Invoice Wording Dilemmas: “To the Order of the Applicant” and Non-Standard Incoterms Explained

QUESTION

Hi Sir,

Good day.

I have read many of your responses that clarify our queries. Thank you so much for sharing your knowledge with us.

I request you to clarify the following:

1. The LC states the applicant as ABC Co., Ltd.

The invoice is made out to “To the order of ABC Co., Ltd.”

Is the above acceptable, since an invoice is not a negotiable document?

Or

Should we raise a discrepancy, as per UCP, since the invoice must be made out to the applicant?

2.  My second query:

The invoice states Incoterms as “CFR Jebel Ali as well as CFR Duty Unpaid as per Incoterms 2020.”

Is this correct, or should a discrepancy be raised?

Please clarify.

Thanks & regards,

Priya

——-

ANSWER

Dear Priya,

Thank you for your questions. Here is my response:

1. Invoice made out “to the order of the applicant” instead of “made out to the applicant”

According to Article 18(a)(ii) of UCP 600, a commercial invoice must be made out in the name of the applicant. So, the default rule is that the invoice must include the applicant, which is ABC Co., Ltd in your case.

Now, the invoice says: “To the order of ABC Co., Ltd.”

The phrase “To the order of…” is quite common in negotiable instruments, but when used in a commercial invoice, it generally still identifies the applicant and does not constitute a discrepancy.

Conclusion:

The invoice showing “To the order of ABC Co., Ltd” should be acceptable since the applicant is still identified as ABC Co., Ltd.

1. Invoice indicating “CFR Jebel Ali as well as CFR Duty Unpaid as per Incoterms 2020”

There will be divided opinions on this case.

Those who follow a strict compliance doctrine will raise a discrepancy, reasoning that “CFR Duty Unpaid” is not an official Incoterm and not what the LC stated.

However, those who are tolerant would waive the discrepancy, reasoning that under CFR Incoterms 2020, the seller (beneficiary) is not responsible for import duties. Therefore, stating “Duty Unpaid” after CFR does not add or change any obligation – it’s just a clarification of what CFR means. So logically, “CFR Jebel Ali” and “CFR Jebel Ali Duty Unpaid” are functionally the same.

Recommendations:

If you are a nominated bank or confirming bank, you can raise the discrepancy just to stay on the safe side.

However, if you are on the issuing bank side, you may probably tolerate it, especially if the applicant does not object.

Hope your questions have been clarified.

Best regards,

Mr. Old Man