Split Payments Under an LC: 80% of Invoice Amount or 80% of LC Amount?

Intro

Credits that split payment between shipment and installation often cause confusion when partial shipments are involved.

The key question is whether payment should be linked to a percentage of the invoice or a percentage of the LC amount.

Question

Dear Mr. Old Man,

We have an LC for USD 10,000, available by payment.

The LC provides:

* 80% payable against shipping documents

* 20% payable against installation/commissioning documents

* Partial shipments are allowed.

Two invoices are presented: USD 7,000 and USD 3,000.

1/ Must the invoice state that the amount claimed represents 80% of the contract value?

2/ Is it a discrepancy if the invoice does not mention the 80% / 20% split?

Thank you.

Najjar
______

Answer

Dear Najjar,

Thank you for the practical question. This is a very common structure, and the answer lies in how banks apply the 80% rule in practice.

How the documents work in practice

• Commercial invoices show the full shipment values:
  • USD 7,000
  • USD 3,000
  • The claimed amount is reflected in the covering schedule or draft, not on the invoice:
  • 80% of USD 7,000 = USD 5,600
  • 80% of USD 3,000 = USD 2,400➡ Total claimed against shipping documents: USD 8,000
  ➡ Remaining LC amount: USD 2,000, payable under the second conditionAnswer to Question 1No.

  The invoice does not need to state that only 80% is being claimed.
  Its role is to describe the goods and their value.

  In a credit available by payment, the claimed amount is reflected in the covering schedule, not on the invoice.

  Answer to Question 2

  No.

  There is no discrepancy if the invoice does not mention the 80% / 20% split, provided that:
  • the claimed amount does not exceed 80% of each invoice value, and
  • the cumulative payment does not exceed 80% of the LC amount.

  Final takeaway

• Invoices show the commercial value
• Covering schedules / drafts show the amount claimed
• The LC controls how much is payable and whenOr, in simpler terms:Invoices tell the story.
  Covering schedules do the math.
  The LC sets the limits.Best regards,

  Mr. Old Man