INSTALMENT NOT DRAWN

Ha Long Bay

QUESTION

Dear Mr. Old Man,

I would like to ask your opinion on the following case:

LC indicates the shipment schedule as follows:

+ 1^st  shipment for 100.00 MTs between 10 September to 25 September, 2014

+ 2^nd shipment for 100.00 MTs between 10 October to 25 October, 2014

+ 3^rd shipment for 100.00 MTs between 10 November to 25 November, 2014

Invoice presented to the issuing bank for the 1^st shipment shows the vessel’s name different from that on Bill of lading. Other terms and conditions comply with LC.

Does Article 32 UCP 600 apply to this situation, the credit ceases to be available for the 1^st and and any subsequent instalment?

Thank you in advance.

LHC

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ANSWER

Hi,

The case in question shows three distinct given periods for three distinct shipments. This type of schedule is subject to Article 32 UCP 600, which says “If a drawing or shipment by instalments is stipulated in the credit and any instalment is not drawn or shipped within the period allowed for that instalment, the credit ceases to be available for that and any subsequent instalment”.

There is a view that if the presentation for the 1^st instalment is  not paid due to valid discrepancy, it is deemed not to have been drawn or shipped, and therefore, the credit ceases to be available for that instalment and any subsequent instalment. However, there is also a view that since the 1st shipment was made within the period allowed, L/C is still available for subsequent instalments.

I tend to agree  with the first view.

Kind regards,

Mr. Old Man