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Article 35 of ucp 600 states that ''if a nominated bank determines a complying presentation and forward the documents to the issuing bank or confirming bank ,whether or not the nominated bank has honoured or negotiated ,an issuing bank or confirming bank must honour or negotiate ,or reimburse that nominated bank even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank , or between the confirming bank ad the issuing bank.

Dear Sir
I want to stress on the point of above stated article ''whether or not the nominated bank has honoured or negotiated'' My query is nominated bank can honour only after receiving the proceeds from the issuing bank so in the above case the documents itself had been lost in transit so how come the nominated bank can honour in the above case.

Sandeep,

your intepretation is wrong

1.first of all , if the nominated bank determines that the presentation is "complying"....stress on the word complying ,ie the nominated bank has determined the docs are in order.

2.a nominated bank (when it is not a confirming bank too) has been authorised or requested by the issuing bank can decide whether to honour or negotiate. it is not obliged, unless its undertakes and communicates to beneficiary..

3.when the docs are sent to IB after determining its complying IB must reimburse that nomi bank(ARTICLE 7C)

these are the explanations of rules.. but if the docs are lost ,IB can ask for copy of the documents.

as you were saying the nom bank honours after it receives proceeds is not correct. they can pay the beneficiary before.

at sight by nominated bank (generally without recourse)
acceptance:if it accepts draft, its without recourse
deferred payment:if it undertakes ,its without recourse


if nominated bank honours only after receiving proceeds , where is the risk involved... it would be as good as bank making payment behalf of IB.
if you have the latest cdcs book page 256 & 257 will give you a better idea

Hi

Unable to understand your query. A nominated bank can honour, if it so chooses, if it deems a presentation to be complying. It can do so by accepting a draft, incurring a deferred payment undertaking or pay at sight depending on the credit.So i dont believe that the issuing bank has any role here when nominated bank decides to honour.

And could you please clarify what you mean by proceeds ?

Felix

their is nothing more to add than What RAHULCH has expalined..i support it completely

dear,

proceeds means reimbursement or funds of documents.
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as per felix definition of honour that matches with UCP.
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there is no room for honoring after receiving funds from the issuing bank.

1-if sight, nominated have nothing to do other than to credit benef.'s account
2-with term credit, if nominated bank is waiting funds at maturity and funds come due and received by them. no need for any undertaking the time is elapsed.
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from the structure of your question, you may mean that should the nominated bank wait till the issuing bank acknowledged receipt of documents at issuing bank counter and then effect payment, issue any undertaking, or accept any draft drawn on it. in this case no need as art.35 protects this issue.
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Regards