article 2

part 2

advance or agree to advance negotiation the nominated banks advance their own funds to the beneficiary negotiation with recourse is the most common form of negotiation unless the credit is cofirmed it is to be noted that since the nominated bank does not give any undertaking to negotiate, unless it has confirmed the credit, unless it has confirmed the credit, it may refuse to advance funds to the beneficiary even after agreeing to advance. it will, however be liable, if it has entered into a seperate agreement with the beneficiary or communicated in its advice that it undertake to negotiate.

advising bank

an IB may utilize the service of correspondent banks in other countries to advice a DC to the beneficiary. such a correspondent bank is known as the advising bank as mentioned in article 2. advising banks only responsibility is to satisfy itself as a apparent authenticity of the credit or any amendment to that credit that it has received from the IB and that is advice of credit or amendment to the beneficiary accurately reflect the terms and conditions of the credit. this means their should not be ambiguity btwn what has been received from the IB and what has been advised to the beneficiary. if this happens then advising bank will be responsible for the same. sometimes Advising bank more than an advising bank , it may be nominated bank or a confirming bank. the applicant mostly mention an advising bank in his LC appli form. but if the IB does not have any arrangements with the bank given by applicant then the IB will route the LC to the bank with the IB has arrangements, with the consent of applicant, to further advice to beneficiary. however if the applicant has not specified a bank , the IB can use its own advising bank. in most cases the advising bank is the nominated bank or in the other word it could be beneficiary bank if the credit is directly advised. the applicant and benef. may have agreed to have beneficiary's bank as the advising bank/nominated bank.

confirming bank

despite the irrevocable independent undertaking of the IB, the beneficiary may have doubt whether the IB will be able to pay because of reason like the IB is in a country that has foreign exchange deficiency or where the political environment is unstable or like. in such a case the beneficiary may want the credit to be confirmed by a bank in his own country. in this case the DC will have to mention that the credit is to be confirmed.. in this case, the confirming bank in addition to that of the IB to honor or negotiate a complying presentation. a confirming bank has to be very sure about confirming a credit because it has no recourse either from the IB or the beneficiary confirmation is added at the request or authorization of the IB

presenter of document

it could be beneficiary, bank or any party that makes a presentation on behalf of the benefi. at times even freight forwarder act as a presenter of document on behalf of the beneficiary to a bank

1)not necessary party involved ? 2)what is applicant bank and how is it different from an issuing bank ?

it is interesting to note that even though its an applicant who provides instruction to issue or amend a DC ,its not a NECESSARY PARTY INVOLVED IN THE LC. this is because of the reason that it is an issuing bank that has given the undertaking to determine compliance of documents and pay or determine non compliance and refuse. thus IB ultimately resp. for any reimbursement to the nominated bank that has acted on its nomination, or settlement to a beneficiary. 2)it is possible that the beneficiary wants the applicants to get a LC issued through a particular bank, but the bank is not the applicant bank. in this case the applicant may approach its bank and ask it to request the named bank to issue the credit, usuallu under the protection of a guarantee or some other arrangement. inorder to be associated with the credit applicant bank will req the IB to insert its name in the credit. ITS TO BE NOTED THAT APPLICANT BANK HAS NO RECOGNITION UNDER THE UCP AND IT IS THE NAMED ISSUING BANK THAT HAS UNDERTAKEN TO HONOR A COMPLYING PRESENTATION.

negotiating bank

negotiating bank is a term often seen in DC where nominated bank's name is supposed to appear. in reality, this term is not defined by UCP. negotiating is an act of providing finance. it can not be pre determined whether a particular would negotiate or not. therefore IB should avoid using this terminology in issuance of LC

negotiation part 1

part 1 a NB unless its confirming bank gives no independent undertaking to pay. however if the NB accepts a draft (in case available by acceptance) or incurs a deferred payment undertaking (in case of credit available by deferred payment) the NB irrevocably bound to pay at maturity. negotiation of documents is possible only when the credit is available by negotiation. if a draft is required under negotiation credit , it is not to be drawn on nominated bank. purchase of draft is a method of finance that the benef. avail from nominated bank

part 3

the basic principle of negotiation is that the nominated bank pays out of its own fund , if it pays from the fund received from the issuing bank, then it will be considered as honor and not negotiation. negotiation usually with recourse unless the nominated bank has confirmed the credit, or entered into a negotiation on without recourse basis. however in a credit available by payment, the nominated bank is always without recourse. however, in a credit available by payment, the nominated bank may enter into a with recourse agreement with beneficiary as it has not given any independent undertaking to make payment