Transferable LC

larryBacon · Post by **larryBacon** » Wed May 26, 2004 1:00 am

A transferable LC is issued. One of its conditions calls for the bene to courier one original of each document to the issuing bank, with bene certificate indicating despatch of originals by courier.
Any suggestions as to how to transfer the LC without falling foul of Article 48 ?

Laurence

JudithAutié · Post by **JudithAutié** » Sun May 30, 2004 1:00 am

this is the same problem you run into when a transferable credit requires that one copy of the invoice and 1/3 B/L (and other documents eventually) be put in ships bag. I haven't been able to get around that one either. The only suggestion I could make is to have the credit amended so that the documents are courried to the transferring bank within a specified lapse of time to be further forwarded on by the latter.
Sorry I can't give any better suggestion
Regards
Judith

AbdulkaderBazara · Post by **AbdulkaderBazara** » Tue Jun 01, 2004 1:00 am

Suggest, as the transferring bank, that you mention the name & address of the bank that issued the master letter of credit in place of the term "issuer". The term "issuer" may confuse the transferee beneficiary as to whether he /she should courier one original of each document to the issuer of the master letter of credit or the issuer of the transferred / secondary letter of credit. Nevertheless, the transferor must agree to the replacement since this action may likely disclose the name of the transferee beneficiary, the amount of the transferred credit etc to the applicant of the original credit. If the transferor doesn't agree, then an amendment to the credit must be sought.

In my opinion, if the transferor agrees, the replacement of the term "issuer" by the name of the issuer of the master letter of credit would not constitute deviation from the terms and conditions of the original credit.

The presentation of the certificate evidencing despatch, along with other documents required for payment under the credit, to the transferring bank or any other nominated bank (if the credit so allows), should be sufficient prove that the transferee beneficiary has preformed in accordance with the terms and conditions of the credit.
[edited 6/1/2004 8:40:45 AM]

larryBacon · Post by **larryBacon** » Tue Jun 01, 2004 1:00 am

I appreciate your contribution, Abdulkader, but the essence of the problem is that if the transferee despatches the original documents to the bank initiating the DC, it is not possible for the first benef to do likewise.
If the transferee sends them to the first benef, to enable him to send them in compliance, the transferee would not be able to comply.

Laurence

AbdulkaderBazara · Post by **AbdulkaderBazara** » Wed Jun 02, 2004 1:00 am

The 2nd beneficiary meets the terms and condition of the credit by producing the required certificate along with the other documents called under the LC. The 1st bene will also meets the terms and conditions of the credit by presenting the certificate issued by the 2nd beneficiary along with the rest of the documents whether or not he replaces the invoice and draft. As stated earlier, there can be commercial concerns for the 1st bene and the applicant.

larryBacon · Post by **larryBacon** » Fri Jun 04, 2004 1:00 am

If the first bene presents a cert. issued by the second bene, the presentation will be discrepant, as the LC calls for the bene to despatch originals and certify to this effect himself.

Laurence

AbdulkaderBazara · Post by **AbdulkaderBazara** » Sat Jun 05, 2004 1:00 am

The issuer authorized transfer of the LC and thus expects a second bene's performance. However, the LC calls for bene cert. without specifying which bene. Based on that we may apply article 20a of UCP 500(ambiguity as the issuers of the document) and accept 2nd bene's certificate provided the commercial concerns are taken care of.

Believe this approach would meet the documentary requirement in accordance with UCP 500 (taken literally) but it might not be the safest as it could draw argument. The best one would be to get clarification from the issuer.

larryBacon · Post by **larryBacon** » Sun Jun 06, 2004 1:00 am

Abdulkader,

a transferable LC (TLC)does not contain a requirement that it must be transferred. These are sometimes opened before final negotiations have been completed between bene & applicant. A TLC gives to the (1st) bene the option to transfer some or all of the value of the TLC. Article 48 stipulates that the only documents which may be replaced are invoice & draft. Thus, when the issuing bank specifies a requirement for a bene cert, it must be issued by the first bene. The difficulty lies in the fact that when transferred, the same condition applies to the 2nd bene. If the 2nd bene complies by sending docs direct to the issuing bank and certifying to that effect, how can the first bene also certify compliance ?

Laurence

AbdulkaderBazara · Post by **AbdulkaderBazara** » Mon Jun 07, 2004 1:00 am

Agree with you that a transfer is not a must and I did not mean that when I referred to it. There would not be a query if the bene had no intention to transfer.

To go back to the issue, today, I was able to look at ICC Policy Statement on "Transferable Credits and UCP" - Issue no. 6 under article 48(c)covers similar query to the one you have raised.
[edited 6/7/2004 9:37:27 PM]

JudithAutié · Post by **JudithAutié** » Tue Jun 08, 2004 1:00 am

So we've made the circle round back to the fact that such a condition is not acceptable under a transferable credit and that an amendment has to be obtained.

I often wonder whether the applicants make such requirements on purpose or by lack of foresight.

Regards
Judith