Can a BG Be Transferred? Clarifying Rights and Risks under URDG 758

QUESTION

Dear Mr. Old Man,

I have some questions regarding a transferable bank guarantee (BG) that needs your expert opinion:

Bank A advised our company (the beneficiary) of a BG issued by Bank I with the following terms and conditions:

• The BG is transferable
• Payment condition: Bank I shall pay upon receipt of the demand accompanied by CCIC Certificate issued at the port of discharge.

Questions:

1. Our company is a trader. Can we request Bank A to transfer the BG to our supplier?
2. Is the payment condition risky for us?

Looking forward to your advice.

Thank you.

T.M.

___________________

 ANSWER

Hi,

Thank you for your questions. Please find my response below:

   1. Can the bank guarantee (BG) be transferred to a new beneficiary?

According to Article 33(a) of URDG 758, a guarantee is transferable only if it specifically states it is “transferable”, in which case it may be transferred more than once for the full amount available at the time of transfer.

In this case, since the BG states that it is transferable, it may be transferred to a new beneficiary. However, Article 33(b) URDG 758 also makes clear that even if the guarantee specifically states that it is transferable, the guarantor (the issuing bank) is not obliged to give effect to a request to transfer that guarantee after its issue except to the extent and in the manner expressly consented to by the guarantor.

In other words, the advising bank is not in a position to transfer the BG at your request. You may submit a request to the guarantor to transfer it to the supplier, but the final decision—whether to agree or refuse—rests solely with the guarantor.

 Possible solution:

Per Article 33(g) of URDG 758, your company—as the original beneficiary—may assign the proceeds of the BG. However, please note that the guarantor is not obliged to pay an assignee unless it has explicitly agreed to do so.

2. Is the payment condition under the BG risky for the beneficiary?

Based on your description, the BG states that Bank I will pay upon receipt of a demand for payment accompanied by a CCIC Certificate at the port of discharge certifying that the products comply with quality, safety, and environmental standards of China and international markets (I’m assuming this is what you meant).

This condition poses a high risk for the beneficiary. Why? Because the CCIC is often obtained at the buyer’s request; if the buyer (the guaranteed party) fails to provide the beneficiary with the required CCIC Certificate, the beneficiary cannot make a complying presentation. In such a case, the guarantor has the right to refuse payment.

The payment obligation is therefore dependent on the buyer’s cooperation—which is outside the beneficiary’s control. The ICC generally advises against accepting such conditions, as they put the beneficiary in a vulnerable position.

Such a condition is considered risky and inappropriate under ICC best practices. If possible, your company should negotiate to remove or replace the CCIC requirement with a more neutral or objective condition that you can control.

I hope this helps clarify your concerns.

Best regards,

Mr. Old Man