Understanding UCP 600 Sub-article 30(c) – The 5% Tolerance Rule

Intro

Article 30(c) of UCP 600 looks short, but it’s one of those rules that makes bankers and traders scratch their heads. Let’s unpack sub-article 30(c) together, with an example to make it real.

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QUESTION

Hi,

Article 30(c) of UCP 600 states:

Even when partial shipments are not allowed, a tolerance not to exceed 5% less than the amount of the credit is allowed, provided that the quantity of the goods, if stated in the credit, is shipped in full and a unit price, if stated in the credit, is not reduced or that sub-article 30(b) is not applicable. This tolerance does not apply when the credit stipulates a specific tolerance or uses the expressions referred to in sub-article 30(a).

I find it hard to understand the above article. Could you please elaborate and give an example to illustrate the article?

Regards,

Th.

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ANSWER

Dear Th.,

I once answered a very similar question (you can also find it on my website www.mroldman.net).

Sub-article 30(c) is basically a safety valve. Even when partial shipments are not allowed, the beneficiary can present documents for up to 5% less than the LC amount, as long as:

• the full quantity of goods (if stated in the LC) is shipped, and
• the unit price (if stated in the LC) is not reduced.

Why does this rule exist? It often comes up under CFR or CIF terms, where freight and insurance charges are only estimates at the time the LC is issued. When the shipment actually happens, those costs can turn out lower than expected. The rule ensures a presentation isn’t refused just because the invoice ends up slightly short of the LC amount.

Example

LC details:

• Credit amount: Not exceeding USD 815,000
• Goods: 10 units of ABC Sport Car Model Y 2025
• Quantity: 10 units
• Unit price: USD 80,000/unit
• Delivery term: CFR Da Nang Port, Vietnam
• Freight charges: as per actual invoice, not exceeding USD 15,000
• Shipment: Osaka Port, Japan → Da Nang Port, Vietnam

Invoice presented:

• Goods: 10 cars × USD 80,000 = USD 800,000
• Freight charges: USD 14,000
• Total invoice = USD 814,000 CFR Da Nang

 Conclusion:

A draft drawn for USD 814,000 is acceptable under UCP 600 sub-article 30(c). The beneficiary shipped the full quantity, did not reduce the unit price, and the total amount is within 5% less than the LC amount due to lower actual freight.

Best regards,

Mr. Old Man