Dear Experts,
Is Back to Back (Counter) Documentary Credit transferable or not?
Is Back to Back (Counter) Documentary Credit Transferrable?
-
- Posts: 16
- Joined: Thu Oct 25, 2012 1:38 am
- First Name: NIAZAHMED
- Last Name: RUMEL
- Organization: SOUTHEAST BANK LIMIT
- Filter: Two Plus Two =: 4
- Location: BANGLADESH
-
- Posts: 57
- Joined: Fri Feb 11, 2011 8:25 pm
- First Name: ISAAC
- Last Name: TUDU
- Organization: Bank
- Filter: Two Plus Two =: 4
- Location: INDIA
Back to Back (Counter) Documentary Credit
Though there are lot of similarities between a "Transferable Credit" and "Back to Back (Counter) Documentary Credit" but a Back to Back (Counter) Documentary Credit is not transferable. As per UCP 600, Art 38.b - Transferable credit means a credit that specifically states it is "transferable". A transferable credit may be made available in whole or in part to another beneficiary ("second beneficiary") at the request of the beneficiary ("first beneficiary").
Regards,
Isaac
Regards,
Isaac
-
- Posts: 984
- Joined: Mon Oct 25, 2010 11:52 am
- First Name: Abrar
- Last Name: Ahmed
- Organization: Crown Agents
- Filter: Two Plus Two =: 4
B2B LC
Unlike a transferable LC, a back to back LC is independent of the master LC and in theory, it can be constructed in any manner of the back to back LC issuing bank's choosing, including adding the feature of transferability.
However, in practice, since the issuing bank of the master LC will seek to use the performance under the master LC as security to issue the back to back LC, it will seek to ensure the back to back LC mirrors the terms of the master LC. With this in mind, it would be a foolhardy bank which agrees to issue a transferable back to back LC, and thereby potentially creating a risk by introducing the possibility of a third beneficiary in the transactional chain.
However, in practice, since the issuing bank of the master LC will seek to use the performance under the master LC as security to issue the back to back LC, it will seek to ensure the back to back LC mirrors the terms of the master LC. With this in mind, it would be a foolhardy bank which agrees to issue a transferable back to back LC, and thereby potentially creating a risk by introducing the possibility of a third beneficiary in the transactional chain.
-
- Posts: 57
- Joined: Fri Feb 11, 2011 8:25 pm
- First Name: ISAAC
- Last Name: TUDU
- Organization: Bank
- Filter: Two Plus Two =: 4
- Location: INDIA
back back LC
Agreed with Abrar as Transferred LC derives not only its existence from the Master LC (Original LC) from which it receives its terms and conditions (except for the permitted exceptions), but also its utilisation, whereas, in back to back LC operations, there are two wholly independent LCs with wholly independent issuing bank undertakings.