transferable L/C and our commission
Post 1 of 5
hello everyone
We are a trading company in Egypt. We are working with a chinese factory to sell products to our clients.
One of our clients is gonna pay by a transferable L/C to our company benefit then our bank will transfer the L/C (not issue another new L/C) to the factory.
The total value of our client L/C is the amount of money includes the factory money and our commission (profit). Then this transferable L/C will be transfered to the Chinese bank. My question is, can i transfer only the amount of money due to the factory after deducting our profit and without the need to issue another fresh L/C?
If not, what is the alternatives?
We are a trading company in Egypt. We are working with a chinese factory to sell products to our clients.
One of our clients is gonna pay by a transferable L/C to our company benefit then our bank will transfer the L/C (not issue another new L/C) to the factory.
The total value of our client L/C is the amount of money includes the factory money and our commission (profit). Then this transferable L/C will be transfered to the Chinese bank. My question is, can i transfer only the amount of money due to the factory after deducting our profit and without the need to issue another fresh L/C?
If not, what is the alternatives?
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01 Dec 2007 17:32
Post 2 of 5
Replying to [t4sgroup]:
Let me quoteto you a part of Article 38 of UCP 600 which deals exclusively with Transferable LCs:
"g. The transferred credit must accurately reflect the terms and conditions of the credit, including confirmation, if any, with the exception of:
• the amount of the credit,
• any unit price stated therein,
• the expiry date,
• the period for presentation,
• the latest shipment date or given period for shipment,
any or all of which may be reduced or curtailed.
The percentage for which insurance cover must be effected may be increased to provide the amount of cover stipulated in the credit or in these articles.
The name of the first beneficiary may be substituted for that of the applicant in the credit.
If the name of the applicant is specifically required by the credit to appear in any document other than the invoice, such requirement must be reflected in the transferred credit. "
I hope this answers your question. Do read the whole of article 38 if you wish to know more about the relevant Rules.
Let me quoteto you a part of Article 38 of UCP 600 which deals exclusively with Transferable LCs:
"g. The transferred credit must accurately reflect the terms and conditions of the credit, including confirmation, if any, with the exception of:
• the amount of the credit,
• any unit price stated therein,
• the expiry date,
• the period for presentation,
• the latest shipment date or given period for shipment,
any or all of which may be reduced or curtailed.
The percentage for which insurance cover must be effected may be increased to provide the amount of cover stipulated in the credit or in these articles.
The name of the first beneficiary may be substituted for that of the applicant in the credit.
If the name of the applicant is specifically required by the credit to appear in any document other than the invoice, such requirement must be reflected in the transferred credit. "
I hope this answers your question. Do read the whole of article 38 if you wish to know more about the relevant Rules.
01 Dec 2007 19:18
Post 3 of 5
Replying to [t4sgroup]:
In transferring the L/C:
1) your company will be first beneficiary and your supplier in China will be second beneficiary.
2) L/C number will be the same for the original L/C you received from the issuing bank and the L/C you transfer to your supplier in China.
Some concerns when you transfer the L/C to your suuplier in China:
1) All terms and conditions as well as the descrition of the goods must the same as the original L/C your received from issuing bank, except:
a) the total amount of the credit - it should be the total purchase value from your China supplier
b) Unit price - it should be the unit price you purchase from the China supplier
c) Expiry date & presentation period - you must look into expiry date & the presentation period that the original L/C you received from issuing bank. The expiry date for the transfer L/C must earlier than the original L/C you received to ensure you have enough time to prepare and present the doc to bank.
2) Must ensure the original L/C you received is transferable and third party documents is acceptable
Just a simple brief here to transfer the L/C.
1) You receive a transferable L/C.
2) Request your bank to transfer the L/C with the concerns above to your China suppier.
3) Shipment shipped as agreed sales contract.
4) Your China supplier will prepare all the documents as per L/C requirement and prepsent to bank.
5) Your bank will advise you when they received the doc from remitting bank.
6) You accept the doc and substitute some doc eg: Invoice and Packing List and present to bank for negotiation.
7) The issuing made payment.
8) Once received the remittance from issuing bank, your bank will then made payment to your China supplier (2nd beneficiary) as per credit transferred and the rest amount will remit into your account.
**Please correct me if information above is incorrect** TQ!
In transferring the L/C:
1) your company will be first beneficiary and your supplier in China will be second beneficiary.
2) L/C number will be the same for the original L/C you received from the issuing bank and the L/C you transfer to your supplier in China.
Some concerns when you transfer the L/C to your suuplier in China:
1) All terms and conditions as well as the descrition of the goods must the same as the original L/C your received from issuing bank, except:
a) the total amount of the credit - it should be the total purchase value from your China supplier
b) Unit price - it should be the unit price you purchase from the China supplier
c) Expiry date & presentation period - you must look into expiry date & the presentation period that the original L/C you received from issuing bank. The expiry date for the transfer L/C must earlier than the original L/C you received to ensure you have enough time to prepare and present the doc to bank.
2) Must ensure the original L/C you received is transferable and third party documents is acceptable
Just a simple brief here to transfer the L/C.
1) You receive a transferable L/C.
2) Request your bank to transfer the L/C with the concerns above to your China suppier.
3) Shipment shipped as agreed sales contract.
4) Your China supplier will prepare all the documents as per L/C requirement and prepsent to bank.
5) Your bank will advise you when they received the doc from remitting bank.
6) You accept the doc and substitute some doc eg: Invoice and Packing List and present to bank for negotiation.
7) The issuing made payment.
8) Once received the remittance from issuing bank, your bank will then made payment to your China supplier (2nd beneficiary) as per credit transferred and the rest amount will remit into your account.
**Please correct me if information above is incorrect** TQ!
04 Dec 2007 21:58
Post 4 of 5
Replying to [t4sgroup]:
According your question.
The Chinese company has already opened the LC to your company but you are not the end supplier means, you should found new real end supplier and newly sign the Sales contract with the company below value of LC cost.
Example: your end buyer has already opened the LC USD 250 means you can detect your commission from the LC value , so you can make sales contract USD245 with your end supplier.
Your should handle carefully in this deal the followings
1. If end supplier open 2 % PB to your bank account you can’t transfer the PB to your end buyer so you should be make contract amendment the end seller should open the PB to directly to end buyer.
2. Or Your Company has to give the PB 2% to end buyer. When you get 2 % PB from your end seller.
3. Your end supplier should secure the material in his yard because the transferable LC can transfer only one time only.
4. Or your end supplier have stable to take back to back LC to their end supplier.
Those all condition will satisfy you can proceed this kinds of deal otherwise, you can link buyer and seller directly and you can get your commission from buyer of seller under ICC law with NCND. Its purly Legal and avoiding your painful.
According your question.
The Chinese company has already opened the LC to your company but you are not the end supplier means, you should found new real end supplier and newly sign the Sales contract with the company below value of LC cost.
Example: your end buyer has already opened the LC USD 250 means you can detect your commission from the LC value , so you can make sales contract USD245 with your end supplier.
Your should handle carefully in this deal the followings
1. If end supplier open 2 % PB to your bank account you can’t transfer the PB to your end buyer so you should be make contract amendment the end seller should open the PB to directly to end buyer.
2. Or Your Company has to give the PB 2% to end buyer. When you get 2 % PB from your end seller.
3. Your end supplier should secure the material in his yard because the transferable LC can transfer only one time only.
4. Or your end supplier have stable to take back to back LC to their end supplier.
Those all condition will satisfy you can proceed this kinds of deal otherwise, you can link buyer and seller directly and you can get your commission from buyer of seller under ICC law with NCND. Its purly Legal and avoiding your painful.
31 Jan 2008 07:15
Post 5 of 5
I'm an iraian chief accountat.my
responsibilty is foreigns sellfpor abroad
for some comapanies as petrochemical
&some industrial semi complicated
materials,for so so long period and very
sincerely and credit between two company,
know beacuse of these banding a
cannot open l/c very soon it will be
copeletely
jamed beside more than 4000 angery
worker&
for God's sake find to us.
Who could help me and worker.
hurry please please
responsibilty is foreigns sellfpor abroad
for some comapanies as petrochemical
&some industrial semi complicated
materials,for so so long period and very
sincerely and credit between two company,
know beacuse of these banding a
cannot open l/c very soon it will be
copeletely
jamed beside more than 4000 angery
worker&
for God's sake find to us.
Who could help me and worker.
hurry please please
09 Feb 2008 10:48
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