negotiation Charge + Interest for Negotiation as claimed
D) Documents Value + Negotiation Charge + Interest for Negotiation at the rate agreed by the applicant.

Hi Pal,

I opt for B; negotiation fees will include the gap between value date of disboursing and value date of refund.
I saw banks crediting beneficiary value date 10 days after presentation, to cover the period of time, mailing time etc.
Other comments appreciated
Ciao

Hi Anower Vi,
My choice is Option-A
Because Beneficiary request for negotiation for his own purpose/interest.
Applicant will not responsible for this charge/Interest.
So issuing bank Will Pay only the document value.
for more Ref:Book Page-286 (10.2.5.1)

Correct answer is option A due to following explanation.

Interest and charges are usually deducted up front and settlement is made after such deductions. The nominated bank will receive reimbursement from the issuing bank or from a confirming bank, if applicable, for the face value of the drawing.

Dear Anwar

The answer is "A"

REASONS
1.the IB when reimbursing the the negotiating bank, reimburses the face value of "draft" or the "documents".
2.what does negotiation means its a form of payment where by the negotiating bank pays upfront or on a later date amount after the charges (interest for the remaining period).


hope u are sitting for CDCS in april ..if so do contact me on rahul.rhythm@gmail.com

Hi

The interest charges for negotiation cannot be borne by the issuing bank. The correct answer is A.
However we are seeing ever increasing requests from clients to reimburse the bene for the interest charges as well.

We do comply at times when there is enough credit comfort on the client and that he/she is not using the LC as a financing tool

Regards
Felix

The answer is option A

1 Because negotiation is an option to the beneficiary for his benefit . The bene could have simply presented the docs and not have them negotiated . He could have waited till maturity to receive the proceeds
2.The credit clearly states that the charges are on the beneficiary
3. We have had cases where the applicant has paid the negotiation charges and interest , but it had been clearly specified in the credit at the outset itself.