MT720 Transfer of a Documentary Credit

When MT720 is used

Traders often sell goods they buy from someone else. The buyer opens a credit marked IRREVOCABLE TRANSFERABLE in favour of the trader, the first beneficiary. The trader asks the transferring bank (the nominated bank, or the issuing bank, named as authorised to transfer) to transfer the credit to its supplier, the second beneficiary. The transferring bank sends an MT720 to a bank in the supplier’s country, which advises the transferred credit. The supplier ships and presents documents under the transferred credit; the trader then substitutes its own invoice (and draft, if any) and keeps the difference.

UCP 600 article 38 sets what may change in a transfer. The credit must be transferred on the terms of the original credit, except that the amount and any unit price may be reduced, the expiry date, the period for presentation and the latest shipment date or shipment period may be shortened, the insurance percentage may be increased so that it still covers the original amount, and the first beneficiary’s name may replace the applicant’s. Field 50 of the MT720 therefore names the first beneficiary, and 59 the second beneficiary.

A credit can be transferred only once: the second beneficiary cannot transfer it again to a third, although transferring back to the first beneficiary is allowed. A transferable credit can be split into several partial transfers to different suppliers when partial drawings or shipments are allowed, and the transferring bank is not obliged to transfer except to the extent and in the manner it expressly consents to.

Field 21 keeps the issuing bank’s credit number, 20 is the transferring bank’s own reference, and 52a (or 50B for a non-bank issuer) names the issuer of the original credit. Field 40B line 2 says whether the transferring bank adds its confirmation to the transferred credit. Field 78D, a later addition to the message, carries instructions from the transferring bank itself, for example where the second beneficiary must present documents so that the first beneficiary’s invoices can be substituted.

Long transferred credits continue in one or more MT721 messages. Amendments to a transferred credit reach the second beneficiary’s bank in an MT707 from the transferring bank. The MT710 is different: it passes on the same credit for the same beneficiary, without a transfer.

MT720 format: sequences and fields

Rules worth knowing

• Either 52a or 50B identifies the issuer of the original credit, not both. For a credit issued by a non-bank, 50B is used.
• Drafts and payment details: 42C and 42a go together; the credit carries either 42C with 42a, or 42M alone, or 42P alone (error C90).
• Shipment: either 44C or 44D, not both (error D06).
• Long transferred credits continue in one or more MT721 messages. Information in a field of the MT720 must not be repeated in an MT721, and nothing in an MT721 may conflict with it.
• For a freely negotiable transferred credit, the advice to the second beneficiary must say that it has to be presented at each negotiation and that each negotiating bank notes the negotiation on it.
• Under UCP 600 article 38 only the amount, unit price, expiry date, presentation period, latest shipment date or period, insurance percentage and the applicant’s name may differ from the original credit. Anything else must be transferred as it stands.

MT720 example

Gulf Trading LLC in Dubai holds a transferable credit for USD 250,000.00 from a buyer in Germany, available with ZagTrader Test Bank (ZAGTAEADXXX) and naming it as transferring bank. Gulf Trading buys the pumps from Acme Components Ltd in London for USD 210,000.00 and asks for a partial transfer. ZagTrader sends an MT720 to BANKGB2LXXX, the supplier’s bank, with a lower amount, an earlier expiry and shipment date, and a shorter presentation period, and keeps the documents coming back to itself so Gulf Trading can substitute its own invoice.

{1:F01ZAGTAEADAXXX0000000000}{2:I720BANKGB2LXXXXN}{4:
:27:1/1
:40B:IRREVOCABLE
WITHOUT OUR CONFIRMATION
:20:ZTTRF2610260002
:21:DE26LC0004711
:31C:261012
:40E:UCP LATEST VERSION
:31D:270115DUBAI
:52A:BANKDEFFXXX
:50:GULF TRADING LLC
OFFICE 1204 BUSINESS BAY TOWER
DUBAI, UAE
:59:/GB42BANK40051587654321
ACME COMPONENTS LTD
1 HIGH STREET
LONDON, UK
:32B:USD210000,00
:41A:ZAGTAEADXXX
BY PAYMENT
:43P:NOT ALLOWED
:43T:NOT ALLOWED
:44E:FELIXSTOWE, UK
:44F:HAMBURG, GERMANY
:44C:261130
:45A:+500 INDUSTRIAL PUMPS MODEL ZP-200 AT USD 420.00 PER UNIT
+CIF HAMBURG INCOTERMS 2020
:46A:+SIGNED COMMERCIAL INVOICE IN 3 ORIGINALS
+FULL SET OF CLEAN ON BOARD OCEAN BILLS OF LADING MADE OUT
TO ORDER AND BLANK ENDORSED, NOTIFY APPLICANT
+INSURANCE CERTIFICATE FOR AT LEAST USD 275,000.00 (110 PCT OF
THE ORIGINAL CREDIT AMOUNT) COVERING INSTITUTE CARGO CLAUSES (A)
:71D:ALL BANKING CHARGES OUTSIDE THE
UAE ARE FOR BENEFICIARY ACCOUNT
:48:15
:49:WITHOUT
:78D:+DOCUMENTS TO BE PRESENTED TO ZAGTAEADXXX FOR
SUBSTITUTION OF INVOICES BY THE FIRST BENEFICIARY
-}

Line by line

The BICs, names, references and the IBAN are made up; the IBAN has valid check digits.

The remaining USD 40,000.00 of the original credit stays available to Gulf Trading, which presents its own invoice for the full sale value and receives the difference once the issuing bank pays.

Common errors and rejects

1. Terms changed that article 38 does not allow

   The transferred credit adds a document, changes the port or the Incoterms rule, or drops a condition. The second beneficiary’s presentation then no longer fits the original credit and the first beneficiary’s substitution fails. Only amount, unit price, dates, presentation period, insurance percentage and the applicant’s name may change.

2. Applicant left in field 50

   Field 50 of the MT720 is the first beneficiary. Copying the original applicant there exposes the trader’s buyer to its supplier and confuses the documents.

3. Issuing bank and non-bank issuer both present

   52a and 50B are alternatives for the issuer of the original credit; send one of them.

4. Drafts and payment details in the wrong combination (C90)

   As in the MT700: 42C with 42a, or 42M alone, or 42P alone.

5. Both 44C and 44D present (D06)

   Keep either the shortened latest shipment date or the shipment period, not both.

6. Amount format in 32B

   Comma as the decimal mark, no thousands separators: USD210000,00.

   How to fix it

ISO 20022

Swift’s MT and MX equivalence table (May 2024) gives no ISO 20022 equivalent for the MT720, as for every documentary credit message. Category 7 trade messages were not part of the November 2025 move of payment instructions to ISO 20022 and are still exchanged in MT format.

Payments under the transferred credit, to the second beneficiary and later the margin to the first beneficiary, travel in ISO 20022 payment messages such as pacs.009 between banks.

Related messages

• MT700Issue of a Documentary Credit
• MT721Transfer of a Documentary Credit
• MT710Advice of a Third Bank's or a Non-Bank's Documentary Credit
• MT707Amendment to a Documentary Credit
• MT730Acknowledgement
• MT799Free Format Message

MT720 questions

What is an MT720?

It is the Swift message used to transfer a transferable documentary credit to a second beneficiary. The transferring bank sends it to the bank that will advise the transferred credit to the second beneficiary, usually the supplier of the first beneficiary.

What is the difference between MT710 and MT720?

The MT710 passes the same credit on to another bank for the same beneficiary. The MT720 transfers the credit to a different, second beneficiary, often for a lower amount and with earlier dates.

What can change when a letter of credit is transferred?

Under UCP 600 article 38: the amount and unit prices may be reduced, the expiry date, presentation period and latest shipment date may be shortened, the insurance percentage may be raised, and the first beneficiary’s name may replace the applicant’s. Everything else stays as in the original credit.

Can a transferred credit be transferred again?

Not to a third beneficiary: a credit can be transferred only once. A transfer back to the first beneficiary is allowed. A credit may, however, be split into several partial transfers when partial shipments or drawings are allowed.

What is an MT721?

The MT721 is the continuation of an MT720 when the goods description, documents, conditions or special payment conditions do not fit in one message.