SHORT SHIPMENT OR NOT?

QUESTION

Dear Mr Old Man,

LC stipulates as follows:

– Partial shipment: allowed.
– Latest date of shipment: 13 Feb 2014
– Presentation period: within 15 days from the date of shipment but within the validity of the credit
– Expiry date: 28 Feb, 2014.
– Additional conditions: 135,000 meters will be on or before 13 Feb, 2014.

Beneficiary makes a presentation including BL showing quantity shipped as 115,000 meters and shipment date as 13 Feb, 2014.

The issuing bank raises the discrepancy “short shipment”.

Is the discrepancy valid?

Thank you.
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ANSWER

Hi,

The discrepancy is not valid.

The LC allows partial shipments. So, the issuing bank cannot raise the discrepancy “short shipment” even if it knows for sure that no further shipments will be made.

For your reference, please find attached below my answer to a question similar to yours.

Kind regards,
Mr. Old Man
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ATTACHMENT:

TO PAY OR NOT TO PAY IF SHIPMENT IS NOT EFFECTED IN FULL
Tuesday, March 16, 2010 8:51:55 AM
to-pay-or-not-to-pay-if-shipment-is-not-effected-i

QUERY FROM NICO PARIS

Partial shipments

I am a trainee currently dealing with my first LC matter and have what I hope is a straight-forward query.

Under the LC, the sales contract and the UCP rules partial shipments are allowed. Partial drawings also.

If the beneficiary of the LC in which the description of goods is 5410 MT (+/-10%) ships only 80% is he entitled to payment of the equivalent amount of money, provided he invoice accordingly and provided all documents are consistent? I.e. can a beneficiary effect partial shipment and expect partial payment without shipping the full amount?

Would the position change if the bank is aware of factors which will render it impossible to make any further shipments so as to complete the quantity of goods under the LC?

Does the position change if the presentation is made prior to expiration of the LC but the bank waits until expiration before refusing to honour the LC on the basis that it is impossible to conduct a full shipment?

Thank you in advance for any help,

Nico

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COMMENT FROM MR. OLD MAN

To Pay or Not to Pay if Shipment not effected in full.

Dear Nico Paris,

I try to answer question by question as follows:

1/ If partial shipment is allowed, the beneficiary can effect partial shipment and receive payment of equivalent to the value of the goods partially shipped. The nominated bank/the issuing bank does not care whether the beneficiary shall effect further shipments or not. That the beneficiary fails to effect further shipments shall be subject to the penalty clause or arbitration clause, if any, in the sale contract.
2/ The position remains unchanged, i.e. the nominated bank/the issuing bank must honour the complying documents even if it is aware of any factors or even evidence showing that no further shipments are to be effected by the beneficiary.

3/ The position still remains unchanged whether the LC has been expired and no further shipments are to be effected. The nominated bank/the issuing bank must honour if the documents presented are complying. That the presentation is made prior to the expiration of the LC but the nominated bank/the issuing bank waits until expiration to refuse to honour on the basis that goods required have not been shipped in full are not encouraged and not acceptable.

Best regards,

Nguyen Huu Duc