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INCOTERMS IN THE INVOICE

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QUESTION

Dear Mr. Old Man,

I appreciate your answer to the following:

Situation:
L/C stipulates trade term in Field 45A as FOB any Chinese port.
B/L presented indicates Port of Loading as Shanghai Port, China.
Invoice presented shows FOB any Chinese Port.

Question:
Is the invoice discrepant? Must it show FOB Shanghai Port to comply with B/L?

Thank you.
M.
——————-
ANSWER

The fact that the invoice showed FOB any Chinese Port complies with the L/C terms but appear to conflict with the B/L. Notwithstanding this fact, my view is that the invoice is acceptable whether it shows FOB any Chinese Port or FOB Shanghai China.

By the way, for your reference I would like to quote herewith ICC Opinion R236 on a similar situation with a slight difference:

QUOTE
Description of goods in the invoice vs. description in the credit
Official Opinion R236 – 1995/96
From UCP500 – Sub-Article 37(c)
QUERY
We require clarification of the above Article in its application to a specific case. The question is whether the price term in the description of goods in the invoice of 'F.O.B. Japan' would correspond with the price term in the description of goods in the L/C of 'F.O.B. Shimonoseki'. (Shimonoseki is a seaport in Japan). And if the above is a discrepancy, whether it is a discrepancy which would justify the refusal of documents under the terms and conditions of the L/C.
The following are the details of the above case:
1. On Feb 26, 1994, an L/C for Yen 26,775,000 was issued by X Bank, Pohang, Korea through SWIFT MT 700 in favor of Y Co., Ltd in Japan for account of Z Co., Ltd in Korea and this L/C was advised through XX Bank, Shimonoseki, Japan.
2. The documents for Yen 14,280,000 were negotiated on Mar 18, 1994 at YY Bank, Tokyo, Japan and sent to the issuing bank, X Bank, Pohang, Korea and were received on Mar 28, 1994.
3. On April 1, 1994, discrepancy and unpaid notice was sent to the negotiating bank. (Discrepancy : The price term in the description of goods in invoice 'F.O.B. Japan' did not correspond with the price term in the description of goods in the L/C 'F.O.B. Shimonoseki'.)
The issue is whether the trade term 'FOB Japan' indicated in an invoice presented under a credit calling, under 'Description of goods and/or services', for a trade term (in the credit referred to as 'price term'): 'FOB Shimonoseki' is to be considered as not complying with the terms and conditions of the credit and is therefore a justification to reject the documents presented.
ANALYSIS/CONCLUSION
Analysis
When commercial parties mutually agree on trade terms by stipulating them in a credit, they are bound by these terms as a material part of the contract. This position is taken irrespective of whether the trade term is stipulated in the credit as part of the description of the goods or not. In the specific case, the commercial invoice indicates the term "FOB Japan", whereas the credit calls for the term "FOB Shimonoseki".
Minority opinion
"FOB Japan" means inter alia that the price quoted is for delivery of the goods at the port of loading within Japan. Reference may be made to Incoterms 1990 wherein the definition of FOB means that the seller fulfils his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. "FOB Japan" is not a named port of shipment. The credit specifically indicates that the price of the goods covered were to be quoted as free on board Shimonoseki, a particular place defined.
Majority opinion
There is an evidence from the bill of lading required in the credit and presented, that "Shimonoseki" is a port in Japan, as it says "Port of Loading: Shimonoseki, Japan", and that the invoice in question also names "Shimonoseki, Japan" as the place where the goods have been shipped from.
Conclusion
While not a unanimous decision, the majority of the Group of Experts said that, in this particular case, the trade term "FOB Japan" indicated in the invoice should not be considered a discrepancy and the documents presented should not be rejected.
R236 – UCP500 Sub-Article 37(c)
UNQUOTE

Hope it is useful.

Best regards,
Mr. Old Man

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One Comment

  1. anonymous

    February 3, 2012 at 9:02 am

    Anonymous writes:Rather difficult to understand clearly your quote but i really appreciate your enthusiastic in sharing the knowledge and experience about L/C.Do hope to learn more and more from you.

    Reply

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