ICC Digital Library Forum

Dear all,
is the payment clause that we shall pay only when we receive funds from issuing bank under original l/c, usual in tranferred letters of credit and the banks are always using such structure of payment clause when transferring l/c or is it something which some banks are using but it is not proper.
thanks
Snježana

Hi,

Unless the transferring bank is the confirming bank, the transferred L/C would contain the following clause or a clause of similar effect: “We shall pay only when we receive funds from the issuing bank under the original L/C”.

Kind regards,
N.H. Duc

Such clause in the transferred credit is unnecessary as long as the transferring bank has not confirmed the credit i.e. is not engaged to honor/negotiate presentations under the transferred credit.
Regards
Antoine Samaha

So, if we put in transferred l/c such clause (that we shall pay only after receipt of funds under originala l/c) what would be the risk for transferring bank and the first beneficiary (presuming we have not confirmed l/c)

Hi,

Not sure if the below answer covers your question.

There’s no risk for the transferring bank as it just gives a conditional payment undertaking that it will pay only after receipt of the proceeds under the original L/C. That is to say, so long as it has not received the proceeds, it will not pay the second beneficiary.

There’s no risk for the first beneficiary, either as such clause is not for the first beneficiary but for the second beneficiary.

The beneficiary may bear the risk of non-receipt of the difference if he fails to present his own invoice and draft to replace those of the second beneficiary or if the invoice presented by the first beneficiary creates discrepancies that cannot be corrected on the first demand and the transferring bank decides to present the documents as received from the second beneficiary to the issuing bank.

Kind regards,
N.H. Duc