Best Trade Solution

Dear all,

Consider a transferable letter of credit is issued by bank A and bank B is the transferring bank. Bank B transferred the credit making it available with bank C. now say bank c found the document of the second beneficiary complying and negotiated. after substitution of the document by that of first beneficiary, the document became discrepant and issuing bank refuses eventually. credit expired mean while. what is the relation between bank C and bank A here and does bank C enjoys same protection as if it has been nominated by the issuing bank?

where UCP says that nominated bank is selected by the issuing bank, can we call bank C a nominated bank under this definition?

When making the credit available at C bank counters bank B presumably added its confirmation to the credit otherwise the bank B will not add any reimbursement instruction but the clause that upon receiving funds from issuing bank they will pay bank C accordingly.
Could you post the action of transferring bank regarding confirmation?

A transferable credit may be made available in whole or in part to another beneficiary (second benef) at the request of the beneficiary (first benef). The transferring bank cannot amend the terms to make it available with another bank. The only terms that can be amended are amount, unit price, expiry date, period, latest shipment date which may be reduced and insurance cover which may be increased.

This is more important in cases where first beneficiary has the right to substitute documents and the credit is available with a specific nominated bank and not with any bank.

The nominated bank cannot select another nominated bank as then it would be amendment of the original terms of the credit.

as per clause 38 i of ucp 600 if second beneficiary submits compliant documents and after substitution by first beneficiary the documents are discrepant, transferring bank has the right to present docs received from second beneficiary to the issuing bank without further responsibility to first beneficiary. Hence transferring bank should not sent the substituted documents.

Vinod,
regarding your comments in BOLD letters... Just to make sure....have you read art. 38 j?
On the other hand , the scenario was that the transferring bank did not notice the discrepancy found in substituted documents and sent them to issuing bank who refused them.
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Berry,
in practice it is unlikely that when credit is not confirmed by transferring bank, this will make the credit available at the place of 2nd benef bank. When credit was confirmed then it is clear that transferring bank substituted its undertaking of issuing bank to pay 2nd benef complying docs.