Switching of BL in B-B LC

michaeltan · Post by **michaeltan** » Sun Jun 24, 2001 1:00 am

Master credit issued by bank A required 'Full set of original clean on board ocean Bill of Lading issued to the order of the issuing bank marked freight prepaid & notify applicant'

As the beneficiary's bank, B, we have been asked to issue a Back to Back LC to the ultimate supplier. We are advised that in a Back-Back, we should ensure the terms of the second credit mirror that of the master credit. Given that, should we ask for the BL to be made out to the issuing bank & notify applicant? Or would it be possible to ask for the BL to be made out to the order of B & notify the middleman …this BL will later be switched & substituted by one that complies with the master credit requirements.

On the topic of switching of BL, we have also heard of cases where Ports of Loading/Discharge could be changed to mask certain info from the applicant & ultimate supplier. How do the banks view this practice which I feel carry certain legal implications in that the bank may later be accused of being a party to misrepresentation or worse fraud.

I would appreciate very much some feedback from those bankers or consultants who have experienced switching of BL as to whether you need any undertaking from the middleman or shipping co.

Thank you.

T.O.Lee · Post by **T.O.Lee** » Sun Jun 24, 2001 1:00 am

As an experienced consultant dealing with such issues, we would not suggest you to adopt the switched bills of lading approach unless you know all the parties involved well and that you are absolutely sure that they are all gentlemen. Otherwise it is not worth for your bank to take such risk.

The best way is to approach the issuing bank promptly, who would consult the applicant, for the issuance of an amendment to the master LC to fit the baby LC and to remove all the risk exposed by the issuing bank of the baby LC.

We are from www.tolee.com

[edited 4/18/02 7:57:08 PM]

larryBacon · Post by **larryBacon** » Sat Jun 30, 2001 1:00 am

As T.O. Lee suggests, ther best way to approach this is to get an amendment to the first L/C requiring the original Bs/L to be consigned "to order". This will satisfy the concerns of banks, beneficiaries and applicants.