UCP 600 Article 38: Transfer Requires Express Statement

Introduction

One of Article 38's most fundamental requirements is deceptively simple: a documentary credit must contain an express statement that it is transferable before any transfer can occur. This requirement is not a formality—it is a structural safeguard that protects all parties in the transaction. Without an express transferability statement, a credit cannot be transferred, regardless of the parties' commercial intentions or prior dealings.

This requirement creates a clear, binary condition: either the credit says it is transferable, or it is not. There is no middle ground, no implied transferability, and no exception for custom or practice. Understanding this requirement—and the consequences of ignoring it—is essential for any practitioner involved in documentary credit transactions.

Failure Modes

1. Attempting to Transfer a Credit Without an Express Statement

The most basic failure is attempting to transfer a credit that does not contain the required express statement. A nominated bank that processes such a transfer is acting outside UCP 600's framework, creating potential liability for itself and confusion for all parties.

2. Relying on the Applicant's Verbal or Written Instruction to Make a Credit Transferable

The applicant's instruction to the issuing bank to make the credit transferable does not satisfy Article 38(a)'s requirement. The credit itself must contain the express statement. A separate instruction from the applicant—even if written—does not change a non-transferable credit into a transferable one.

3. Using Ambiguous Language That Does Not Clearly Express Transferability

Credits that contain ambiguous language—such as "credit may be assigned" or "payment rights are negotiable"—do not satisfy the express statement requirement. Article 38(a) requires clarity, not creativity. The word "transferable" or a clearly equivalent expression must be used.

4. Assuming Transferability Based on the Credit Type or Trade Practice

Some practitioners assume that certain types of credits (e.g., credits for commodities or perishable goods) are inherently transferable. UCP 600 does not support this assumption. Transferability depends entirely on the express statement in the credit, not on the nature of the goods or the trade practice.

5. Failing to Confirm Transferability at the Time of Transfer Request

When a transfer is requested, the transferring bank should verify that the credit contains the express statement before proceeding. Banks that skip this verification step risk processing an unauthorized transfer.

Resolution Pathways

1. Verify the Express Statement Before Processing Any Transfer

The transferring bank should make express statement verification the first step in every transfer processing workflow. This verification should be documented and retained as evidence that the transfer was authorized.

2. Train Staff to Identify What Does and Does Not Satisfy the Requirement

Trade finance staff should be trained to distinguish between language that satisfies Article 38(a) and language that does not. Specific examples—both compliant and non-compliant—should be included in training materials.

3. Include the Express Statement in Standard Credit Templates

Issuing banks that regularly issue transferable credits should include the express transferability statement as a standard field in their credit templates. This reduces the risk of omitting the statement by mistake.

4. Escalate Ambiguous Cases to Compliance

When the transferability language in a credit is ambiguous, the transferring bank should escalate to its compliance or legal department before processing the transfer. The cost of a compliance review is far less than the cost of an unauthorized transfer.

5. Document the Basis for Every Transfer Decision

Whether a transfer is processed or rejected, the transferring bank should document its reasoning. For processed transfers, the documentation should reference the specific language in the credit that satisfies Article 38(a). For rejected transfers, the documentation should explain why the credit did not meet the express statement requirement.

6. Consult ICC Opinions for Unusual Transferability Language

ICC opinions and DOCDEX decisions address specific scenarios where transferability language has been challenged. These opinions provide authoritative guidance on what constitutes an express statement under Article 38(a).

7. Communicate Transferability Status to the Applicant

Issuing banks should confirm with the applicant whether the credit should be transferable before issuing it. This prevents situations where the applicant did not intend the credit to be transferable but the issuing bank inadvertently included transferability language.

Conclusion

The express statement requirement under Article 38(a) is the gateway to the entire transferable credit framework. Without it, Article 38's provisions simply do not apply. This requirement is absolute, non-negotiable, and strictly interpreted by the ICC. Banks that understand and enforce this requirement prevent the most fundamental category of transfer-related disputes.

The simplicity of the requirement—just include the word "transferable"—belies its importance. It ensures that all parties consent to the transfer mechanism, prevents unauthorized transfers, and maintains the integrity of the documentary credit system.

Frequently Asked Questions

1. Can a credit be made transferable by amendment after issuance?

Yes. Under Article 10, a credit can be amended to add a transferability statement. However, the amendment must be accepted by all parties, and the credit must contain the express statement from the effective date of the amendment. Transfers cannot be processed based on a pending amendment that has not yet taken effect.

2. Does the word "assignable" satisfy the express statement requirement?

ICC opinions have typically held that "assignable" is not equivalent to "transferable" under Article 38. Assignment and transfer are different legal concepts under UCP 600. A credit described as "assignable" but not "transferable" does not meet Article 38(a)'s requirement.

3. What if the credit contains the word "transferable" but in a different context?

The word "transferable" must appear in the context of the credit's terms, not in an unrelated clause or a document reference. For example, a reference to "transferable warehouse receipts" in a cargo description does not make the credit itself transferable.

4. Can a bank accept a transfer if the express statement is in a language other than English?

UCP 600 does not mandate a specific language for the express statement. The statement can be in any language, provided it clearly conveys transferability to a reasonable banking practitioner. However, practitioners should be cautious about non-English statements and may want to request clarification.

5. Is an express statement required for assignment of proceeds?

No. The assignment of proceeds under Article 39 is a different mechanism from the transfer of a credit under Article 38. Assignment of proceeds does not require the express transferability statement because it is governed by a separate article with different requirements.

Source Notes

Context only — the following sources informed the background understanding for this guide but were not directly reproduced or copied:

• ICC Incoterms 2020 publication (International Chamber of Commerce, 2020)
• ICC UCP 600 publication (International Chamber of Commerce, July 2007)
• ICC Academy: A guide to types of documentary credit, published October 2024
• ICC Academy: Certified UCP 600 Specialist (CUCP) program materials, published July 2025
• ICC Academy: UCP 600 and ISP98: Key differences and applications, published October 2025