**Split Payments Under an LC: 80% of Invoice Amount or 80% of LC Amount?**

Intro

Credits that split payment between shipment and installation often cause confusion when partial shipments are involved.

The key question is whether payment should be linked to a percentage of the invoice or a percentage of the LC amount.

Question

Dear Mr. Old Man,

We have an LC for USD 10,000, available by payment.

The LC provides:

• 80% payable against shipping documents
• 20% payable against installation/commissioning documents

Partial shipments are allowed.

Two invoices are presented: USD 7,000 and USD 3,000.

1. Must the invoice state that the amount claimed represents 80% of the contract value?
2. Is it a discrepancy if the invoice does not mention the 80% / 20% split?

Thank you.

Najjar

______

Answer

Dear Najjar,

No, the invoice does not need to state that the amount claimed represents 80% of the contract value, unless the LC expressly requires such wording.

Where partial shipments are allowed, the correct approach is to link payment to a percentage of the LC amount, not the invoice amount.

The bank simply ensures that:

• payments against shipping documents do not exceed 80% of the LC amount, and
• the remaining 20% is paid only against the documents specified for installation or commissioning.

The invoice only needs to state the amount claimed.

Failure to mention “80% / 20%” on the invoice is not a discrepancy.

Best-practice LC wording

Available by payment as follows:

(a) Up to 80% of the LC amount against shipping documents

(b) Remaining 20% of the LC amount against installation/commissioning documents

Takeaway

•  “80% of the LC amount” is correct and safest
•  “80% of invoice amount” works only when partial shipment is not allowed
• The LC controls payment — not the invoice

Best regards,

Mr. Old Man