Tranferred L/C

[MIA19]

Hi,
Can a transferable LC which states that partial shipments are not allowed be transferred in part to a single second beneficiary?

Wouldn't it be impossible to execute since LC is transferred only partly? What would be scenario in which it would be still possible to execute?
regards
Snježana

[shahriar]

as per UCP 600, the transferring bank is allowed to change the followings

- the amount of the credit,
- any unit price stated therein,
- the expiry date,
- the period for presentation, or
- the latest shipment date or given period for shipment,

if partial shipment is not allowed, the transferring bank should not transfer LC in part as the 2nd beneficiary will inevitably breaching a LC term

[mia vervacke]

if partial shipment is not allowed, the transferring bank should not transfer LC in part as the 2nd beneficiary will inevitably breaching a LC term

What about following situation:

L/C amount USD 100.000,- for 5000 pcs of goods
First beneficiary : ABC Company

First beneficiary is only capable to produce 2500 pcs and asks to XYZ company (sister company or other company from the group)
to produce the remaining 2500 pcs. They agree to put everything in the same container/vessel.
First beneficiary transfers part of the l/c (USD 50.000,- for 2500 pcs) to XYZ company.

L/C has been transferred in part and no partial shipment is made!

Please comment

[nesarul]

dear,
Still it is not wise to transfer, there are probably two reasons:
a. Due to sub article 38(d) & 38(g) we can not be well protected at extreme cases.
B. The agreement what is suppossed to is outside the bank's control.
nesar

[mia vervacke]

Dear Nesar,

I agree that my situation I have given is not correct, because in a transferable l/c the only documents you can substitute are probably the invoice and the draft. You can't substitute/add other documents (this is a situation for a back to back l/c).

UCP 600 Art 38d:
A credit may be transferred in part to more than one second beneficiary provided partial drawings or shipments are allowed.

But as you can see, the above clause covers the situation where the l/c must be transferred in part to MORE THAN ONE SECOND BENEFICIARY. In our case there is only 1 second beneficiary. So UCP 600 doesn't prohibit the partial transfer to one second beneficiary.

In fact you always transfer in part if you change the amount of the credit,

Please comment

[CDCS2009]

thats really sweet counter dear mia indeed

i guess "extreme cases" by edear nesar wants to say that if we transfer this LC, then 2nd beneficiary can not make complying presentation with out the help of first beneficiary.

[nesarul]

dear,
The objective of sub article 38(d) is also equally applicable on ur case...we can not ignore this sub article on the pela of one second beneficiary in our case. Moreover
just think , you are confirming transferring bank? Do u agreed to do the same? I do understand your logical conclusion where u strive to find a solution on a prudent first beneficiary's argument. But this decision will depends on first beneficiary's performance and control of first beneficiary over second beneficiary..... Where transferring has to relay....at extreme case......court may argue on transferring bank's authority...that why i reluctant to be positive on ur transaction.
Nesar