Article-39-UCP-600-Assignment of proceeds

When a beneficiary of a credit provides a written letter (swift or any other authenticated mode) to make the full or part payment to a third person who may be the manufacturer or supplier of the raw material; is called assignment of proceeds.

Article-39-UCP-600-Assignment of proceeds

The fact that a credit is not stated to be transferable shall not affect the right of the beneficiary to assign any proceeds to which it may be or may become entitled under the credit, in accordance with the provisions of applicable law. This article relates only to the assignment of proceeds and not to the assignment of the right to perform under the credit.

As mentioned above a credit need not to be transferable that the right of the beneficiary to assign any proceeds.

It does not grant a right to the assignee (a third person whom beneficiary assigns) to perform under the credit or to present documents. It allows a beneficiary to assign its right to receive some, or all, of the proceeds to a third party, which in most cases would be a supplier, but this could be another entity or a bank. Applicable law will also come into the picture while making the payment to proceed other than beneficiary.

Example: A credit was issued by ABC Company, India in the favor of XYZ Company, China for USD 10,000 available with issuing bank on usance basis, partial shipment allowed.

Presentation-1- Received for value USD 5000 found clean and honored by issuing bank.

Assignment of Proceeds Receives for value USD 5000 in favor of NC Company, Hong Kong.

Issuing bank is in sole discretion whether to pay NC company or not, based on local law, regulatory risk, compliance check, and having a look from a money laundering perspective as well. If issuing bank accepts the assignment of proceeds request; and decides to make the payment that does not mean NC Company has to perform under the credit or submit the document.

Presentation-2- Received for value USD 5000 found clean and payment made to NC Company, Hong Kong.

Note: Usually an assignment of proceeds is sent in authenticated free format swift MT799 message.

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Chandan Kumar Yadav
My name is Chandan Kumar Yadav CDCS, CSDG, CITF, PGDIBO,AML-KYC, CCFE, MLIBF, CSF, 6SIGMA a trade finance professional with an experience of 11 years whereas worked with several stages of letter of credit, bank guarantee and on other payments methods of trade transactions such as documentary collection, open accounts, SBLC etc., I have a fair understanding of Trade Based Money Laundering as well, Blogging related to Trade Finance is my passion and I want to share which I know and learn from others, I have worked with Wells Fargo, Yes Bank Limited and Bank of America, India which helped me to gain knowledge, view of Trade Finance and importance of International Trade in world's economy. Trade Finance is thumping product, everyday we are learning something new so in order to keep learning I started this as one of the platform. . Let's Learn Together

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