Reviewing the latest draft of ‘UCP600’ a concern that has been at the back of my mind, off and on over the years, regarding the ‘interplay’ of sub-Art 10c and Article 13 & 14 of UCP500 has re-surfaced.
10c says ‘Except where expressly agreed to by the Nominated Bank and so communicated to the Beneficiary, the Nominated Bank’s … examination [i.e. for compliance] … of the documents … does not make that bank liable to pay [etc.] ….’.
However this does not seem to be recognised in 13 & 14. 13b requires ‘a Nominated Bank acting on [the Issuing Confirming Bank’s] behalf … to examine documents and to determine whether to TAKE UP or REFUSE documents and to inform the [relevant] party ….’. In other words, when a Nominated Bank is examining documents for compliance 13b is apparently saying it has only two choices, (1) to take up or (2) to refuse.
I have always understood the verb ‘to take up’ to mean pay, accept a draft, incur a deferred payment undertaking or negotiate as appropriate. Therefore, if a Nominated Bank does not want to ‘take up’ documents it has examined and found complying it must -per 13b- seemingly ‘refuse’.
However, based on 14d the only basis on which a Nominated Bank is apparently permitted to refuse documents is if they are discrepant. In other words there does not seem to be any scope in Article 13 & 14 for a Nominated Bank to examine documents, find them compliant but ‘refuse’ them, e.g. because -where the credit is available by sight payment- there are insufficient funds or -in the case of a credit available by acceptance, deferred payment or negotiation- the issuing bank risk is unacceptable.
Given 10c, I would have expected 14 at least to cover the possibility of the ‘refusal’ by a non-confirming nominated bank of COMPLYING documents.
As a result 13 &/or 14 (with the exception of 14e) seem to me to conflict with 10c. Am I missing something? Please put me out of my misery.
Brain teaser or brain failure?
Brain teaser or brain failure?
What I understand is that a nominated bank agreed with the beneficiary to negotiate and to pay or to accept a draft or to incur a deferred payment (i.e. to add a "silent confirmation" or a similar commitment) under an unconfirmed credit that available with the nominated bank by negotiation (or by payment/ acceptance/deferred payment as the case may be), the nominated bank must either "take up" or "refuse" the documents upon presentation according to article 13 & 14 and obtain reimbursement from the issuing/confirming bank per article 9. This is an engagement between the nominated bank and the beneficiary ONLY when nominated bank EXPRESSLY AGREED with the beneficiary ("and so communicated to the beneficiary")
Sincerely,
Albert
[edited 11/30/2005 5:56:04 PM]
Sincerely,
Albert
[edited 11/30/2005 5:56:04 PM]
-
RolandLeupi
- Posts: 115
- Joined: Fri Apr 05, 2019 5:26 pm
Brain teaser or brain failure?
Dear Collegues,
Albert, I do not thins that the UCP have drafted an article which reflects particular agreements between nominated bank and beneficiary. It is not a certainty but my feeling.
I therefore agree with Jeremy. In fact the words "take up, negotaition and payment"are in the context of the UCP of same meaning. I remember when the 500 rules were object of consultency the problem already had arisen. When then drafted, the ICC has to issue position papers clarifiying the word negotiation. And this was the beginning (and the continuing) of uncertainties.
In fact, a nominated bank having not confirmed the DC will check the documents and reibmurse itselves or send the documents to issuing bank awaiting the relative cover as indicated on the advice to beneficiaries when advising the DC. For the UCP this is not a negotiation, since no immediate payment (or others) is made. There are therefore two kind of negotiations, i.e. the negotiation without payment for unconfirmed DC and negotiation with immediate payment for confirmed DC.
Taking out the art. 10b.ii would create much less confusion that it actually does.
Roland
Albert, I do not thins that the UCP have drafted an article which reflects particular agreements between nominated bank and beneficiary. It is not a certainty but my feeling.
I therefore agree with Jeremy. In fact the words "take up, negotaition and payment"are in the context of the UCP of same meaning. I remember when the 500 rules were object of consultency the problem already had arisen. When then drafted, the ICC has to issue position papers clarifiying the word negotiation. And this was the beginning (and the continuing) of uncertainties.
In fact, a nominated bank having not confirmed the DC will check the documents and reibmurse itselves or send the documents to issuing bank awaiting the relative cover as indicated on the advice to beneficiaries when advising the DC. For the UCP this is not a negotiation, since no immediate payment (or others) is made. There are therefore two kind of negotiations, i.e. the negotiation without payment for unconfirmed DC and negotiation with immediate payment for confirmed DC.
Taking out the art. 10b.ii would create much less confusion that it actually does.
Roland
-
KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Brain teaser or brain failure?
Dear Jeremy,
Please be careful Jeremy – someone may take it literally, that you want to be ”put out of your misery”.
I think that the problem lies (as Roland indicates) in the words “take up”. It seems that I have been “brought up” with a slightly different understanding of the word “take up” than the one you express there:
We use it in the situation where we have chosen to examine the documents, and found them compliant, but we do not want to pay or negotiate or accept – or similar!
From that perspective it makes perfectly good sense. The advising bank’s only responsibility (in this case) is the examination of the documents.
So perhaps one more term should be defined in article 2: Take up!
Best regards
Kim
Please be careful Jeremy – someone may take it literally, that you want to be ”put out of your misery”.
I think that the problem lies (as Roland indicates) in the words “take up”. It seems that I have been “brought up” with a slightly different understanding of the word “take up” than the one you express there:
We use it in the situation where we have chosen to examine the documents, and found them compliant, but we do not want to pay or negotiate or accept – or similar!
From that perspective it makes perfectly good sense. The advising bank’s only responsibility (in this case) is the examination of the documents.
So perhaps one more term should be defined in article 2: Take up!
Best regards
Kim
Brain teaser or brain failure?
Jeremy, it is really a misery!
The UCP does not cover the situation because the big part lies outside of the scope of the credit operations.
It depends on the conditions of the agreement between benef and nominated bank (non-confirming)
So that the important thing is WHAT communicated by the NB in its advice to the benef.
Considering different possibilities , I think that UCP (the new) should not contain any provision in regards to this situation. On the other hand, it may basicly establish a simple procedure such as " If a non-confirming NB does not communicate anything otherweise in its advice (or by any other separate agreement) ", it undertakes to pay,accept,negotiation...as appropriate under its nomination in the credit.But it may create some problems and misunderstandings between parties to the credit.
And the non-confirming NB's mere receipt,examination,forwarding of the docs (without pay,accept,negotiate...) under special agreements must be guarded as how it is made by present UCP provision sub art 10 c.
Regards,
Yahya
The UCP does not cover the situation because the big part lies outside of the scope of the credit operations.
It depends on the conditions of the agreement between benef and nominated bank (non-confirming)
So that the important thing is WHAT communicated by the NB in its advice to the benef.
Considering different possibilities , I think that UCP (the new) should not contain any provision in regards to this situation. On the other hand, it may basicly establish a simple procedure such as " If a non-confirming NB does not communicate anything otherweise in its advice (or by any other separate agreement) ", it undertakes to pay,accept,negotiation...as appropriate under its nomination in the credit.But it may create some problems and misunderstandings between parties to the credit.
And the non-confirming NB's mere receipt,examination,forwarding of the docs (without pay,accept,negotiate...) under special agreements must be guarded as how it is made by present UCP provision sub art 10 c.
Regards,
Yahya
-
AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Brain teaser or brain failure?
If the Nominating Banking has not expressly agreed and so communicate to Beneficiary to pay, incur deferred payment undertaking, accept drafts or negotiate, I have a confusion as to on whose behalf the Nominating Bank acts when it decides to perform one or more of the following action : receive, examine or forward documents. I am inclined to believe it acts on behalf of the Issuing / Confirming Bank for the receipt and/or forwarding document but may act on behalf of the Beneficiary for the act of examining documents to help Beneficiary identify discrepancies (if any) and correct the curable discrepancies if time permits and then follow-up on the Issuing / Confirming Bank to act in accordance with article 13 and 14 to honour their obligations or refuse as the case maybe.
Since article 13 and 14 are related to examination of documents and discrepant document and notice, I believe the two article may not be enforcible on a Nominated Bank who did not expressly communicated its decision to pay, incur a deferred payment undertaking, accept draft or negotiate.
regards
Abdulkader
[edited 12/2/2005 9:24:24 AM]
Since article 13 and 14 are related to examination of documents and discrepant document and notice, I believe the two article may not be enforcible on a Nominated Bank who did not expressly communicated its decision to pay, incur a deferred payment undertaking, accept draft or negotiate.
regards
Abdulkader
[edited 12/2/2005 9:24:24 AM]
Brain teaser or brain failure?
Thanks all of you for your views so far. I’ll respond more fully when time permits.
Regards, Jeremy
Regards, Jeremy
Brain teaser or brain failure?
I have found a bit of time to respond.
Kim, if I understand you correctly, you are saying your interpretation of ‘to take up documents’ is ‘to find the documents compliant’. Obviously if your interpretation were correct it would overcome my concern. I’m not going to say you are wrong, but it seems to me very odd that if you are right 13b does not talk about deciding if documents are ‘compliant’ or not and notifying this fact to the presenter. Thus I am sceptical this view is correct. But I do agree that ‘take up’ ought to be defined in ‘UCP600’ to put the matter beyond dispute.
Albert and Yahya, my impression is that you give emphasis to 10c saying ‘Except where expressly agreed to by the Nominated Bank and so communicated to the Beneficiary’. But my point is- what if the Nominated Bank does not give this express agreement and is silent on the matter? Say:
1. the credit is available by sight payment and the Nominated Bank has authority to debit the Issuing Bank’s account;
2. the Nominated Bank receives the documents on banking day 1, when the Issuing Bank’s account is in substantial credit, starts examining them and on banking day 3 finds them compliant;
3. on banking day 3 the Issuing Bank’s account is overdrawn up to the authorised limit and the correspondent banking department is not prepared to agree to overdrawing further the issuing bank’s account.
Logically the Nominated Bank would not want to ‘take up’ the documents. Under 13b the only alternative to not taking up documents is to ‘refuse’ them. However, 14d only allows refusal if the documents contain one or more ‘discrepancies’.
Therefore, my point is 13 & 14 seem to take no account of the possibility, seemingly permitted by 10c, of a non-confirming Nominated Bank that has not (a) entered into any agreement of any sort with the beneficiary nor (b) agreed prior to examination with the presenter on whose behalf the Nominated Bank is acting (presenter or Issuing Bank)- within a reasonable time: (1) examining documents (2) finding them compliant and (3) notifying the presenter that they are compliant but that the Nominated Bank is not prepared to take them up.
Therefore my 'misery' continues!
[edited 12/5/2005 7:53:39 PM]
Kim, if I understand you correctly, you are saying your interpretation of ‘to take up documents’ is ‘to find the documents compliant’. Obviously if your interpretation were correct it would overcome my concern. I’m not going to say you are wrong, but it seems to me very odd that if you are right 13b does not talk about deciding if documents are ‘compliant’ or not and notifying this fact to the presenter. Thus I am sceptical this view is correct. But I do agree that ‘take up’ ought to be defined in ‘UCP600’ to put the matter beyond dispute.
Albert and Yahya, my impression is that you give emphasis to 10c saying ‘Except where expressly agreed to by the Nominated Bank and so communicated to the Beneficiary’. But my point is- what if the Nominated Bank does not give this express agreement and is silent on the matter? Say:
1. the credit is available by sight payment and the Nominated Bank has authority to debit the Issuing Bank’s account;
2. the Nominated Bank receives the documents on banking day 1, when the Issuing Bank’s account is in substantial credit, starts examining them and on banking day 3 finds them compliant;
3. on banking day 3 the Issuing Bank’s account is overdrawn up to the authorised limit and the correspondent banking department is not prepared to agree to overdrawing further the issuing bank’s account.
Logically the Nominated Bank would not want to ‘take up’ the documents. Under 13b the only alternative to not taking up documents is to ‘refuse’ them. However, 14d only allows refusal if the documents contain one or more ‘discrepancies’.
Therefore, my point is 13 & 14 seem to take no account of the possibility, seemingly permitted by 10c, of a non-confirming Nominated Bank that has not (a) entered into any agreement of any sort with the beneficiary nor (b) agreed prior to examination with the presenter on whose behalf the Nominated Bank is acting (presenter or Issuing Bank)- within a reasonable time: (1) examining documents (2) finding them compliant and (3) notifying the presenter that they are compliant but that the Nominated Bank is not prepared to take them up.
Therefore my 'misery' continues!
[edited 12/5/2005 7:53:39 PM]
Brain teaser or brain failure?
hello everyone ! since a nominated bank has the right to elect if will negotiate or not, i think art.14b reffers (except issuing and confirming banks)only to nominated banks that elected to negotiate the docs giving value (making immediate payment or undertaking an obligation to make payment).
so the words "to take up" doesn't apply to nominated banks that did not or will not negotiate.
to check docs,send them to issuing bank,reimburse yourselves
on issuing bank/reimb bank and pay the bnf only after receipt of funds doesn't means to take up the docs.
art.14b clearly states "or a nominated bank acting on their behalf".i think this must be understand as reffering to a negotiating bank.
bogdan
so the words "to take up" doesn't apply to nominated banks that did not or will not negotiate.
to check docs,send them to issuing bank,reimburse yourselves
on issuing bank/reimb bank and pay the bnf only after receipt of funds doesn't means to take up the docs.
art.14b clearly states "or a nominated bank acting on their behalf".i think this must be understand as reffering to a negotiating bank.
bogdan
Brain teaser or brain failure?
Bogdan,
Firstly, this is not a matter that is confined to negotiation. It affects all the availability options, i.e. sight payment, acceptance, deferred payment and negotiation. (I do hope you are not using the term ‘negotiation’ as a catch-all expression for ‘take up (and therefore settle/undertake to settle)’ documents.)
Secondly, the act referred to in 14b, that is being performed on behalf of the nominated bank, is ‘determin[ing] … whether or not they [the documents] appear … to be in compliance’. There is not any reference to ‘taking up documents’.
Thirdly, you say that the words "to take up" do not apply to nominated banks “that did not or will not negotiate”. I agree that this is clearly the case -with respect to 13 & 14- where the nominated bank, PRIOR to examination, states to the presenter that any examination is on behalf of the presenter and not the Issuing/Confirming Bank. My point is that 13 & 14 do not seem to take account of the apparent ability -per 10c- of a nominated bank to refuse to take up (i.e. pay, accept a draft, incur a deferred payment undertaking or negotiate) where it has examined documents on behalf of the Issuing Bank / Confirming Bank and found them compliant.
Jeremy
[edited 12/6/2005 10:03:51 AM]
Firstly, this is not a matter that is confined to negotiation. It affects all the availability options, i.e. sight payment, acceptance, deferred payment and negotiation. (I do hope you are not using the term ‘negotiation’ as a catch-all expression for ‘take up (and therefore settle/undertake to settle)’ documents.)
Secondly, the act referred to in 14b, that is being performed on behalf of the nominated bank, is ‘determin[ing] … whether or not they [the documents] appear … to be in compliance’. There is not any reference to ‘taking up documents’.
Thirdly, you say that the words "to take up" do not apply to nominated banks “that did not or will not negotiate”. I agree that this is clearly the case -with respect to 13 & 14- where the nominated bank, PRIOR to examination, states to the presenter that any examination is on behalf of the presenter and not the Issuing/Confirming Bank. My point is that 13 & 14 do not seem to take account of the apparent ability -per 10c- of a nominated bank to refuse to take up (i.e. pay, accept a draft, incur a deferred payment undertaking or negotiate) where it has examined documents on behalf of the Issuing Bank / Confirming Bank and found them compliant.
Jeremy
[edited 12/6/2005 10:03:51 AM]