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I NTERNAT I ONAL COMMERC I AL LAW
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may be used to “honor”. Article 2 lists three kinds of payments (i) sight
payment under sight payment credit; (ii) promise against documents
together with payment at maturity under deferred payment credit; and (iii)
acceptance (promise against bills of exchange) together with payment at
maturity under acceptance credit. The payment under negotiation credit
does not constitute an honoring, whether by the negotiating bank or the
issuing bank. However, according to the definition of “negotiation”,
negotiation need not be confined to negotiation credit. Any purchase by the
nominated bank may be deemed as negotiation. And any payment by the
issuing bank at sight or at maturity may not be considered as negotiation.
Negotiation may be constituted in credits other than the negotiation
credit
UCP500 permits only the bank authorized by the issuing bank to negotiate,
and “negotiation” was defined as “giving value”. That means that negotiation
may only be constituted under a negotiation credit (a credit available with
negotiation). However, the new definition of “negotiation” in UCP600 is,
“t
he purchase by the nominated bank of drafts (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.”
There is
no restriction as to whether the credit is a negotiation credit or not. According
to the current definition, the prepayment of a nominated bank may be deemed
as negotiation. And according to the definition of nominated bank, a bank
with which the credit is available is a nominated bank. It follows that an
issuing bank may be a nominated bank when a credit stipulates that it is
available with the issuing bank by acceptance. If such issuing bank prepays,
it negotiates. According to art.12 (b) of UCP600, under an acceptance or
deferred payment credit there is a nomination from the issuing bank to
allow the nominated bank to prepay or purchase their promised undertaking.
It signifies that an acceptance or deferred payment credit may be also a
negotiation credit. Negotiation means “purchase” under UCP600.
A separate undertaking of issuing/confirming bank to reimburse
nominated bank
UCP600 explicitly stipulates that the issuing/confirming bank has a
separate undertaking to the nominated bank other than that to the beneficiary.
So, it may be understood that when a credit stipulates a nominated bank,