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dear all

i have recently studied some issued letter of credits and considered below condition:

in proforma invoice terms of payment was sight payment letter of credit
in mt 700 in field 41 a it was mentioned available by negotiation.

can anybody explain if in sight payment , is it workable/practicable to write NEGOTIATION in field 41a?
if yes , what is the reason issuing bank accept to write this term in this field.

b.regards
omid

Hi Pal,

contracts and l7c's are two separate worlds. Probably negotiation is similar to payment at sight, but
in the first case beneficiary will get money from local bank, with payment by the foreign issuing bank. Some Countryes prohibit payments of goods en route, but accept that a foreign bank may
give money to a supplier/beneficiary.
Too difficult to explain....
Other comments appreciated
Ciao

Hi All,
Negotiation of LC implies the value is given to the exporter by the exporters bank and in case of Payment , the LC/ Exporter will get value only from the importer.
Brads
Pritish

A credit available by payment or by negotiation (unless otherwise stated) means that L/C is payable at sight.
The only diference lays in the method of reimbursement and this is stated under art 2 of UCP 600.

dear all

as per article 2 of ucp 600 " negotiation means the purchase by the nominated bank of drafts and or documents ...by advancing or agreeing to advance funds to the beneficiary on or before the banking day...."
IMHO , normally it is beneficiary that must insist in putting " available by negotiation" in field 41A and he normally must have already come to an agreement with its bank to advance the funds .
the point that i can not understand is the reason base on that, issuing bank insist to put availabe by negotiation instead of available by payment.

appreciate your opinions

b.regards
omid

in case of L/C available by payment : payment will be effected on the strenght of tested message of benef's bank
in case of L/C by negotiation, reimbursement is made only upon receipt of compliant presentation at issuing bank counters
So the advantage of checking docs before payment would prevail

'' available by sight / available by negotiation ''
1. available by sight: payment will be effected once both '' applicant and beneficiary's bank '' confirm the compliance of the presentation
2. available by negotiation : payment will be effected once both '' applicant & beneficiary's bank '' confirm the compliance of the presentation BUT beneficiary's bank could pay the beneficiary in advance and purchase the liability with applicant bank

In practice, I see no remarkable difference when issuing sight payment LCs either by NEGOTIATION or BY PAYMENT from applicant's and issuing bank's side.

Issuing bank's insist on negotiable LC seems not logical/sensible to me as banks issue numerous LCs available with nominated banks and authorize them to pay beneficiary against complying presentations. Maybe, issuing bank requests this for this transaction only (not general policy).

Negotiation refers to purchase of documents or drafts of complying presentation by the nominated bank. So even if LC is available by deferred payment nominated bank can negotiate if it is a complying presentation.

HI,
Sometimes, the wording of sales contract, P.I,... is not good enough to discean.
It's not the problem when proforma invoice states "sight payment letter of credit" as a term of payment while L/C indicates "available by negotiation" in field 41a.
wording "sight payment L/C" = "L/C at sight", I mean. An issuance of an L/C by negotiation or by payment depends on reimbursement instructions from bank to bank.
Anyway, either "by negotiation" or "by payment", Beneficiary will be paid at sight as long as documents are compliant.
Regds,

Dear Friend ,

available by negotiation has two option , either to be negotiation sight or negotiation differed

you need to check field 78 for instruction of payments for more clarification
some banks indicate whether sight or negotiation in field 78
.
as for the meaning , its authorizing the nominated bank or any bank in case of any bank in (country)
to negotiate the documents ( advancing or agreeing to advance funds to the beneficiary before or at the date which reimbursement is due )

regards

When a documentary is issued available by negotiation, it means
1. An advance may or may not be made immediately by a nominated bank
2. Drafts may or may not be required for presentation
3. Settlement, if documentary credit is not negotiated earlier, is made on receipt of documents by the issuing bank ( sight ) or the maturity date of the draft (usance )
Note: Draft to be drawn on issuing bank or reimbursing bank when LC is made available by negotiation.

available at sight by negotiation
it gift nominated bank a right to advance the payment