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INVOICE SHOWING FREE OF CHARGE GOODS AND …

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Camera 360QUESTIONS

Dear Mr. Old Man

Could you please give me  your opinions on the following questions?

QUESTION 1

L/C requires:

– Commodity : Pharmaceutical products

– Description:  Details of quantity and unit price as per contract no. 123

– Total amount: USD100,000.00 (+/-10%)

Invoice presented shows:

– Commodity: Pharmaceutical products

– Description:  Details of quantity and unit price as per contract no. 123

# GETINO-B

Quantity: 30 boxes

Amount: USD49,623

# CLARITEK

Quantity: 10 boxes

Amount: USD4,753

# GETINO-B

Quantity: 30 boxes FREE OF CHARGE

The issuing bank refuses the documents stating the discrepancy: Invoice: Goods (30 boxes of GETINO-B  FREE OF CHARGE)  not called for in the LC.

Is the discrepancy valid?

QUESTION 2

According to UCP600 Sub-article 19(c) (ii), Sub-article 23(c) (ii), Sub-article 24(e) (ii):” a transport documents indicate transshipment will or may take place is acceptable, even if the credit prohibits transshipment”.

Does the provision “prohibits transshipment” in the LC take no effect on MMTD, AWB, Road, Rail, Inland waterway transport documents and these transport documents can show evidences of transshipment, example transshipment from truck A to Vessel A, Truck A to Truck B, Airplane No.1 to No. 2… even if  the credit prohibits transshipment? Are these transport documents always allow transshipment in any cases?

QUESTION 3

Must packing list, weight list, certificate of quantity, certificate of quality, certificate of fumigation…. show descriptions of goods in general term? Is there a need for such documents to show description of goods?

QUESTION 4

According to UCP 600 sub-article 16 (e), can a bank can return the documents to the presenter at any time after it has advised that it is holding the documents pending further instructions from the presenter WITHOUT PRIOR TO ADVISING THE PRESENTER that it will return the documents ?

QUESTION 5

When an invoice shows deduction amount, is the discrepancy “short drawn” valid if the LC prohibits partial shipment?

For example, LC states: LC amount: USD1,000; Partial shipment: Prohibited

Invoice presented shows:

Total amount: USD1,000

Deduction: USD200

Claim amount: USD800

Can we raise the discrepancy “short drawn”?

Thank you very much.

Your sincerely

LHC

——————-

ANSWER

Hi,

In order to receive my answer earlier, you are encouraged to submit question by question. I do not have much time to answer a lot of questions at one time.

1.  Invoice showing goods not called for in the LC

Paragraph C12 (b) clearly states that an invoice is not to indicate goods, services or performance not called for in the credit. THIS APPLIES EVEN WHEN THE INVOICE INCLUDES ADDITIONAL QUANTITIES OF GOODS, SERVICES OR PERFORMANCE AS REQUIRED BY THE CREDIT or samples and advertising material and are stated to be free of charge.

It is understood that para C12 (b) not only applies to the goods not called for in the LC but also to the additional quantities of goods called for in the credit. I treat 30 boxes of Getino-B FREE OF CHARGE shown on the invoice as the ADDITIONAL QUANTITIES OF GOODS, hence, I say it’s discrepant as per para C12 (b).The discrepancy raised by the issuing bank is valid.

What’s more? An invoice should not include goods free of charge because the buyer may have problem with the customs who may refuse to clear all the goods shipped or at least the quantities of the additional goods shipped free of charge.
A contract that includes goods free of charge may not be acceptable by the customs. Just imagine a contract showing 3 Rolls Royces free of charge. I don’t think the customs will agree to clear those free of charge Rolls Royces.

2. Transshipment

It is understood from sub-article 19 (c) (ii), sub-article 23 (c) (ii) and sub-article 24 (e) (ii) that transshipment must be allowed, even if prohibited by the LC.

3. Description of goods in documents other than the commercial invoice

The following can help answer your question:

Sub-article 14 (e) says: “In documents other than the commercial invoice, the description of the goods, if stated, may be in general terms not conflicting with their description in the LC”.

ICC Opinion R364 says: “There is no specific requirement for a good description to appear on any document other than the commercial invoice. A bank, faced with a document with no description of goods, should be satisfied that the document and its content relate to the transaction in hand. The inclusion of the invoice number on the beneficiary certificate would be sufficient information to relate this to the other documents”.

4. Disposal of documents

According to sub-article 16 (e) a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may, after providing required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any time.

So, such a bank may, at a matter of courtesy, inform the presenter of its intention of returning the documents, but it is not obliged to do so.

5. Short drawn or not?

According to paragraph C7 ISBP 745, an invoice may indicate a deduction covering advance payment, discount, etc., that is not stated in the LC.

The deduction in your case is a form of discount which could be up to any amount. There’s no discrepancy.

Kind regards,

Mr. Old Man

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9 Comments

  1. […] INVOICE SHOWING FREE OF CHARGE GOODS AND …. […]

    Reply

  2. MXX

    March 7, 2014 at 9:04 am

    Trong câu hỏi số 5 trên “short drawn or not” tôi có thắc mắc giống như người đặt câu hỏi,theo như Mr old man thì phần chiết khấu hay giảm trừ vẫn có thể được nêu trên trên hóa đơn ko phải là bất hợp lệ, nhưng còn phần ký phát số tiền ít hơn trị giá L/C trong khi giao hàng từng phần ko cho phép thì đó có được xem là “short drawn” ko Mr Old Man ơi??? cảm ơn Mr old Man rất nhiều.

    Reply

    • mroldman

      March 7, 2014 at 9:58 pm

      Hi,

      For the benefit of the LC community, you are encouraged to post your questions and comments if any in English.

      I would like to summarize your question and my answer in English

      Your question:

      Regarding Question No. 5 “short drawn or not”, your answer is the invoice that shows a deduction covering advance payment or discount is acceptable as per paragraph C7 ISBP 745. However, I wonder if I can raise the discrepancy “short drawn” in case the amount claimed is less than that permitted by the LC.

      Here is my answer:

      On DCPro Discussion Forum there have been at least two discussions on this topic, and of course there have been divided opinions on the issue.

      Some opine that as the invoice showing a deduction is acceptable, the amount claimed less than the amount permitted by the LC is acceptable. There is no discrepancy (short drawn), whereas some others say it is a discrepancy.

      I am on the side of those who say that there is no discrepancy. If full shipment is made and full amount of goods shipped is indicated, the issuing bank/applicant should not refuse to pay just because the beneficiary claims for the amount less than that permitted by the LC.

      Just ask yourself: If you were the applicant, would you prefer to pay full amount or pay at a discount price?

      You know the answer already.

      Kind regards,
      Mr. Old Man

      Reply

  3. MXX

    March 11, 2014 at 9:17 am

    Thanks so much

    Reply

  4. thanh thanh

    October 19, 2016 at 9:35 pm

    Dear Mr Old Man,
    Refer to the goods showed in Invoice, i am confused in 1 case as follows:
    L/c stipulates:
    Amount: USD1000,000,
    Partial shipment: allowed
    46A: machines, origin: vietnam, fob haiphong, vietnam
    .
    Invoice shows:
    Goods: machines- set 1: Usd 490,000
    Charge for setting up machines: usd10,000
    Total: usd500,000.
    .
    Dear Sir, could i raise the discrepancy due to the setting up charge not stipulated in L/C?
    Thanks and best regards,

    Reply

    • mroldman

      October 20, 2016 at 10:54 am

      I won’t raise discrepancy in this case.

      Reply

  5. Danushka

    October 28, 2016 at 12:56 am

    Dear Mr. Old Man,

    If customer cleared the goods through a Shipping guarantee, As per article 14(b) of UCP 600, does the issuing bank still has 5 banking days?

    Reply

    • mroldman

      October 28, 2016 at 5:24 pm

      It is true that where the issuing bank has issued a shipping guarantee to enable the applicant to take delivery of the goods there’s no need for the issuing bank to check the documents to determine if they are complying . However, in practice banks would make full use of the 5 banking day rule to save the applicant some interest, and the presenter cannot have good reason based on UCP to urge the issuing bank to pay earlier.

      Reply

  6. Danushka

    November 5, 2016 at 10:58 pm

    Dear Mr. Old Man,

    I wanted to clear some doubts about tolerance. Please correct me
    with the following example about how I understand the tolerance.

    Example I
    30 A. “about” or “approximately”
    If used in connection with the amount, quantity or unit price then, 10% +/- allowed.
    So if the LC used 1000 pens about/approximatley USD10,000/-(FOB)
    means 1000pens can be sent at USD 9,000/- to USD 11,000/-

    So if it is on CIF basis i.e. (COS USD10,000 + Freight $1500 + Insurance$500) Total CIF USD 12,000 then how this apply?

    Example II
    30b 5%+/- from quantity means,
    If 10,000MT @ USD 100,000/- mean,
    quantity can be 9000MT to 11000MT but the amount should remain at USD100,000/-

    Example III
    30C 5% – from amount means,
    If 10,000 MT @ USD 100/- (FOB)
    USD 1,000,000/- + Freight + Insurance USD10,000
    (Total USD 1,010,000) and partial shipment not allowed yet,

    USD1,000,000 + (Cost and Insurance up to USD 9500) acceptabale?

    Example IV
    MT1000 at about USD 10,000 means,
    Quantity can be changed from 950MT to 1050MT and simultaneously LC value can be changed from USD 9000 to USD 11000.

    So seller can send 950MT for USD 11,000
    Example V
    Also under MT700 field 39 if we put 10/10 means,

    If LC value is USD 100,000 (10,000pens @ USD 10) then goods can be consigned from USD 90,000 to USD 110,000. but the quantity and the unit price must be stated in the invoice as 1000 pens @ USD10.

    Example VI
    Also under MT700 field 39 if we put 10/10 means and under additional condition (47A) we say tolerance 5 +/- from quantity allowed then,

    If LC value is USD 10,000 (1,000pens @ USD 10) then goods can be consigned from USD 9,000 to USD 11,000 and the quantity may vary from 1050pens to 950 pens.

    So the seller can send a consignment worth of USD 11000 consist of 950 pens.

    Please correct me with the above examples in order to get clear understand about tolerance.

    Reply

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