INVOICE SHOWING FREE OF CHARGE GOODS AND…
QUESTION
Dear Mr. Old Man,
Could you please provide your opinions on the following questions?
QUESTION 1
The L/C requires:
– Commodity: Pharmaceutical products
– Description: Details of quantity and unit price as per Contract No. 123
– Total amount: USD 100,000.00 (+/-10%)
The invoice presented shows:
– Commodity: Pharmaceutical products
– Description: Details of quantity and unit price as per Contract No. 123
# GETINO-B
Quantity: 30 boxes
Amount: USD 49,623
# CLARITEK
Quantity: 10 boxes
Amount: USD 4,753
# GETINO-B
Quantity: 30 boxes (Free of charge)
The issuing bank refuses the documents, citing the following discrepancy:
“Invoice: Goods (30 boxes of GETINO-B free of charge) not called for in the L/C.”
Is this discrepancy valid?
QUESTION 2
According to UCP 600 Sub-articles 19(c)(ii), 23(c)(ii), and 24(e)(ii):
“A transport document indicating that transshipment will or may take place is acceptable, even if the credit prohibits transshipment.”
Does this mean that the provision “prohibits transshipment” in the L/C has no effect on Multimodal Transport Documents (MMTD), Airway Bills (AWB), Road, Rail, and Inland Waterway transport documents?
Can these transport documents indicate transshipment (e.g., from Truck A to Vessel A, Truck A to Truck B, or Airplane No. 1 to Airplane No. 2) even if the L/C explicitly prohibits transshipment?
Are these transport documents always allowed to indicate transshipment in any situation?
QUESTION 3
Must documents such as the packing list, weight list, certificate of quantity, certificate of quality, and certificate of fumigation provide a general description of goods?
Is it mandatory for these documents to contain a description of the goods?
QUESTION 4
Under UCP 600 Sub-article 16(e), can a bank return the documents to the presenter at any time after it has advised that it is holding the documents pending further instructions from the presenter—without first notifying the presenter that it will return the documents?
QUESTION 5
If an invoice shows a deduction in the total amount, is the discrepancy “short drawn” valid if the L/C prohibits partial shipments?
For example:
• L/C details:
• L/C Amount: USD 1,000
• Partial shipment: Prohibited
• Invoice presented:
• Total amount: USD 1,000
• Deduction: USD 200
• Claim amount: USD 800
Can we raise the discrepancy “short drawn” in this case?
Thank you very much.
Yours sincerely,
HC
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ANSWER
Hi,
To receive a quicker response, I encourage you to submit one question at a time, as I have limited time to answer multiple questions at once.
1. Invoice Showing Goods Not Called for in the L/C
According to ISBP 821 C12(b), an invoice must not indicate goods, services, or performance not required by the credit.
This applies even if the invoice includes additional quantities of goods stated to be “free of charge.”
Paragraph C12(b) applies to both:
1. Goods not called for in the L/C.
2. Additional quantities of goods that are called for in the L/C.
In this case, the 30 boxes of GETINO-B free of charge on the invoice qualify as additional quantities, making the invoice discrepant under Paragraph C12(b).
Therefore, the issuing bank’s refusal of the documents is valid.
Additionally, invoices should generally not include free-of-charge goods because:
• Customs authorities may refuse to clear shipments containing such items.
• Contracts that include free-of-charge goods may not be acceptable for import clearance.
• Imagine a contract stating “3 Rolls-Royces free of charge”—customs would likely reject it.
2. Transshipment
Under UCP 600 Sub-articles 19(c)(ii), 23(c)(ii), and 24(e)(ii), transshipment must be allowed even if the L/C explicitly prohibits it.
Thus, in cases involving Multimodal Transport Documents (MMTD), Airway Bills (AWB), and Road, Rail, and Inland Waterway transport documents, the prohibition of transshipment in the L/C has no effect.
These transport documents are always permitted to indicate transshipment.
3. Description of Goods in Non-Commercial Invoice Documents
Sub-article 14(e) states:
“In documents other than the commercial invoice, the description of the goods, if stated, may be in general terms, provided it does not conflict with the description in the L/C.”
According to ICC Opinion R364:
• There is no requirement for a description of goods on documents other than the commercial invoice.
• Banks should verify that documents relate to the transaction (e.g., by checking invoice numbers).
Conclusion:
• Documents do not need to contain a goods description.
• If a description is included, it must be in general terms and not conflict with the L/C.
4. Disposal of Documents
According to UCP 600 Sub-article 16(e):
A nominated bank acting on its nomination, a confirming bank (if any), or the issuing bank may return the documents to the presenter at any time, after fulfilling the requirements of Sub-article 16(c)(iii)(a) or (b).
This means:
• The bank may inform the presenter as a courtesy before returning the documents.
• However, it is NOT obligated to do so.
5. Short Drawn or Not?
According to ISBP 821 C7, an invoice may indicate a deduction for advance payments, discounts, etc., even if the L/C does not state them.
In this case, the deduction represents a discount, which could be up to any amount.
There is no discrepancy.
Kind regards,
Mr. Old Man
