WHEN MUST THE TRANSFERRING BANK ADD ITS CONFIRMATION TO A TRANSFERRED L/C?

QUESTION

Dear Mr. Old Man,

I have a question that’s been confusing me:

1. The original L/C issued to the first beneficiary is confirmed.
2. However, when that L/C is transferred to the second beneficiary, the transferred L/C does not include confirmation.

Now, UCP 600 sub-article 38(g) clearly states:

A transferred credit must accurately reflect the terms and conditions of the credit, including confirmation, if any, except for…

So based on this clause, I understand that the transferred L/C must include the confirmation.

But in reality, when I contact banks, none of them seem willing to provide this “back-to-back confirmation” in the transferred credit.

Does that mean the transferring bank is in breach for transferring the credit without confirmation?

Looking forward to your insight.

H.

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ANSWER

Hi,

You’re right to refer to sub-article 38(g) of UCP 600. It states that a transferred credit must reflect the same terms and conditions of the original credit, including confirmation, if any—with certain allowable exceptions.

However, note the key phrase “including confirmation, if any.”

Even when the original L/C is issued with confirmation instructions—i.e., the issuing bank requests the advising/transferring bank to add confirmation—the advising/transferring bank is not obligated to comply. It may choose not to add its confirmation, despite the instructions.

So, if the transferring bank has not confirmed the original credit, the transferred credit will not carry confirmation either.

On the other hand, if the transferring bank did confirm the original L/C, then any transferred credit must also include that confirmation.

If you have evidence (e.g., from the first beneficiary) that the transferring bank confirmed the original L/C, then yes, you may request that the confirmation also apply to the transferred credit.

The ICC has previously addressed a similar case in Opinion R587/TA.399, which I’ll summarize below. Please note that this opinion was issued under UCP 500, so it refers to article 48 rather than article 38 in UCP 600. (You may also find it difficult to locate this opinion online.)

ICC OPINION R587/TA.399 – Summary

Analysis:

• Sub-article 38(c) UCP 600 (formerly 48(c) UCP 500) says that a transferring bank is under no obligation to transfer a credit unless it agrees to do so.
• While the credit must generally be transferred on the same terms as the original, including confirmation, the UCP does not mandate that confirmation must always transfer along with the credit.

Conclusion:

• The transferring bank is only obligated to transfer a credit on the terms it agrees to, subject to Article 38.
• However, if the transferring bank has confirmed the original L/C, then logically, any transferred credit should also include that confirmation.
• Importantly, adding confirmation to a transferred credit does not increase the confirming bank’s total liability under the credit, though it might affect the duration or location of that liability.

Best regards,

Mr. Old Man