WHERE A DOWN PAYMENT HAS BEEN MADE OUTSIDE LC

QUESTION

Dear Mr. Old Man,

I have a case that needs your help.

Contract details as follows:

Goods: ABC
Quantity: 10,000 MT (+/- 10%)
Unit price: USD 100/MT
Total amount: USD 100,000.00 (+/-10%)

Down payment: USD 5,000.00

The applicant does not want to open an LC for USD 100,000.00 (+/- 10%) because he has paid a down payment of USD 5,000.00 outside the LC. Neither does he want to open an LC for USD 95,000 (+/- 10%) because it does not comply with the contract.

He wants to open an LC for an amount of from USD 85,000.00 to USD 105,000.00. Is it possible?

If yes, how to indicate the above amounts in Field 32B? If not, can you recommend a solution for this, please?

Thank you.
PM
————

ANSWER

Hi,

Field 32B is used to indicate currency code and amount. Tolerance, if any, will be indicated in Field 39A, e.g., 10/10 which means more or less 10% in LC amount is acceptable.

The maximum contract amount is USD 110,000.00. However, a down payment of USD 5,000.00 has been made, hence, the maximum LC amount will be USD 105,000.00.

LC can be issued as follows:

32B (Currency Code, Amount) : USD 105,000

39B (Maximum Credit Amount) : NOT EXCEEDING

42C (Draft at…): Draft at sight for 100 PCT of invoice value less USD5,000 being down payment amount

45A (Description of Goods):

Goods: ABC
Quantity: 10,000 MT
Unit price: USD 100/MT
Total amount: USD 100,000.00
More or less 100 PCT in quantity and total amount is acceptable

47A (Additional conditions): Invoice must show deduction of USD 5,000.00 representing down payment amount.

Kind regards.
Mr. Old Man