DRAFT AMOUNT < INVOICE AMOUNT

.by Old Man on Friday, September 30, 2011 at 3:19pm.QUERY FROM H.M

Dear Mr.Old Man,

I shortly describe the transaction and hope to receive your final conclusion

LC amount: USD300,000

Field 41: Draft at sight for 100% invoice amount.

Invoice presented covering full shipment with full amount of USD300,000.
Draft presented for USD290,000
Amount claimed in covering letter: USD290,000

Applicant accepts the documents and agrees to pay USD290,000.

Questions:

1. Should we honour the documents with USD290,000 or USSD300,000? Is there any problem arising afterward if the beneficiary claims for USD290,000 payment?

2. If the beneficiary's bank presents another set of documents (with covering letter and draft only) valued USD10,000 in presentation period, should we honour it? (assumption that partial shipment is allowed).

Thanks for your valuable assistance.

Best regard.

H.M

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ANSWER

Hi,

1) This situation is not exactly the same as that in UCP 600 sub-article 18(b). It may be said that the situation is not covered in the rules.

You may reject the documents as the draft was drawn not as per LC requirement. However, if you accept the documents notwistanding the said discrepancy, you may pay the claimed amount as instructed in the covering letter. The presenter bears the risk of its wrong instruction if any.

2) You can refuse the second presentation of USD10,000 as it is not complying with L/C requirements.

Last but not least, if needed, you may at your own discretion contact the presenter to clarify the issue.

Best regards,

Mr. Old Man

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