Negotiation Vs Purchase

[Masoom Hasan]

Is there any difference between Negotiation and Purchase [Under Article 2 and Sub-Article 12 (b) of UCP 600]?

[bdesh]

Art. 2 clearly defines: -

Negotiation means the purchase.............

.
Accordingly I think these bear same meaning per UCP-600 since no other definition/explanation found in the publication.

[Masoom Hasan]

Ok. If we take the clarification made by 'bdesh', then, is the word purchase mentioned in sub-article 12(b) similar to to the word purchase mentioned in article 2 of The UCP 600?

[Masoom Hasan]

Hi everybody,

Here I want to share some thoughts with you. According to sub-article 12(b) ofthe UCP 600,

By nominating a bank to accept a draft or incur a deferred payment undertaking, an issuing bank authorizes that nominated bank to prepay or purchase a draft accepted or a deffered payment undertaking incurred by that nominated bank.

Again according to the definition of 'Honour' under article 2

Honour means:
a. to pay at sight if the credit is available by sight payment.
b. to incur a deffered payment undertaking and pay at maturity if the credit is available by deferred payment.
c. to accetp a bill of exchange ('draft") drawn by the beneficiary and pay at maturity if the credit is availabel by acceptance.

So can we say that, according to sub-article 12(b) issuing bank (IB) allows the nominated bank (NB) to advance fund to the beneficary when credit availbale by:
a. by accepatnce,
b. by deferred payment;
and in this case NB is allowed to advance fund only when it makes acceptance of the draft or incurs own deferred payment undertaking and it does not relates to advanicng fund when credit is availble "by negotiation".

Furthermore, I would like to quote here from the commentary of UCP 600 concerning explanation of sub-article 12(b):

With this new sub-article, the rules provide for discount authorization simply by the issuing bank nominating a bank to accept a draft or incur a deferred payment undertaking. A bank nominated to negotiate is, by the definition of "negotiation" in UCP 600, as well as UCP 500, authorized to purchase a complying presentation (under UCP 500 to "gice value").

There is now no difference between the authorization to prepay or purchase a draft accepted or deferred payment undertaking incurred by a nominated bank and the authorization to negotiate, ie. to purchase a complying presentation.

So eventually can we say:

i. prepay or purchase under sub-article 12(b) can be dubbed as discounting
ii. it can also be dubbed as negotiation

Awaiting for your particiation.

Thanks.