Tolerance - Quick Help required

MOHAMMEDMUJEEB · Post by **MOHAMMEDMUJEEB** » Wed Aug 26, 2009 1:00 am

Hi,

We have received a presentation from beneficiary.

Description : 250 MT for USD 100,000.

Bene has presented the invoice for 260 MT for USD 100,400.

As a negotiating bank, we found the documents comply. we have applied UCP article 30(b)., as the qty are MT.

Issuing bank has rejected the dox stating the following discrepancies.

1.LC overdrawn by USD 400, LC qty overshipped by 10 MT.

For the above case, UCP article 30(b) applies or not., Is issuing bank correct in there decision.

Can't the above article apply for this presentation.

Can some explain in brief about the above article.

DanielD · Post by **DanielD** » Wed Aug 26, 2009 1:00 am

260 is OK art. 30 applies as it is below 5%.
Trouble is you were allowed to accept the invoice for 100.400 but you had to negotiate for the amount of the credit only (art. 18 b.) that is 100.000.--. So , try to sort it out with the issuing bank
Regards
Daniel

MOHAMMEDMUJEEB · Post by **MOHAMMEDMUJEEB** » Thu Aug 27, 2009 1:00 am

Dear Daniel,
As per UCP article 30(b), +/-5% is allowed when qty is not measurable.

When bene shipped +5%, cant LC overdrawn.

Thanks.

DanielD · Post by **DanielD** » Thu Aug 27, 2009 1:00 am

Mohammed,
You cannot say "when quantity is not measurable". Quantity may be exceeded by 5% for measures such as weight (tons), capacity (liters), surface (square meters) length (meters), but cannot be exceeded for packing units (cases) or individual items (cars).
The invoice may exceed the amount of the credit (as a nominated bank you are free to accept it or not) but not your drawing. In your case you should have honoured/negotiated for 100.000 and request IB to cover you with the extra 400 when you sent the documents
Daniel

GlennRansier_ · Post by **GlennRansier_** » Thu Aug 27, 2009 1:00 am

The answer is located in UCP Article 18 b. Banks are premitted to accept invoices for amounts in excess of the LC value but they cannot honour or negotiate for any amount in excess of the LC.

GerhardH · Post by **GerhardH** » Fri Aug 28, 2009 1:00 am

Dear Mohammed,

I agree with Daniel, as art. 30 only allows overshipment of the goods but no overdrawing of the L/C amount: '...and the total amount of the drawing does not exceed the amount of the credit.'

In case you accepted invoice for USD 100.400,00 but you draw only USD 100.000,00 which represents the L/C value, there should not be any problem.

regards
Stephan