FOB or CFR and delivery terms on Transferable LC

[remshore]

Hi,

I'm a trader B, and let's tell that I need to buy the product T for my client A.

I will use a transferable LC to pay my provider C.

So if I understand well, I tell my client A to pay me by transferable LC for the product T.

Then with my bank confirming the transferable LC, I will pay my provider C with this LC.

Then how do I organize the shipment ?

I mean if I buy my product T in China, and need to deliver in Africa for example, but I don't want my provider to send it directly to my client, how can I do ?

First, I thaught I would tell my provider to deliver me FOB China, then I will do the shipment with my ship agent from FOB China to CFR Africa.

But is it possible with a transferable LC ? If not what is the solution ?

If I let my provider C deliver me CFR Africa, then how my client A will receipt the product, through the customs, etc, because I will be the receiver on the BL (I mean my Bank, based in France by the way).

Another important information : my client need to receive on CFR base, because he won't have to pay tax and customs since it's production tools for his own company.


I'm really confused.

And one last thing, most of my potential providers doesn't want FOB term, they do prefer CFR, because they want to have control on the shipment, worried to not be paid, etc, but if it's FOB on the term between me B and my provider C, why he would be worried ?


Thanks for your help.

[jmitra]

dear remshore,

its very difficult to hide the identities of the parties of a transferable letter of credit from each other. in fact, transferable credit was never designed for this. the only possible solution i see -

1. put your name as the shipper. in this way at least the ultimate buyer will not know the supplier. but not vice versa

i really dont think if the original LC is CFR basis, then you can transfer it on FOB basis as that would conflict with the original LC.

what you really need in this case is a back to back letter of credit issued by your bank against the LC you have received. in that case you have to bear all the negative consequences.

[remshore]

Hi,

thanks for your reply.

So if I understand well :

1. I can only change the BL and Invoice on a transferable letter of credit ? please confirm

2. I can't have different incoterms using a transferable letter of credit ?

I'm really stuck because I can't use back to back letter of credit, my bank doesn't do that.

Thanks for your reply.

[floppyer]

I have the same problem.
Did you find the solution? How can you buy in FOB and sell in CFR with a transferable LC?
Thank you very much.

[cristiand969]

back to back letter of credit would be the solution

[picant]

Hi Pal,

in transferable credit, documents from second beneficiary must be the same that first beneficiary will use to avail the originary l/c, except invoices and drafts. In your case it is advisable a back to back l/c but
you need credit facility with your bank.
Other comments appreciated
Ciao