Transferred DC

• Reduces risk of non-payment if all the terms and conditions of the original credit are met
• Provides assurance of a confirmed order
• Enables the recipient to obtain financing in some countries where a Documentary Credit is required

If your buyer is a middleman, trading house or sourcing office, you may receive a Transferred Documentary Credit as the payment instrument. The transaction cycle starts with the ultimate buyer issuing a Transferable DC to your buyer (the middleman) who then transfers all or part of the DC to you to source the goods and effect payment. You are paid when the ultimate buyer pays your buyer and from those proceeds, your share of the payment is credited to you.

A Transferred DC signifies that your buyer has a bank undertaking to pay if the terms and conditions of the related Transferable Credit are met (the terms of which are very similar to the Transferred DC issued to you). This is particularly important if you are not comfortable or uncertain of the financial standing of your buyer.

Although the undertaking to pay by the DC issuing bank is transferred to you, there are two points to note:

As you do not have ultimate control over the presentation of compliant documents under the Transferable/master DC, your buyer (the transferor/first beneficiary) could mishandle the documents and thus put the payment at risk.

A less common issue is that your buyer may not transfer any subsequent amendments of the original DC to you. This could put you in a position whereby you cannot fulfil the requirements of the Transferable DC entirely.

The probability of the above occurring depends on the terms of the Transferable DC and the terms of the transfer. If you have any concerns, please arrange for a consultation with us.

For further information, please call our Customer Service Centre on 4 4722 24 or stop by at your nearest HSBC branch.You could also contact us via e-mail.