Home Mr Old Man CAN A TRANSFERRED LC CHANGE THE PAYMENT TERMS FROM SIGHT TO DEFERRED PAYMENT?

CAN A TRANSFERRED LC CHANGE THE PAYMENT TERMS FROM SIGHT TO DEFERRED PAYMENT?

3 min read
0
0
323

QUESTION

Dear Sir.

Need a clarification on transferable LC regarding clause 42C:

If the original LC mentions LC at sight, can the 1st beneficiary change this to LC 30 days usance when transferring this LC to the 2nd beneficiary ( if 2nd beneficiary agrees to LC 30 days).

If a sight LC is transferred as a sight LC, we foresee this problem: The 2nd beneficiary after shipment will send the original docs to 1st beneficiary’s bank for payment on sight basis. The bank that transferred this LC won’t have the money for this draft and will then have to wait for 15 days min for the payment to come from the buyer’s bank, after 1st beneficiary switches the invoice and bill of exchange. (courier through collection basis).

Hence, can the LC be transferred for a usance period of around 30 days, enough time to get the payment from buyer’s bank. Or will the shipper have to wait for 15 to 20 days for the payment from 1st beneficiary’s bank?

Pls advise early.

Thanks

V.

———-

ANSWER

Dear V.

Under UCP 600 sub-article 38(g), a transferred LC must accurately reflect the terms and conditions of the LC, including confirmation, if any, except: the amount of the LC, any unit price stated therein, the expiry date, the period for presentation, or the latest shipment date or given period for shipment, any or all of which may be reduced or curtailed.

Therefore, the first beneficiary cannot change the payment terms from sight  to deferred payment when transferring the LC to the second beneficiary. Mere agreement between the first beneficiary and the second beneficiary is not sufficient for the transferring bank to transfer the LC with such a change.

The first beneficiary need not request such a change because unless the transferring bank is a confirming bank, under the transferred LC, the transferring bank will only undertake to pay the second beneficiary upon receipt of funds from the issuing bank whether the LC is payable at sight or after xxx days of payment.

Kind regards,

Mr. Old Man

Load More Related Articles
Load More By Mr Old Man
Load More In Mr Old Man

Leave a Reply

Your email address will not be published. Required fields are marked *

Check Also

INVOICE NOT CERTIFYING WHAT HAS NOT BEEN SHIPPED

QUESTION Dear Sir, LC allows both AIR and SEA shipment. Amount: USD 100,000 Shipment by AI…