UCP 600 SUB-ARTICLE 30(C) versus ISBP PARAGRAPH 60 (part 2)

________________________________________
SHEILAR
________________________________________

Dear Nguyen Huu Duc, Abrar,

Thank you for your comment.

I apologize for my late reply, as the end of the year is really too busy for me to get back to you soon.
I can see that there are some contradicting views about the relationship between ISBP para.60 and sub-article 30c.

Do you (both of you) mean that ISBP para.60 actually has nothing to do with sub-article 30c.?
But I note that the wording of sub-article 30 c in the literal sense does not stipulate any specific situation except the specified quantity and unit price, thus I read the "5 % less than the amount of the credit" as a general term for various situation that might lead to such a result, i.e. which would include the adjustment of cost, freight and might also include discount or whatever. Maybe I'm totally wrong. But I still fail to see why an invoice which shows a deduction labelled as "discount" would not be bound by sub-article 30c. Also we have come across many refusal advice concerning invoices cited discrepancies based on this reason. Moreover, I think ISBP is intended to explain UCP rules rather than contradict them, isn't it?

Thanks and best regards
Sheilar
________________________________________
MR. OLD MAN
________________________________________

Dear Sheilar,

The differences between UCP 600 sub-article 30(c) and ISBP Para 60 may be that:
– UCP 600 sub-article 30(c) refers to TOLERANCE, whereas ISBP Para 60 refers to DEDUCTIONS or DISCOUNTS.
– UCP 600 sub-article 30(c) applies to the case where partial shipments are not allowed, whereas ISBP Para 60 applies to any case whether partial shipments are allowed or not.
– UCP 600 sub-article 30(c) covers the situations where the terms CFR or CIF and price quotation is based on a soft quotation on the insurance premium and/or the freight charges. The purpose of UCP 600 sub-article 30(c) is to ensure that a reduction in, for instance, the cost of freight or the insurance premium does not prevent the honoring of documents under the L/C. Upon presentation of the documents, the beneficiary invoices for the actual insurance and freight costs, which conceivably are less than those quoted originally in the purchase order. Therefore, a 5% tolerance is allowed in the invoice, always provided that the quantity of the goods, if stipulated in the L/C, is shipped in full, and a unit price, if stipulated in the L/C, is not reduced.
An example to illustrate the point of UCP 600 sub-article 30(c):

LC details:
L/C amount: Not exceeding USD150,000
Goods: 10 trucks
Unit price: USD12,000/unit
Delivery term: CFR Da Nang Port, Vietnam
Freight charges as per actual freight invoice but not exceeding USD30,000

Invoice presented:
Goods: 10 trucks
Unit price: USD12,000/unit
Freight charges: USD23,000.
Total invoice amount: USD143,000 CFR Da Nang Port, Vietnam

Conclusion:
Draft drawn for USD143,000 is acceptable as per UCP 600 sub-article 30 (c).

Best regards,
Nguyen Huu Duc
________________________________________
SHEILAR
________________________________________

Dear Nguyen Huu Duc, Abrar,

Thank you for your always kind response.
Maybe I would change my mind some time.
As the year has come to a close, let me take this opportunity to wish you a Merry Christmas and a lucky new year.
May 2011 is sucessful to you. (see the Chinese painting in the attachment, pls.)
Sheilar
________________________________________
AHMED ABRAR
________________________________________

Hi Sheilar

Sorry for stepping in so late, and advance best wishes for the season to both you and Nguyen Huu Duc!

I agree with Nguyen Huu Duc, in that ISBP para 60 is not directly related to sub-art 30c, and is applicable regardless of any existing LC tolerance.

Sub-art 30c is actually intended to cover a tolerance situation of the LC value. If a quantity and unit price is mentioned then of course, any underdrawing, regardless of percentage, would be discrepant. If the LC is silent with regard to quantity and unit price, then an underdrawing by up to 95% would be acceptable, whether supported by a "deduction" or "discount .

If the LC is underdrawn by over 5% (and LC is silent with regard to quantity, unit price, and tolerance), then such a presentation would be discrepant unless supported by evidence of deductions, examples of which are given in para 60 of ISBP

Theoretically, the tolerance under sub-art 30c applies, regardless of whether partshipments are allowed, but in the case of partshipments being allowed, a bank would not necessarily be in a position to determine the number of shipments a benefciary may make, so the sub-art 30c could never be validly enforced.

Best regards

Abrar