Re : Payment Under Reserve

[leechiankoh]

Hi,

Can somebody explain to me the meaning of:-

1) negotiation of documents with descrepancies under reserve/guarantee not allowed

2) payment under reserve

TQ so much.

[shahriar]

dear leechiankoh,

what you are talking about was actually a concept under UCP500. the nominated bank used to pay for a discrepant document by taking a indemnity bond from the beneficiary and bears all the risk. in 600, negotiation is defined as

Negotiation means the purchase by the nominated bank of draft (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.

by definition, negotiation involves a complying presentation. therefore a nominated bank cannt negotiate a discrepant document. if it does, then there will be no protection under UCP as issuing bank is responsible to reimburse nominated bank only for a complying presentation. hope that answer the question.

regd

shahriar