Risky and Uncertain Situations in Negotiation of LCs

In the context of letters of credit, "negotiation" typically refers to the advancing of funds by a nominated bank before a credit’s due date by purchasing documents through another party. Under the current UCP rules, negotiation is defined as “the 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.”[[1]] As evidenced by court decisions worldwide, there have been differing interpretations of the definition of negotiation across jurisdictions.[[2]]