Multiple Beneficiaries
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Multiple Beneficiaries
Is there a possiblity to have a letter of credit (standby or commercial)be issued in favour of multiple beneficiaries? If yes, under what circumstances?
Multiple Beneficiaries
UCP 500 ALREADY HAS MULTI-BENEFICIARIES
We already have an LC with two beneficiaries, such as in a transferable LC subject to UCP 500 (Article 48 is for two or more beneficiaries).
MULTI-ISSUERS IN USA
Recently in New York, an insurance company accepts a standby LC issued by more than one issuer, and their payment obligations are according to an agreed percentage. However, these issuers must also be jointly and severally responsible for the full drawing amount. That means if one issuer goes bankrupt, the other remaining issuers have to take up the share of payment obligation left over by this bankrupted issuer (we use the term "issuer" here to be consistent with the ISP 98 which is more popular in the USA).
COMPLEXITIES WE HAVE TO FACE
Before we issue an LC allowing two beneficiaries to draw (other than in transferable form), we have to decide whether they be restricted to an agreed percentage in the total drawing amount available with the LC? The next question is should they draw the LC in "jointly or severally" manner? That means if the other beneficiary does not make any drawing, then may the remaining beneficiary draw the full available LC value before expiry?
Can the two beneficiaries negotiate their documents with two negotiating banks, in an open negotiation LC?
Do we need two advising banks for beneficiaries domiciled in two countries?
Do we need two confirming banks? Are they jointly and severally responsible for the full LC payment obligations?
Can one part be transferable and another part be not transferable?
Can one part be available for sight payment and another part by deferred payment or negotiation to suit the different needs of the two beneficiaries?
Can we call for a BL in one part and AWB in another?
We must clear all these hurdles before we issue such LC.
We do not wish to go on further on hypothetical cases.
KEEP OUR FEET ON THE GROUND
From a practical point of view, why not issue two LCs each to a separate beneficiary to avoid such complexities? Unless one or both of the splitted LC is below minimum charge level, there is no savings for a single LC putting the two beneficiaries together. Those banks that charge for excessive details may charge for the additional beneficiary and the second advising bank. The savings may be negligible. From a cost against benefits/risk point of view we do not encourage such contemplation.
Scholars in the universities like hypothetical cases because they are not good at practical issues. They may not have traded in their whole lives. On the contrary, consultants put practical issues on top priority because their customers come to them for solutions to their problems consistent with the theories but have no interest in the theories themselves.
We understand that Mr. AbdulKaderB is from KSA. We look forward to meeting you in our Trade Finance Risk Management workshop on 1-3 October in Jeddah presented by the IOB.
We are from www.tolee.com
[edited 5/10/02 8:44:28 PM]
We already have an LC with two beneficiaries, such as in a transferable LC subject to UCP 500 (Article 48 is for two or more beneficiaries).
MULTI-ISSUERS IN USA
Recently in New York, an insurance company accepts a standby LC issued by more than one issuer, and their payment obligations are according to an agreed percentage. However, these issuers must also be jointly and severally responsible for the full drawing amount. That means if one issuer goes bankrupt, the other remaining issuers have to take up the share of payment obligation left over by this bankrupted issuer (we use the term "issuer" here to be consistent with the ISP 98 which is more popular in the USA).
COMPLEXITIES WE HAVE TO FACE
Before we issue an LC allowing two beneficiaries to draw (other than in transferable form), we have to decide whether they be restricted to an agreed percentage in the total drawing amount available with the LC? The next question is should they draw the LC in "jointly or severally" manner? That means if the other beneficiary does not make any drawing, then may the remaining beneficiary draw the full available LC value before expiry?
Can the two beneficiaries negotiate their documents with two negotiating banks, in an open negotiation LC?
Do we need two advising banks for beneficiaries domiciled in two countries?
Do we need two confirming banks? Are they jointly and severally responsible for the full LC payment obligations?
Can one part be transferable and another part be not transferable?
Can one part be available for sight payment and another part by deferred payment or negotiation to suit the different needs of the two beneficiaries?
Can we call for a BL in one part and AWB in another?
We must clear all these hurdles before we issue such LC.
We do not wish to go on further on hypothetical cases.
KEEP OUR FEET ON THE GROUND
From a practical point of view, why not issue two LCs each to a separate beneficiary to avoid such complexities? Unless one or both of the splitted LC is below minimum charge level, there is no savings for a single LC putting the two beneficiaries together. Those banks that charge for excessive details may charge for the additional beneficiary and the second advising bank. The savings may be negligible. From a cost against benefits/risk point of view we do not encourage such contemplation.
Scholars in the universities like hypothetical cases because they are not good at practical issues. They may not have traded in their whole lives. On the contrary, consultants put practical issues on top priority because their customers come to them for solutions to their problems consistent with the theories but have no interest in the theories themselves.
We understand that Mr. AbdulKaderB is from KSA. We look forward to meeting you in our Trade Finance Risk Management workshop on 1-3 October in Jeddah presented by the IOB.
We are from www.tolee.com
[edited 5/10/02 8:44:28 PM]