Is Back to Back (Counter) Documentary Credit Transferrable?

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RISALAT
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Is Back to Back (Counter) Documentary Credit Transferrable?

Post by RISALAT » Sat Nov 09, 2013 9:30 pm

Dear Experts,
Is Back to Back (Counter) Documentary Credit transferable or not?

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picant
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Meaning?

Post by picant » Sat Nov 16, 2013 6:31 pm

Hi Pal,

a back to back credit is a credit that originates another credit having the same contets but differing for certain details.
It is used when it is no possible to transfer the originary doc. credit.
Other comments appreciated
Ciao

IJTUDU
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Back to Back (Counter) Documentary Credit

Post by IJTUDU » Wed Nov 20, 2013 7:28 pm

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").

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Isaac

abrar
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B2B LC

Post by abrar » Thu Nov 21, 2013 1:10 am

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.

IJTUDU
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back back LC

Post by IJTUDU » Thu Nov 21, 2013 2:10 pm

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.

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