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INVOICE NOT ISSUED BY THE BENEFICIARY

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QUESTION

Dear Mr. Old Man

Please kindly advise me of the following case:

Our customer asks us to issue an LC (not transferable LC)
Documents required: Invoice in triplicate
F47A: Third party documents acceptable

Question:

1. Whether invoice issued by a named person or entity other than the beneficiary acceptable? (as stated by ISBP 745 Para. A19)

2. Any risks for us if invoice not issued by beneficiary.?

Your prompt reply is highly appreciated.

Rgds,

NMH
——-

ANSWER

Hi,

1. By stating “third party documents acceptable”, the LC allows all documents, except drafts but INCLUDING INVOICES, to be issued by a named person or entity other than the beneficiary.

Please compare paragraph 19 (c) ISBP 745 with paragraph 21 (c) ISBP 681 to see that ISBP 681 is clearer than ISBP 745 in respect of the expression “third party documents acceptable”.

Paragraph 19 (c) ISBP 745: "third party documents acceptable" – all documents for which the credit or UCP 600 do not indicate an issuer, except drafts, may be issued by a named person or entity other than the beneficiary.

Paragraph 21 (c) ISBP 681: "third party documents acceptable" – all documents, excluding drafts but INCLUDING INVOICES, may be issued by a party other than the beneficiary. If it is the intention of the issuing bank that the transport or other documents may show a shipper other than the beneficiary, the clause is not necessary because it is already permitted by sub-article 14(k).

2. I do not see there is any risk in this case.

Kind regards,
Mr. Old Man

P/S:

I must admit that I am of the minority who says if LC states “third party documents acceptable”, then according to paragraph A19(c) the invoice can be issued by a named person or entity other than the beneficiary. If ICC had intened that invoices must be always issued by the beneficiary, this should have been included in A19(c) ISBP 745 by adding “… , except drafts AND INVOICES, …”

I have referred this case to my fellow editors of Trade Services Update – LC Monitor and the majority agrees that notwithstanding LC stating “third party documents acceptable”, sub-article 18 (a) (i) UCP 600 still applies and the invoice must be issued by the beneficiary.

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10 Comments

  1. anonymous

    October 2, 2013 at 11:10 pm

    andt writes:dear mr old man, in my opinion, according to ''Paragraph 19 (c) ISBP 745: "third party documents acceptable" – all documents for which the credit or UCP 600 do not indicate an issuer, except drafts, may be issued by a named person or entity other than the beneficiary'' and ucp 600, article 18 ai, requires that invoice is issued by beneficiary. hence, although LC allows “third party documents acceptable”, invoice is issued by beneficiary.could you pls give your view on this matter?best regardsandt

    Reply

  2. mroldmanvcb

    October 3, 2013 at 8:10 am

    Hi Andt,In my opinion, if LC requires invoice to be issued by beneficiary then it must be issued by the beneficiary notwithstanding LC stating third party documents acceptable. Similarly if LC requires a beneficiary certificate then a certificate issued by a party other than the beneficiary is not acceptable notwithstanding LC stating third party documents acceptable. If ICC had intended that invoices must be always issued by the beneficiary, this should have been included in A19(c) ISBP 745 by adding “… except drafts AND INVOICES…”I think the expression "third party documents acceptable" in LC overides sub-article 18 (a)(i) UCP 600. So, the invoice in this case can be issued by a party other than the beneficiary. Kind regards,Mr. Old Man

    Reply

  3. anonymous

    October 3, 2013 at 4:10 pm

    Anonymous writes:Hi Mr. Old manI am very happy when finding out your blog.Could you please help me solve the following case?We have presented a set of document to the issuing bank, including 3 originals of insurance certificate. But, they send us a notice of discrepancy related to the insurance certificate: “Insurance certificate not shows total number of originals issued”. Because according to LC, insurance certificate must show total number of originals issued. The buyer does not accept this discrepancy as the issuing bank told them that “this is a very important discrepancy”. If we do not show total number of originals issued, the buyer and the issuing bank cannot know how many originals actually issued, while the buyer only received 3 ones. To solve this case, we need to present these insurance certificates again. So, I have one question that, how many insurance certificate do we need to present again? And if we present 3 originals again, what will happen with the 3 first originals? Do they become null and void when 3 new ones reach the issuing bank? And the total number of originals which the insurance company issued now is still “3” or more?Thank you.

    Reply

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      July 18, 2017 at 6:31 am

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  4. mroldmanvcb

    October 3, 2013 at 5:10 pm

    It is practice that there is no need for the insurance document to indicate the number that has been issued. However, where the insurance document indicate a number of originals issued then all originals must be presented. If the LC requires the insurance document to indicate the number of originals issued then it must so indicate to comply with the LC. If you intend to send three other originals of the insurance document to replace the discrepant ones, you should so instruct in the covering letter and/or ask the issuing bank to return the discrepant ones to you for cancellation.

    Reply

  5. anonymous

    October 4, 2013 at 9:10 am

    Anonyme writes:Thank you very much for your answer. However I am wondering that why the 3 fist originals of insurance certificates do not automatically become null and void when 3 new ones reach the issuing bank.

    Reply

  6. mroldmanvcb

    October 4, 2013 at 10:10 pm

    The three first original of insurance certificate cannot automatically become null and void when 3 new ones reach the issuing bank because they are not part of the new ones.

    Reply

  7. anonymous

    October 5, 2013 at 9:10 am

    Anonyme writes:Thank you Mr. Old man.

    Reply

  8. anonymous

    November 17, 2013 at 2:11 pm

    suresh kapoor writes:Dear Old manit is only the text of LC that can overwrite UCP and not ISBP, in the main question ,invoice had to be issued by the beneficiary , unless otherwise specified by LC

    Reply

  9. mroldmanvcb

    November 17, 2013 at 8:11 pm

    Hi Suresh, Agreed.Kind regards.

    Reply

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