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The transferable credits rule is not revolunized but is certainly improved
not only with rewording (windowdressing) for clarity but also with
restructuring (remodelling) for effective
functionality.
There are some new things in the rule, which change the content, meaning and
function.
Whether window-dressing or
remodeling depends I guess on the eyes that see it. So what I will try here
is to describe the changes/modifications that have been done to the “old”
article 48 … in UCP 600 it is article 38.
First of all the same thing
that has happened to the rest of the articles has also happened to article
38: It has been totally re-drafted with a
clear objective of making it clearer, less ambiguous and more transparent.
My view is that this has been achieved rather well. As such the transferable
LC is complicated – perhaps not from an abstract point of view – but from a
practical point of view. Transferring an LC
always involves certain operational risks – different from advising or
issuing an LC.
The opening of the article
has been changed radically – so it now says:
A bank is under no
obligation to transfer a credit except to the extent and in the manner
expressly consented to by that bank.
This is very intentional –
as the drafting group wants to signal that the
starting point of any “transfer” is that the
transferring bank’s willing to do so – regardless whether that bank is
nominated, confirming or whatever.
In a UCP 600 context
it is important to note that the definitions
directly related to transferable credits are found in article 38 – and not
together with the rest of the definitions in article 2. In
article 38 you find the following definitions:
-
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”).
-
Transferring bank means a
nominated bank that transfers the credit or, in a credit available with
any bank, a bank that is specifically authorized by the issuing bank to
transfer and that transfers the credit. An
issuing bank may be a transferring bank.
-
Transferred credit means a
credit that has been made available by the transferring bank to a second
beneficiary.
From
the definition of “transferring bank” it is important to note that the
issuing bank may also be the transferring bank. This will, for example, be
the case where the transferring bank is not
willing to transfer the LC.
When it comes to amendments
a simplified approach has been attempted. The new rule is that the “request
for transfer must indicate if and under what conditions amendments may be
advised to the second beneficiary. The transferred credit must clearly
indicate those conditions”.
A new rule
is that if the LC is confirmed, then the transferred LC must also be
confirmed (sub article g).
In the UCP 600 sub-article
38(i) it has been made clear that the transferring bank has the right to
forward the documents to the issuing bank as received from the second
beneficiary i.e. without substituting invoice and/or draft in the following
scenarios:
-
First beneficiary fails to
present own invoice/draft
-
The
invoice/draft presented by the first beneficiary creates discrepancies
that did not exist in the presentation made by the second beneficiary (and
the first beneficiary fails to correct them on first demand).
Another new
rule is that documents under the transferred LC by the second beneficiary
must be made to the transferring bank (sub article k). This
means that the second beneficiary is not allowed to present the
documents
directly to the issuing bank.
Conclusion
So I guess that the
conclusion is something like: The transferable
credit has not been revolutionized in the UCP 600, but surely it has been
improved and made clearer on a number of points. The new
things in the rule are the structural changes. The structural changes change
the content, meaning, and function.
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