Types of Payments/Negotiation

Negotiation

In regard to letters of credit, when the documents are presented and reviewed by the bank, the process is referred to as negotiation of the documents. In accordance with UCP 600, a bank authorized to negotiate documents/drafts is authorized to give value for draft (s) and/or document(s), which means the letter of credit can stipulate that payment be made by the advising, issuing or confirming bank. For the purposes of the UCP, the interpretation is either “making immediate payment” or “undertaking an obligation to make payment” (on the due date).

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