A transferable L/C is a L/C that is specifically stipulated to be transferable. A transferable L/C can be redeemed in whole or in part by another beneficiary (second beneficiary) at the request of the beneficiary (first beneficiary). A transferable L/C can only be transferred once. When the importer opens a transferable L/C, it means that he agrees that the exporter will have other persons designated by the exporter fulfill the obligation of delivery and delivery of documents. But it does not mean that the sales contract has also been transferred. If the second beneficiary cannot deliver the goods, or the delivery does not comply with the contract, and the documents do not meet the requirements of the sales contract, the original exporter shall still bear the seller’s responsibilities stipulated in the sales contract.
For the buyer, using a transferable L/C involves certain risks. Because the buyer does not know the credit and operating ability of the transferee, and is not sure whether the goods provided by the transferee can meet the requirements of the sales contract. Therefore, unless there is a special need and a reliable guarantee from the first beneficiary, the buyer generally will not agree to open a transferable L/C.
An untransferable L/C is a L/C that the beneficiary has no right to transfer to others for use. Any letter of credit that does not have the word “transferable” written on it is a non-transferable letter of credit. A non-transferable letter of credit can only be used by the beneficiary himself.