Transferable Letter of Credit
A credit the first beneficiary can make available to its own supplier, under UCP 600 article 38 How it works. A transferable letter of credit lets the exporter named in the credit, the first beneficiary, ask a bank to make the credit available in whole or in part to another party, the second beneficiary. It suits a trader who sells goods made by someone else: the manufacturer ships and is paid under the same credit. UCP 600 article 38 governs it. A credit can be transferred only if it expressly says it is transferable, and the transfer is made by a transferring bank: a nominated bank, or a bank the issuing bank has authorised. No bank is obliged to transfer except to the extent it has agreed to. What article 38 allows and limits. What it does not protect against. The second beneficiary is paid only on a complying presentation, made to the transferring bank (article 38(k)). It relies on the issuing bank's undertaking, because a transferring bank that has not confirmed takes on no duty to pay (article 12). The first beneficiary's margin depends on swapping in its own invoice when asked: if it fails to do so on first demand, the transferring bank may send the supplier's documents to t…
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