Transferable letter of credit is one in wish fixed in the verbiage that can be transferred. This can be stated only by the authorization of the LC owner (end buyer). Right and obligation of the LC will be transferred from trading company to the end seller (manufacturer or wholesaler)transfer may be either full or partial.
This type of LC is commonly used by sellers (trading company) that have pending sales but due to the luck of founds and their inability to pay for the goods (products). Export brokers most often use transferable L/Cs.
Partial transfer can be applied to secure commission, for example let’s say that you are selling wheat at price 300$ to your buyer. Your price from supplier 295$ sow you have to let in your bank 5$ as benefit to your company. This will look like this:
You get transferable LC from your buyer for the sum 300$ but you transfer to your supplier only part (295$).
Transferable LC can be used to provide the manufacturer with assurance of payment if the he will performs under the transferred L/C terms and conditions and in some case when seller asks for advance.
Credit letter can be transferred under criteria governed by Article 48 of the Uniform Customs and Practice for Documentary Credits (UCP 500). Banks are under no obligation to transfer a credit except to the extent and in the manner expressly consented to. Furthermore, the transferring bank must be specifically named in the letter of credit as the bank authorized to affect the transfer.
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Transferable letter of credit criteria vary from bank to bank, but may include such requirements as:
– The transfer-or being a customer of the transferring bank.

– Negotiation of the credit being restricted to the transferring bank.

– The issuing bank being a correspondent of the transferring bank.

– All terms and conditions of the credit being acceptable to the transferring bank.
When you transfer CL (credit letter) you have to make some change on it to get your benefit or pay for some extra charge to your side.
Under the Article 48 of the UCP 500 limits below listed change that can be applied to the LC:

– The L/C amount may be reduced.

– Unit prices may be reduced.

– The expiry and latest shipping dates may be curtailed.

– The time period after the date of shipment for presenting documents to the bank may be curtailed.

– The name of the beneficiary is substituted for the name of the applicant (buyer), but if the applicant’s name is required to be stated in any document other than the invoice, this requirement must be adhered to.

– If an insurance document is required, the coverage may be increased to provide coverage as required by the original L/C.

– The place of payment or negotiation may be changed to the location of the transfer.

Regarding the limitation fixed by the article of UPC 500 if the L/C does not meet the bank’s transfer criteria bank retains the right to decline the transfer of the LC (letter of credit). It may consent if certain terms and conditions of the LC are amended to meet its requirements. Any amendment to a letter of credit is subject to agreement of the buyer, the buyer’s bank, and the beneficiary who is requesting the transfer. Banks retain the right to decline any transfer request.

Will the supplier and the buyer be able to identify each other?

Probably so, even if the bills of lading do not give the buyer as “consignee” and the “notify party” is shown as the buyer’s customs broker. All of the seller’s documents (except for invoice and draft) are forwarded to the buyer through their banks, and a packing list should
have the seller’s name and address.

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