Obligation of Negotiating bank

[siva.coolguys]

Hi

LC states available with XYZ bank by Negotiation.....

What are all the obligation for XYZ bank?, if the documents are presented to XYZ bank.
How it would honor the claim?
In this case there is any need of Reimbursing Bank?

Please clear me out, because i saw a LC available with field same as mentioned above and there is a reimbursing bank. I thought that negotiation is to honor the claim before it sight the funds from the issuing bank then y there is a need of the reimbursing bank, I was confused.

Any suggestion welcome

Thanks in advance
Siva

[iLC]

dear siva,

your understanding of the issue is correct. in a credit, available by negotiation, there is no need for a reimbursement clause. in fact this is on which payment LC is different from negotiation. ICC has made this clear much ago. unfortunately some bankers are yet to realize this. as long as we have banker who are "not so much interested in rules", we will continue to see such LCs

[ajoy]

My two bits :

The reimbursemnt instructions are from IB to NB.

Agreed that for nego LCs the negotiating bank must pay from its pocket before recieving funds from IB or appointed RB.

However,
1) the 'negotiating bank' still needs to claim and recieve the money from the issuing bank.
2) the bene also typically pays the negotiating bank ' interest' for the 'transit period'.

If I were a nominated bank I would be comfortable if I knew upfront where my rembursement would come from. In fact, for some issuing countries some banks donot agree to be a confirming or even a nominated bank unless a 'reimbursing bank' is clearly stated in the LC.

Hence , having a reimbursing bank in such LCs does serve a practical purpose.
ICC and its experts are not always practical unfortunately
The market right or wrong rules always.

So I wouldnot worry too much if a reimbursing bank was mentioned in the 'nego' LC.....

Cheers