QUESTION: What is the difference between discounting and negotiation in the context of letters of credit? Could you clarify? ——- ANSWER: Hi, Great question — it’s one that often comes up in trade finance. Under UCP 600, the term officially used is “negotiation”, not “discounting.” According to Article 2 of UCP 600, negotiation refers to: “The purchase by the …

QUESTION Dear Mr. Old Man, Good day. Could you kindly explain whether there’s any difference between CFR FO and CFR + FO as used in letters of credit? Also, which type of shipment are these Incoterms suitable for—containerized cargo, break bulk, bulk cargo, etc.? Does this mean CFR FO (or CFR + FO) is only applicable when a Charter Party …

QUESTION Dear Mr. Old Man, I’ve come across a bit of a puzzler: The LC I’m handling shows the goods are sold on EXW (Ex Works) terms, yet it also calls for presentation of a Bill of Lading (BL). From what I understand, under EXW, the seller’s responsibility stops at their own doorstep—they’re not even obliged to load the goods. …

QUESTION Dear Mr. Old Man, I’m having trouble understanding ISBP C9, about additional charges and costs in the invoice. Could you kindly explain it? Regards, Siva —— ANSWER Hi Siva, I believe you’re referring to paragraph C10 in ISBP 821, not C9. (C9 in ISBP 745 was renumbered as C10 in the latest ISBP 821.) It reads: “Additional charges and …

QUESTION Dear Mr. Old Man, How are you? Hope you are well. I need your guidance and clarification for better understanding the difference between UCP 600 sub-article 26 (c) and ISBP 821 D31 (a) with regard to  “charges additional to freight in transport document”. Regards Siva —– ANSWER Hi, UCP 600 sub-article 26(c) says“A transport document may bear a reference, by stamp …

QUESTION Hi Mr. Old Man, I’ve been trying to find this information but couldn’t get a clear answer on Google. When an importer requests their bank to issue a usance LC, does the bank lock up the amount in his account until the LC reaches maturity? Thank you. Tengku —— ANSWER Hi, Whether a deposit is required for the issuance …

QUESTION Hello Mr. Old Man, After nearly two decades in the industry, I recognize there’s still much for me to learn about project financing. To educate myself more, I’ve been reading up for days and tonight I found your blog. Your expertise in this area is incredible, and I’m reaching out in hopes that you might be willing to share …

QUESTION Dear Sir How are you doing? If we show a round off figure of $625,000.00 instead of $ 625,000.05, Will it be a Discrepancy. The calculation is as below. Unit Price: USD 41,666.67 Qty: 15 Total = USD 41,666.67 x 15 = USD 625,000.05 But, if we show $ 625,000.00 in the Invoice and Draft, Will it be a …

QUESTION Hello Sir, I hope you are doing well. Sir, I have a query that I hope you can help me with. Sub-article 20 (c) (ii) of UCP 600 allows transshipment if goods are shipped in a container, trailer, or LASH barge. Why is transshipment permitted in these cases? Regards, Ahtisham Ali ————– ANSWER Hello, In my understanding, it is …

QUESTION Dear Mr. Old Man, I need your guidance in the following scenario: If a Nominated Bank has incurred its deferred payment undertaking or has accepted a draft drawn on it but fails to honour at maturity, then what options does the beneficiary have? Please clarify. Regards, Siva Prasad —— ANSWER Hi Siva, According to UCP 600 sub-article 7 (a) (iii) and …