UCP Art 48d - 1st beneficiary may retain his right not to forward amendment to 2nd beneficiary.
ICC opinion 485 - "If a request is received to cancel the original credit or a reduction in the value that would affect the value of a transferred credit, no agreement of the first beneficiary can be acted upon until such time as the agreement of the 2nd beneficiary is received." Can we assume that changing the description of goods, shorten the shipment latest...etc should be included? Any comment?
If 2nd beneficiary's bank requests you to insert the clause "Any amendment which could change the second beneficiary's rights under the transfer, or change the terms or conditions to which the second beneficiary must apply, will nevertheless be advised to second beneficiary"into your transferred L/C, will you do it? Why or why not?
Thanks
Transfer + amendment
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Transfer + amendment
Whenever we make a transfer of a credit, whether or not the first beneficiary reserves the right not to forward any amendments to the second beneficiary, we require that the first beneficiary undertake to refuse any amendment to the original credit which would adversly affect the transfer unless the second beneficiary accepts such amendment.
However, on principle, I would not add the clauses requested by the second beneficiary's bank.
best regards
Judith
However, on principle, I would not add the clauses requested by the second beneficiary's bank.
best regards
Judith
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- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Transfer + amendment
I have always considered transferable letters of credit as complex transactions. I thought this posting would attract answers from the well know DC-Pro participants, who have always been generous to provide their expert views.
I believe you would agree with me that once an LC or portion of an LC is transferred that specific part (in partial or whole) would create an irrevocable undertaking by the issuing bank and / or the confirming bank towards the 2nd beneficiary(ies). Any changes to the newly created situation, that is, the irrevocably transferred LC, would need the approval of the parties involved. The parties here would be the applicant (the first beneficiary), the beneficiary (2nd beneficiary) and the banks involved (issuing bank, confirming bank and somewhat transferring bank by virtue of its right under article 48c – limited to not willing to advise the transfer of an amendment.)
If we agree to this principle we can then conclude the following to the situation in question:
a) 1st beneficiary may have the right not to advise the amendment that would not affect the right of the second beneficiary such as for example:
1. Increases in the LC value & Increase in the quantity of the goods, unit price
2. Extension of the shipment and expiry date
3. Request for additional different type of goods.
The list could go on as long as it does affect the terms and conditions of the transferred LC. The 1st beneficiary may accept or reject such amendments without being obligated to advise the 2nd beneficiary(ies).
b) By transferring the credit; however, the 1st beneficiary has forgone his right to solely decide on accepting amendments that would directly affect the newly created irrevocable commitment i.e. the irrevocably transferred LC(s) unless the 2nd beneficiary(ies) (new party(ies) to the transferred LC) approves the change(s) as well (article 48e). Examples of this situation would:
1. Reduce the LC value, unit price, quantity
2. Change in the specification of the goods, method of shipment
3. Cancellation of the LC, reduction of the expiry or shipment dates
Again the list could go on.
Based on the above I would consider the 2nd beneficiary’s bank request as redundant and would not add to the transferred LC.
I believe you would agree with me that once an LC or portion of an LC is transferred that specific part (in partial or whole) would create an irrevocable undertaking by the issuing bank and / or the confirming bank towards the 2nd beneficiary(ies). Any changes to the newly created situation, that is, the irrevocably transferred LC, would need the approval of the parties involved. The parties here would be the applicant (the first beneficiary), the beneficiary (2nd beneficiary) and the banks involved (issuing bank, confirming bank and somewhat transferring bank by virtue of its right under article 48c – limited to not willing to advise the transfer of an amendment.)
If we agree to this principle we can then conclude the following to the situation in question:
a) 1st beneficiary may have the right not to advise the amendment that would not affect the right of the second beneficiary such as for example:
1. Increases in the LC value & Increase in the quantity of the goods, unit price
2. Extension of the shipment and expiry date
3. Request for additional different type of goods.
The list could go on as long as it does affect the terms and conditions of the transferred LC. The 1st beneficiary may accept or reject such amendments without being obligated to advise the 2nd beneficiary(ies).
b) By transferring the credit; however, the 1st beneficiary has forgone his right to solely decide on accepting amendments that would directly affect the newly created irrevocable commitment i.e. the irrevocably transferred LC(s) unless the 2nd beneficiary(ies) (new party(ies) to the transferred LC) approves the change(s) as well (article 48e). Examples of this situation would:
1. Reduce the LC value, unit price, quantity
2. Change in the specification of the goods, method of shipment
3. Cancellation of the LC, reduction of the expiry or shipment dates
Again the list could go on.
Based on the above I would consider the 2nd beneficiary’s bank request as redundant and would not add to the transferred LC.
Transfer + amendment
Abdulkader,
With MNg1 it seems to be all 'one way traffic'. I cannot trace that s/he has answered a single query of anyone else or even offered any thanks for a reply. Therefore, in line with my policy of 'mandatory politeness and reciprocity' I have not posted a response.
Regards, Jeremy
With MNg1 it seems to be all 'one way traffic'. I cannot trace that s/he has answered a single query of anyone else or even offered any thanks for a reply. Therefore, in line with my policy of 'mandatory politeness and reciprocity' I have not posted a response.
Regards, Jeremy
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- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Transfer + amendment
Jeremy,
I respect your policy; however, we would always be pleased to hear from you. I'm definitely sure that the benefactors of your and other experts’ views go beyond the person who started the posting. As far as I’m concerned, the Discussion Forum is one of the features of DC-Pro that keeps me renew my subscription.
Best regards
I respect your policy; however, we would always be pleased to hear from you. I'm definitely sure that the benefactors of your and other experts’ views go beyond the person who started the posting. As far as I’m concerned, the Discussion Forum is one of the features of DC-Pro that keeps me renew my subscription.
Best regards