AMENDMENT TO CHANGE THE BENEFICIARY

QUESTION

Hi Mr. Old Man,

We need your advice on the following issue:

We issued an LC in favour of Beneficiary B.
The applicant requests us to issue an amendment to change Beneficiary B into Beneficiary C.

Can we issue such an amendment?

Is the presentation made by the new beneficiary that complies with the LC deemed to be the initial beneficiary’s acceptance of the amendment?

Thank you!
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ANSWER

Hi,

According to sub-article 10 (c) UCP 600, an LC can neither be amended or cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary.

If the initial beneficiary agrees to the amendment to change the initial beneficiary into a new one, it must return the original LC and amendment(s) thereto, if any, to the advising bank in order for the advising bank to re-advise them to the new beneficiary.

So, in addition to amending the name and the address of the beneficiary, the amendment should instruct the advising bank to obtain the original LC and amendment(s) thereto, if any, from the initial beneficiary and re-advise the same to the new beneficiary.

When presenting the documents to the nominated/presenting bank for payment or negotiation or forwarding to the issuing bank, the new beneficiary will present the original LC and amendment(s) thereto, if any, and the advising bank’s advices of the same. If so, the initial beneficiary is deemed to have accepted the amendment.

Amendment can help the applicant save LC cancellation fee and new LC issuance fee as well. However, in my opinion, the better solution for the issuing bank is to cancel the original LC and then issue the new one in favour of the new beneficiary.

Kind regards,

Mr. Old Man