Article 6.b of UCP 600 stipulates “A credit must state whether it is available by sight payment, deferred payment, acceptance or negotiation.”

My questions are:
(a) How can one distinguish between these three types of credits? In other words, what are the distinctive features of each?
(b) Can a bank issue a credit available only with itself, by negotiation?

Quoting from [Catalyst]:


Article 6.b of UCP 600 stipulates “A credit must state whether it is available by sight payment, deferred payment, acceptance or negotiation.”


My questions are:

(a) How can one distinguish between these three types of credits? In other words, what are the distinctive features of each?

(b) Can a bank issue a credit available only with itself, by negotiation?

I see that you are asking questions to involve the members of the board.  As this is a great question IM placing it at the top so that members can put forward what they believe to be the answers.  Great teachers always ask great questions.

Best regards,

Ranger

Replying to [Catalyst]:
Thanks for the privilege. Greatly appreciated.

Replying to [Catalyst]:
Hello Sir,

a) A credit is available by:
+ Sight payment: payment on receipt of the documents by the issuing bank or the bank nominated in the documentary credit.

+ Deferred payment: payment after a period specified in credit, often calculated as number of days after the date of presentation of the documents or after the shipping date.

+ By acceptance: acceptance of a draft which to be presented together with other documents by the issuing bank or by the bank nominated in the documentary credit, and the payment thereof at maturity.

+ By negotiation:means the giving of value for drafts and/or other documents by the bank authorized to negotiate. The negotiating bank has the right of recourse to the beneficiary of the documentary credit if cover is not received from the issuing bank, unless the negotiating bank has agreed to negotiate without recourse to the beneficiary, or has confirmed the credit.

b)"Can a bank issue a credit available only with itself, by negotiation?"
Yes, it can.

Replying to [Catalyst]:

Just to whet your apetite:
(1) "Payment" under an LC is irrevocable, "negotiation" is NOT, unless done by a confirming bank.

(2) The difference between an "Acceptance Credit" and a "Deferred Payment Credit" is of the absence of a draft in the latter.

(3) An Issuing Bank "honours", hence it must always PAY, it can never "negotiate". Therefore, it can never issue an LC available by "negotiation' with itself.

Replying to [Catalyst]:
a good question ,and i will to

Replying to [Catalyst]:
Refer to point no.3 about negotiation, negotiation according to UCP600 means purchase by nominated of drafts (drawn on bank other than the nominated bank) and/or docs under a complying presentation.....

I have seen some confirmed lcs where drawee field carries the name of confirming bank and these lcs are restricted to confirming bank by negotiation. As drawee is confirming bank, this means that the bene has to draw drafts on confirming bank. Now how can that confirming bank negotiate when drafts are drawn on itself.

Under UCP, nego means purchase by nominated bank of drafts drawn on bank other than the nominated bank.

Replying to [Catalyst]:

A confirming bank 'honours' OR 'negotiates'. If a draft is drawn on the confirming bank itself, then the confirming bank negotiates WITHOUT RECOURSE.

1) mixed payment
2) yes the issuing bank can the avalialbe bank because that it's duty under ucp600 article no. 7

Replying to [Catalyst]:

Sorry friend, the first conveys nothing.

You are right about the second point (though not by way of an answer) to the extent that a letter of credit CAN be made available only with the issuing bank.

[I would always recommend to a beneficiary to get an amendment so that the LC is available with a bank of his choice, or any bank, but at his place of business.]

Replying to [Catalyst]:
Suppose LC is restricted to a particular bank by payment, now can exporter present docs to the issuing bank through any third bank (without involving the bank on whom lc is restricted)? Being more specific, what actually means by lc available by payment with a particular bank/