Hi Experts,
I have got a transferable credit arrangment for a deal, where the buyer wants the complete insurance coverage of the goods supplied. At the same time i dont want to disclose the selling price of the material to the supplier from where i procured the goods for sale. now i find it tough to save my interest because i dont want to lose the supplier or the buyer either for future prospects. Should i talk to the supplier that only i will present the whole documents to bank? Kindly suggest what to do?
Manish
Transferable LC
This is more akin to a back-to-back transaction, and not a transferable LC.
With the supplier's agreement, in practice, you could provide the transferring bank with the original insurance document in advance (if you are in a position to do so) , and thereby request the bank to effect the transfer advice without calling for the insurance document. They might agree, but should nevertheless be aware, that any deviation from the terms of Art. 38, such as this, would not afford them any protection as a nomianted bank, under the terms of the UCP.
Also, remember, that the transferee has a right to get paid in his own right, even if the transferor fails to substitute invoices. The transferee can only get paid if they present all the required documents (albeit their own invoices for possibly a lesser amount) under the LC. If the transferee (unwittingly) relinquishes this right, because the transferring bank has failed to transfer the conditions of the original LC correctly, in the event that that the transferring bank (which may be a non-confirming bank) does not negotiate, the transferee may ultimately lose payment recourse even from the issuing bank.
I believe the potential risks outweigh the benefits, but if the transferee were to accept this condition, I would suggest that for the protection of both the transferor and transferee, this deviation is reflected in the underlying contract between the two parties.