Abstract
This article provides the definitions of the negotiation of credit, the negotiating bank and the negotiation credit. It further describes a number of legal status of negotiating banks by looking into the legal relations firstly between the beneficiary and the negotiating bank and secondly between the issuing bank and the negotiating bank. This study is in large part based on relevant provisions of UCP 600 and decisions of the Supreme court of South Korea. Under UCP 600 the definition of negotiation requires the purchase by the nominated negotiating bank of the required documents by advancing funds on or before the banking day on which reimbursement is due to the negotiating bank. A negotiation credit authorizes the negotiating bank who is a nominated bank to purchase from the beneficiary the documents required by the letter of credit and to present those documents to the issuing bank for reimbursement. If the credit is to be honoured at sight, reimbursement is due when the issuing bank determines that there has been a conforming presentation. Reimbursement under a letter of credit available by acceptance or by deferred payment is due at maturity of the credit. In particular, while the timing of advance by the nominated negotiating bank is up to the parties, a promise of the negotiating bank to advance the purchase price to a fraudulent beneficiary does not confer immunity from letter-of-credit fraud prior to its performance. This requires the negotiating bank who is notified of material fraud prior to making an advance to beneficiary to avoid a loss by using the fraud.