CAN AN SBLC BE ISUED IN FAVOUR OF MORE THAN ONE BENEFICIARIES?

QUESTION

Dear Mr. Old Man,

Our customer (ABC, Singapore) has a draft SBLC to be issued in their favour and the applicant’s name is XYZ, Taiwan. No other special instruction stated in the SBLC.

In the event of default of payment by applicant, the beneficiary will activate this SBLC to claim on the issuing Bank.

Our customer is asking if they can claim under a SBLC without showing the applicant’s name. My answer – No).

Our customer intends to issue 1 SBLC with 2 applicant names and several beneficiaries names :

ABC, Malaysia

ABC, Thailand

ABC, Philippines

I don’t think any Issuing bank is willing to do so.

If the SBLC with only 1 applicant name and stated it is transferable then ABC, Singapore can transfer to respective beneficiary i.e. ABC, Malaysia, ABC Thailand, ABC Philippines. Correct?

May I ask if MT760 beneficiary’s name field is it optional.

Need your expertise advise on how to start SBLC vetting whereby I do not have any knowledge?

Thank you.

Best Regards.

Xona

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ANSWER

Hi Xona,

It is common that an SBLC always includes the applicant’s name. However, the applicant is not a party to an SBLC but a party requesting the issuing bank to issue an SBLC. Once issued, the issuing bank is obligated to pay upon receipt of a complying presentation made by or on behalf of the beneficiary. Therefore, the fact that SBLC does not show applicant does not affect the payment obligation of the issuing bank; the beneficiary will receive payment if the claim and documents (if any) are presented complying with the terms and conditions of SBLC.

Rarely, but I think an SBLC can be issued at the request of 2 applicants because this is the relationship between the issuing bank and those applicants according to the LC opening contract signed between the issuing bank and the applicants. However, I don’t think one SBLC can be issued in favour of multiple beneficiaries in different countries. It’s too complicated and impractical. Each SBLC should be issued separately to each beneficiary.

If the SBLC states it is transferable and allows partial drawings, the beneficiary can transfer the SBLC in part to more than one second beneficiary.

I notice that field 50 (applicant) of MT 760 is optional while field 59 (Beneficiary) is mandatory.

If you are the beneficiary of an SBLC, the things you need to consider are:

1/ Is the issuing bank a reputable bank in payment? If not, to avoid risk of non-payment from the issuing bank, you need to request an SBLC confirmed by a large and reputable bank.

2/ You need to check the terms and conditions of the SBLC to make sure you can make a presentation complying with such terms and conditions. If there are any terms or conditions that you cannot comply with, you need to request an immediate amendment.

In international trade, the seller also has to perform KYC and find out information about the financial situation and payment ability of the buyer.

Please note that the above opinions are based on my personal views.

Best regards,

Mr. Old Man