With a transferable credit, the middleman (= the first beneficiary) can instruct his bank to transfer the credit (= the original credit) to the end supplier/producer (= the second beneficiary) either in full or in part.

• The credit must be designated "transferable".

• A transferable credit can normally only be transferred once. If instalment-based consignments are permitted, parts of such a credit may be transferred to one or more end suppliers.

• When it comes to availment, invoices and, where applicable, drafts are exchanged at the transferring bank. The middleman receives the difference between the purchase and sale of the goods (= gross profit).

• The middleman does not need to have a credit limit at the transferring bank.

• If the original documentary credit is confirmed, transfer can be effected with liability on the part of the transferring bank - an additional safeguard for the second beneficiary.

• If the original credit is not confirmed, transfer in favour of the end supplier is effected without liability on the part of the transferring bank.

• The end supplier must rely on the creditworthiness of the issuing bank and it may be that payment is deferred.

• Transfer must be effected in accordance with the terms and conditions of the original credit.

• The following exceptions are permitted under the Uniform Customs and Practice for Documentary Credits:

  • The amount of the credit and unit price may be reduced.

  • The expiry date, document presentation period and loading period may be shortened.

  • The name of the first beneficiary may replace that of the principal.

  • The percentage to be insured may be altered.

• The original credit should be issued in the simplest form possible: numerous documents and special clauses will make transfer more difficult, if not impossible.

• Such transactions require a great deal of expertise.

UBS should always be consulted before entering into any agreements.