Substitution of Applicants Name

[VinodR]

As per sub art 48(h),the name of the First Beneficiary can be substituted for that of the Applicant, but if the name of the Applicant is specifically required by the original Credit to appear in any document(s) other than the invoice, such requirement must be fulfilled.
We have a transferable credit that stipulates, “the monthly progress of works to be certified by the applicant on the invoice. Given the limitations imposed by article 48(h) on the alterations possible in the terms & conditions of the original credit, is it possible for the transferring bank, at the time of transfer to substitute the name of first beneficiary with that of the applicant for certifying the invoice.
We have two schools of thought here, one feels that art 48h allows only for substitution of first bene name for that of the applicant, but the applicant must carry out any certification required to be done by the applicant.
The other school feels that bene name can be substituted for the purposes of certification also, as art 48h clearly states that the requirement of the applicants name to appear if specifically required by the original credit is restricted for documents other than the invoice.
Would appreciate members comments.
regards, Khalid

[NigelHolt]

I personally have no doubt that the first beneficiary’s name cannot be substituted for that of the applicant. Not only does 48(h) not allow this, but substitution would be a nonsense as it would fundametally undermine the protection this provision offers to the applicant and therefore the ‘balance of power’ between applicant and (first) benef.

[AbdulkaderBazara]

Agree. Transferable LC's have continued to be cause of problems. The safest way to handle these types of credits is to scrutinize the conditions from the start i.e. at the time of issuance / advising / transferring / confirming the credit. When in doubt get clarification from the instructing party i.e. applicant / issuer of the letter of credit.