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hello there. need your help in the issue. we received a letter of credit which is available with the issuing bank. the credit says that contrary to article 38, xyz bank is the transferring bank. that means that xyz bank is the transferring bank but not a nominated bank. in this case i would like to know how much of article 38 would apply to this credit. in my opinion,

1. there is no examination by the transferring bank
2. there is no presentation by the 2nd beneficiary to the transferring bank since its not a nominated bank
3. there is no substitution by the 1st beneficiary.
precisely this LC can be transferred in full once without substitution of document.

Hi Pal,

I think that the bank is only authorized to act following the instructions by the issuing bank, the bank will act as tranferring bank but not responsible for honouring the l/c. It is like an l/c expiring in export country but available with the issuing bank. The second beneficiary will present documents, they will be checked and draft and invoice changed and then sent to the issuing bank for honour. The beneficiaries will bear risk of lost in transit, but not late presentation etc.
IMHO the transferring bank will clause its l/c advice "Documents will be paid only if payment received by the issuing bank" or the like.
One more thing: reasons to issue a so complicated l/c?
Ciao

In my opinion the L/C is badly worded. It prevents interalia the transferring bank to make the credit available with second beneficiary bank and this is not in line with UCP600. In addition, how the transferring bank can accomodate place of expiry both for first and second beneficiary in line with UCP600 ( The bank with which the credit is available is the place of presentation) ? The 'transferring bank' should refuse to transfer the credit. The only bank authorized to transfer the credit is issuing bank. When first beneficiary does not provide at first demand his own invoice in replacement of 2nd beneficiary's, it is hard to believe that such transferring bank will take the risk to send 2nd beneficiary documents to issuing bank for settlement.