Derogation to Article 48H UCP

[ARoncoroni]

Dear friends I need your precious opinion about a problem regarding transferable credits:
the first beneficiary of a transferable l/c payable at 150 days b/l instructs transferring bank to transfer the l/c to second beneficiary requesting to change terms of deferred payment in 90 days from b/l in derogation to Article 48H of UCP. Considering that there is full agreement between 1st beneficiary and transferring bank regarding this request,
1) is it possible that issuing bank could refuse to honour reimbursement claims if it were informed about the changed terms of deferred payment?
2) is it enough (to avoid any problem) to ask issuing bank to insert in the master l/c an authorization to transfer the l/c with shorter terms of deferred payment.
3) what could it happen if 2nd beneficiary present documents directly to issuing bank when terms of deferred payment are different?
4) which is the best way to solve my problem without the utilization of back to back l/c.
Thanking you in advance, best regards.

[NigelHolt]

Without liability/responsibility:

I do not see Art 48h is relevant. This refers to changing the ‘place’ of ‘payment or negotiation’ (not incidentally ‘deferred payment’ or ‘acceptance’). It contains no authority to change the ‘tenor’ of the credit, as is being proposed here. Thus, the transferring (presumably) nominated bank would not have any right to reimbursement before 180 days after the b/l date.

The best way, therefore, to solve your 'problem' is to say to the first beneficiary 'no'.

[edited 3/7/03 9:35:33 AM]

[larryBacon]

Sometimes one is called on to innovate with a problem such as this. My suggestion is this :
Let us assume no partial shipment allowed and first bene entitlement is USD100k, with 2nd bene entitlement USD80k. Insert a clause to the effect that valid claims for payment upto and including USD80k is payable at 90 days and valid claims for payment in excess of that figure are payable at 150 days.

Does this solve the problem ?

Laurence

[JudithAutié]

Without responsibility and as a personnal opinion only

how about another innovative suggestion:

Leave in the payment at 180 days but insert a clause stating in the transferred credit that the transferring bank is willing to make an advance payment on the 90th day, with interest etc... charges for account of 1st beneficiary.

This could be done only with well-known and respectable customers, of course, in the light of the Paribas/SanAnder ruling. (and also under the full responsility of the 1st beneficiary)

But sometimes you have to be innovative to survive in this difficult world of banking )

Judith

[larryBacon]

Judith,

I welcome your innovation, but this would make the terms of the transferred credit different to those of the issuing bank & therefore I don't think this could be regarded as a transferred credit. However, if your suggestion was incorporated into a rider to the transferred DC, this could work. This rider would be an undertaking by the transferring bank, separate to and distinct from the DC terms along the lines suggested by you.

Laurence

[lroland]

We apply the following rules when transferring credits :
- payment terms must be similar for the transferred credit as for the basic credit.
Reason why is to respect art. 48 UCP, in particular point i which clearly stiupulate that in case of substitution of invoice by first beneficiary, same is authorized to draw under the credit for the difference, which clearly evidence that "both credits" have the same payment terms.
In addition to that, why should a bank which has agreed to transfer a credit taking the risk of not receiving 1st beneficiary invoices in substition and then being unable to negotiate being the payment terms not as per basic L/C.

Roland

[JudithAutié]

Laurence,
I agree that it would be a good idea to have the clause I suggested as a rider, and not in the credit itself. Thanks for the suggestion
Judith