QUESTIONS REGARDING PLACE OF EXPIRY IN THE TRANSFERRED LC

QUESTION

Dear Mr. Old Man,

I have a question as below:

The transferable LC stipulates:

41a: Available with Bank A, London by negotiation.

Transfer Application form requires:

1. Instruction to expire the transferred portion of the LC in Germany
2. The first beneficiary order number must be indicated on invoice.

Is it reasonable?

In my opinion,

1. As per UCP 600, Article 38 (j) and (k) state that L/C transfer must be made to transferring bank (Bank A located in London). Hence, I think that expiry date of transferred L/C must be London. However, the answer is: “Provided the transferring bank agree to this request, this is allowed under UCP600 sub-article 38k”. I need your explanation.
2. In my opinion, the 1^st beneficiary can substitute own invoice and draft. Hence, the 1^st beneficiary order number indicated on invoice is reasonable. However, the answer is: “This is prohibited by UCP600 sub-article 38g.”. Pls explain to me.

Thanks, and best regards.

KT

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ANSWER

Hi,

1. Field 31D (Date and Place of Expiry) specifies the latest date for presentation of documents under the LC and the place where documents may be presented. The place of the bank with which the LC is available is the place for presentation. In accordance with sub-article 38 (k), presentation of documents under the transferred LC by or on behalf of a second beneficiary must be made to the transferring bank’s counter. The date and place of expiry as per sub-article 38 (k) cannot be changed unless agreed by the transferring bank. Sub-article 38 (k) does not expressly state that it allows such request.

As to your specific case, the request to change the date and place of expiry only helps the second beneficiary proactively present the documents to his bank in Germany to avoid the discrepancy “late presentation” or “LC expired” that may occur. The bank in Germany will act as a presenting bank that makes presentation to the transferring bank for negotiation on behalf of the second beneficiary in accordance with the requirement at Field 41D (available with Bank A in London by negotiation).

2. In my understanding, the requirement for the first beneficiary order number to indicate on invoice implies “on the invoice issued by the second beneficiary” as this requirement shall be stated in the transferred LC, and not the original LC. However, I think this requirement is not necessary as the first beneficiary will substitute his own invoice.

Best regards,

Mr. Old Man