When an Invoice Exceeds the LC Amount: Understanding UCP 600 Sub-Article 18(b)

Intro

In LC practice, commercial invoices are often treated as rigid documents that must strictly mirror the credit amount. However, UCP 600 allows for a degree of flexibility — provided banks understand where discretion ends and obligation begins.

One such provision is UCP 600 sub-article 18(b), which deals with invoices issued for amounts exceeding the LC value. The following Q&A clarifies how this rule works in practice.

Question

Dear Mr. Old Man,

Could you kindly clarify UCP 600 sub-article 18(b) and provide an example to illustrate its application?

Thank you so much.

Best regards,

Penguin

_______

Answer

Dear Penguin,

Thank you for your question.

According to UCP 600 sub-article 18(b), a nominated bank acting on its nomination, a confirming bank (if any), or the issuing bank may accept a commercial invoice issued for an amount in excess of the amount permitted by the credit, and such acceptance will be binding upon all parties.

This is allowed provided that the bank in question has not honoured or negotiated for an amount in excess of that permitted by the credit.

Example

• LC amount: USD 100,000
• Presented commercial invoice amount: USD 110,000

(i.e. USD 10,000 exceeds the LC amount)

Under UCP 600 sub-article 18(b), the nominated bank, confirming bank (if any), or issuing bank may accept this invoice even though its amount exceeds the LC value.

Assume that the nominated bank accepts the invoice but honours or negotiates USD 100,000 only, which is within the LC amount, and claims reimbursement for that honoured or negotiated amount.

In this case:

• The nominated bank is entitled to reimbursement for USD 100,000 from the confirming bank (if any) or the issuing bank.
• The confirming bank or issuing bank must accept the invoice accordingly, as the bank has not honoured or negotiated in excess of the credit amount.

Important Note

It should be noted that the bank cannot unilaterally reduce the invoice amount.

Honour or negotiation for a lower amount than the invoice value is possible only with the beneficiary’s consent.

I hope this explanation helps clarify the intention and practical application of UCP 600 sub-article 18(b).

Best regards,

Mr. Old Man