QUESTION
Dear Mr. Old Man,
Our company has received an LC issued a Korean bank with details as follows:
40A (Form of Documentary Credit): Irrevocable Transferable
44E (Port of Loading): Any port in Vietnam
44F (Port of Discharge): Pusan port, Korea
We want to have the LC to be transferred to the second beneficiary in China. Goods are to be shipped from a port in China to Haiphong port, Vietnam and then to be shipped to Pusan Port, Korea.
In order to hide from the applicant any information about the second beneficiary, we want to substitute drafts, invoices and even bills of lading. We want to know whether the transferred LC can change the port of lading and the port of discharge and whether we can substitute bills of lading.
If not, what should we do?
Thank you in advance.
Regards,
PTT
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ANSWER
Hi PTT,
The transferred LC must reflect the terms and conditions of the original LC, including confirmation, if any, with exception of LC amount and unit price (which may be reduced), expiry date, period for presentation and latest shipment date (which may be curtailed).
I think the transferring bank would not agree to transfer the LC with changes as described in your question.
In order for the transferring bank to effect the transfer your company needs to request the issuing bank to amend the original LC whereby the port of lading shall be “a named port, e.g., Shanghai, or any port in China” instead of “any port in Vietnam”; the shipper on BL shall be your company (notwithstanding that shipper on BL can be any party).
If the issuing bank refuses to amend the original LC, a back to back LC is the solution for your company’s dilemma. Your company should go to the bank that has advised the LC and request that bank to issue a (back to back) LC in favour of the Chinese supplier.
A transferred LC and original LC are one LC. The terms and conditions of the transferred LC are the same as those of the original LC except for those mentions in sub-article 38 (g) UCP 600 which may be reduced or curtailed.
A back to back LC would be issued based on the original LC (master LC). However, they are two separate transactions whereby the issuing bank of the back to back LC may allow any changes provided that such changes do not prevent the middle trader from substituting documents complying with the original LC.
I see that the transaction in question appears to be a temporary import for re-export transaction. Therefore, you are advised to refer to Circular No. 59/2013/TT-BTC issued by Ministry of Finance on May 8, 2013 and other related circulars to find out information about customs procedures. This should be done prior to issuance of the back to back LC.
Kind regards,
Mr. Old Man
