ICC Digital Library Forum

Hatem,

Thanks for taking the time to give me your views in such detail. My reactions to your comments are (following your numbering):

1. You may well be right, however I believe prudence requires the more restrictive interpretation. My only ‘quibble’ would be ‘negotiation [being] restricted to a certain bank’. Given that per sub-Article 10bi availability will always be ‘restricted’ (freely negotiable credits excepted) I do not see that negotiation being restricted to the Transferring Bank should -of itself- override the sub-Art.

2. If I understand correctly, your comment applies to where the place of availability is not changed, but the transfer is advised through another bank (the ‘third/transfer’ bank).

6. My impression is that if a Transferring Bank confirmed a credit and then transferred it unconfirmed, this would be a breach of sub-Art 48h. However, where changing the place of payment/negotiation, I can see an argument for saying a confirming Transferring Bank has the option, at the first beneficiary’s behest, of asking the Transfer Nominated Bank to add or not to add its confirmation.

7. I am not able to see what risk an issuing bank is running if it asks the nominated, and thus (potentially) Transferring Bank, to add its confirmation. If, for example, the second beneficiary makes a complying presentation, but the first beneficiary does not substitute documents, the issuing bank is not only entitled, but obliged, to take up the documents and thus has the right to debit the applicant. Perhaps you might be able to elaborate on this?

Once again, thanks for your helpful contribution.

Regards, Jeremy

Altho I'm not a virgin either, I would like to add a little spice to the discussion :

How would you treat a transferable acceptance credit which stipulates that the draft be drawn on the issuing bank?
In other words, would you present two drafts, one that the second beneficiary draws and another for the first bene's difference. Truth in pricing, that's for sure.

Article 48 stipulates that the transferring bank has no obligation to effect a transfer "except to the extend and in the manner expressly consented to by such bank".

Could this not be interpreted to mean that the reimbursement clause might be changed by the transferring bank from the original reimbursement instructions of the issuing bank so that sufficient time is left to enable the first bene to substitute their documents? I am not talking about clearly changing the payment terms (making a sight credit become a deferred payment credit), but a short reasonable time.

Also, article 48j says "payment or negotiation be effected" to 2nd bene. If I maintain that strictly complying documents will be paid after receipt and examination at my counters, I would be willing to allow the 2nd bene's bank to negotiate -- (at their risk that I find the documents discrepant,) and the 2nd bene paying the interest to his bank between time of their nego and my payment.

Honestly tho, I admit that our bank does not accept to transfer credits unless we keep the place of payment and nego at our counters.

Judith

Judith,

Thank you for your ‘spicy’ contribution. My reactions, without responsibility/liability, are:

1. Re a credit available (presumably by negotiation) by ‘usance’ (‘time’) drafts on the issuing bank: I would expect a Transferring (and Nominated) Bank to require substitution of a draft for the amount of the face value of the substituted invoice, per sub-Art 48j. However, this would be contingent on the Transferring (and Nominated) Bank actually negotiating (otherwise there is the possibility of the first beneficiary having the draft discounted separately and receiving the full (discounted) documents value).

2. I do not see sub-Art 48c as allowing a Transferring Bank to vary sub-Art 48h (“The Credit can be transferred only on the terms and conditions specified in the original Credit ……”). I see the words “to the extent and in the manner expressly consented to by such bank” as simply expressly permitting the Transferring Bank to further restrict the ‘liberties’ allowed by Art 48, e.g. giving the right to refuse to allow the place of pay’t to be changed.

Also, I am not quite sure why the first beneficiary needs ‘sufficient time’ to substitute documents. I would observe that as Art 48 stands, it seems to allow the 2nd beneficiary to make presentation on the expiry date of the original credit and the first beneficiary to make complying substitution after the expiry date (sub-Art 48j refers). However, I recognise I may have missed the point your making.

3. I agree that where the place of negotiation is changed, the ‘second’ negotiating bank (i.e. the bank to whom the 2nd beneficiary has presented documents for negotiation) will need to take into account -when calculating the amount of interest etc to deduct from its negotiation- the fact that:

A. Any settlement received from the ‘first’ negotiating bank will also most likely have interest deducted.

B. Settlement from the Transferring Bank may take slightly longer as a result of document substitution.

Finally, to all in cyberspace, I won’t be around for the next week (not that I imagine this will cause anyone any sleepless nights).

Regards, Jeremy

[edited 3/22/02 11:42:37 AM]