CAN A COMMERCIAL INVOICE EXCEED THE LC AMOUNT?

One area that occasionally causes confusion under UCP 600 is the relationship between Article 18(b) and Article 30(a).

Many practitioners assume that a commercial invoice may exceed the LC amount only where the credit expressly allows a tolerance, or where the words “about” or “approximately” are used in connection with the credit amount under Article 30(a). However, Article 18(b) provides a separate and independent rule.

The following question highlights this important distinction.

QUESTION

Respected Sir,

Sir, I need your help to understand one point related to Article 18.

Can the invoice amount exceed the LC amount only if allowed under Article 30(a), or where the LC specifically allows a tolerance in amount?

Ahtisham Ali

____

ANSWER

Dear Ahtisham,

Thank you for your question.

Not necessarily.

According to UCP 600 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 exceeding the amount permitted by the credit. Such decision will be binding upon all parties, provided that the bank in question has not honoured or negotiated for an amount exceeding that permitted by the credit.

This means that an invoice amount exceeding the LC amount is not automatically discrepant.

In practice, this situation may arise for several reasons. For example, the invoice may show the total contractual amount without deducting an advance payment already received outside the credit. There may also be commercial adjustments, additional charges, or pricing structures causing the invoice amount to exceed the available credit amount.

In such circumstances, the nominated bank acting on its nomination, the confirming bank, if any, or the issuing bank may still accept the commercial invoice in accordance with Article 18(b), provided that the amount honoured or negotiated does not exceed the amount available under the credit.

Article 30(a), on the other hand, addresses a different issue entirely.

Under Article 30(a), when the words “about” or “approximately” are used in connection with the amount of the credit, the quantity, or the unit price stated in the credit, a tolerance of up to 10% more or 10% less than the stated amount, quantity, or unit price is allowed.

Therefore, Article 30(a) concerns permitted tolerances in the terms of the credit itself, whereas Article 18(b) concerns the acceptability of a commercial invoice showing an amount exceeding the credit amount, provided the bank does not honour or negotiate beyond the amount permitted by the credit.

The two provisions operate independently and should not be confused.

Best regards,

Mr. Old Man