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CURRENCY CHANGE IN TRANSFERRED LC

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QUESTION

Dear Mr. Old Man,

Pls kindly advise if the currency on transferable L/C can be different or not. For example: We open transferable L/C to our consignee in VND, but then they transfer to manufacture in Europe in EUR.

I hope so much to receive your soonest advise.

Thank you so much!

V-Acura
————
ANSWER

Dear V. Acura,

I remember having ever answered the same question as yours.
Sub-article 38(g) allows the L/C amount to be reduced but does not allow to change the currency code. So, the answer is "No".

Just imagine what happens if the 1st beneficiary fails to substitute its own invoice dand draft and the transferring bank must present the documents (including invoice in EUR)as received from the 2nd beneficiary to the issuing bank.

So, no, no, no.

Best regards,
Mr. Old Man

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10 Comments

  1. anonymous

    March 15, 2013 at 11:03 am

    V-Acura writes:Dear Mr. Old ManPlease kindly advise me how we describe L/C for the follow case: We sell to customer with payment by L/C. But the payment will be:+ 40% of invoice value when presenting shipping document.+ 10% of invoice will be paid at sight monthly at 5th until the payment has been cleaned.So,L/C will be Irrevocable L/C at sight or How I need to describe more?You are really special teacher and every day I opened your page with joys and interests.Hope to have your soonest advise.

    Reply

  2. mroldmanvcb

    March 15, 2013 at 10:03 pm

    It is quite understandable. However, the clause should be rewritten to make it clearer.+ 40% of invoice value shall be paid against the documents as required in field 46A of the L/C.+ 60% of invoice value shall be paid in 6 equal monthly installments with each installment (being 10% of invoice value) to be paid on the 5th day of each month beginning with the month following the month in which 40% of invoice value is paid.Well, English is not my native language. You may rewrite in better English.

    Reply

  3. anonymous

    March 22, 2013 at 11:03 am

    V-Acura writes:Thank you, Mr. Old man for your valued instructions. I am not the bank staffs, jus the person who is handling LC for import/export procedures. Today I have discussion with one bank man who is doing LC for our enquiry. We are the seller, and on the contract we have the term for LC negotiation of 10% balance after delivery as follows:"10% total value of the L/C will be released to the beneficiary when presenting inspection report signed by both the Seller and the Buyer. But after 90 days counting from the bill of lading date, the payment will be effective automatically without presenting inspection report signed by both the Seller and the Buyer, unless there is any official claim from the Buyer for equipment’s quality/quantity.My question is whether there is any rule not allowing Bank to negotiate the payment to the Seller after certain time as above or not? or the Bank should have some submitted paper to accept the payment, since that guy emphasize that the bank is unabe to release the payment without any supported doc. in accordance with UCP 600.Please kindly give me your opinionOnce again, thank you so much!

    Reply

  4. mroldmanvcb

    March 22, 2013 at 11:03 pm

    Banks deal with documents and not with goods. So, a wise bank would not accept to negotiate such a conditional payment.In L/C transaction, a nominated bank can accept to discount a deferred payment undertaking incurred or a usance draft accepted by itself. This is allowed by UCP.A bank can discount a deferred payment undertaking incurred by the issuing bank or other nominated bank if it is so authorized by the issuing bank or the nominated bank. This is outside L/C and not governed by UCP.A bank can discount a usance draft accepted by the issuing bank or other nominated bank. However, is outside L/C and not governed by UCP.We need a document to trigger the payment. However, if the issuing bank undertakes, e.g., "upon receipt of the required documents (including invoice, bill of lading…), we shall pay 10% invoice value at sight and pay the remaining amount, i.e., 90% invoice value at 90 days after BL date", then the issuing bank's undertaking would trigger the payment of 90% invoice value without the need for further documents to be presented.

    Reply

  5. anonymous

    April 1, 2013 at 5:04 pm

    RAKESH writes:What is split BILL OF Ladings, When they are used ? are they governed by ucp 600.

    Reply

  6. anonymous

    April 2, 2013 at 10:04 am

    Anonymous writes:chao a Mr Old ManEm là sinh viên đại học kinh te đang lam luân văn chuân bi ra truong.Em đang lam vê L/C a có thể tư vấn hay cho e xin mọt it tai liêu về Ưu nhược điêm của các loại L/C và việc ký quỹ để phát hành L/C là như thế nào? và mức ký quỹ tối thiểu đối với từng khách hàng là như thê nao?em cam ơn a rất nhiều chuc a suc khoe va thanh cong hơn nua.A co thể gỏi qua mail Giup e duoc không ạ[email protected]

    Reply

  7. mroldmanvcb

    April 3, 2013 at 10:04 pm

    Originally posted by anonymous:

    RAKESH writes:What is split BILL OF Ladings, When they are used ? are they governed by ucp 600.

    Split Bills of Lading is understood as one of two or more Bills of Lading which have been split from a single Bill of Lading. This possibly occurs when the consignee, for example in Vietnam, surrenders to the carrier the full set of original Bills of Lading and ask the carrier to issue three split Bills of Lading to deliver Goods into three parts at three different ports of discharge or when part (or all) of the shipment have been sold while the vessel is enroute to the port of discharge.
    There is no bill of lading called split bill of lading. In L/C transaction, a bill of lading , however named, will be checked against Article 20 UCP 600.

    Reply

  8. mroldmanvcb

    April 3, 2013 at 10:04 pm

    Originally posted by anonymous:

    Anonymous writes:chao a Mr Old ManEm là sinh viên đại học kinh te đang lam luân văn chuân bi ra truong.Em đang lam vê L/C a có thể tư vấn hay cho e xin mọt it tai liêu về Ưu nhược điêm của các loại L/C và việc ký quỹ để phát hành L/C là như thế nào? và mức ký quỹ tối thiểu đối với từng khách hàng là như thê nao?em cam ơn a rất nhiều chuc a suc khoe va thanh cong hơn nua.A co thể gỏi qua mail Giup e duoc không ạ[email protected]

    Mr. Old Man không nghiên cứu về những vấn đề bạn hỏi nên rất tiếc không có tài liệu cung cấp cho bạn. Về ký quỹ bảo đảm thanh toán L/C thì các các ngân hàng căn cứ trên kết quả đánh giá xếp loại tín dụng đối với khách hàng để có thể áp dụng miễn ký quỹ, ký quỹ một phần hoặc ký quỹ đầy đủ. Khách hàng có quan hệ tốt, được xếp loại AAA, AA, hoặc A+ có thể được miễn ký quỹ, khách hàng mới hoặc xếp loại CCC có thể được yêu cầu ký quỹ 100%

    Reply

  9. Karen

    October 1, 2014 at 3:48 pm

    Regarding no currency change in transferred L/C, our customer has got a transferable L/C in USD, how can we transfer the L/C to their supplier who locate in Vietnam? Suppose we still keep the currency USD in MT720, what’s kind of proceeds remitted to 2nd bene? USD or VND? If the proceeds is made in USD, is it against our foreign exchange control (Circular No.33/2013/TT – NHNN on December 26 to guide the regulations on limiting the utilization of foreign exchange in the territory of Vietnam). It is really confusing since our customer insist on making all transactions in USD
    Thank you for your advice

    Reply

    • mroldman

      October 1, 2014 at 4:04 pm

      Hi,

      No problem. You can transfer the LC in USD to the 2nd beneficiary in Vietnam. The transferring bank can remit the proceeds in USD to the 2nd beneficiary.

      Circular No.33/2013/TT – NHNN is a circular guiding procedures for the approval for activities of export and import of foreign currencies in cash of the authorized banks. It is not applicable to this case.

      Kind regards,
      Mr. Old Man

      Reply

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