Dear All,
Sub-para 68b covers ‘merchandise not called for in the credit’. The problem for me with this is: what criterion(ia) does one apply to determine if merchandise has not been called for in the credit?
To give a recent example:
1. The description of goods in the credit was:
“VARIOUS TYPES OF [BRAND NAME] BRASS COMPRESSION FITTINGS. QUANTITY, TERMS AND RATES AS PER ORDER NO … DATED … ISSUED BY BENEFICIARY’.
2. The invoices presented covered a partial shipment and:
A. contained the above-mentioned goods description.
B. listed 58 separate items, giving the quantity and price of each, NONE of which contained any of the words from the goods description.
3. One of the items was:
“22MM 601 EQ TEE CXCXC Quantity 50 Unit price: F.O.C. Total NO CHARGE”.
Can the fact the goods are described as being ‘Free of charge’ etc being taken as prima facie evidence that ‘merchandise not called for in the credit’ is being supplied and thus that the documents are discrepant (incidentally not under the UCP but on the basis of an implied term of the credit resulting from international standard banking practice)?
I’d particularly appreciate responses from those I have sought to help in the past by replying to their DC-Pro queries and from those who would hope that I would respond to any queries they may post on DC-Pro in the future.
[edited 10/1/2004 3:46:52 PM]
Merchandise not called for
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
Merchandise not called for
Dear Jeremy,
Since I belong to the last group: the one that hope that you may respond to my future queries, I think that I better give you my view of this one
So without responsibility – my personal view is:
This is a tricky, and in many cases illogical paragraph.
I think that one may distinguish between
1) the goods description in the invoice being detailed further than in the L/C – and
2) other items (not part of the L/C text) being added.
The first is in my view ok – while the other is not. I do not think that you can determine anything from the fact that one item is “free of charge”. It could perfectly well be so, already in the commercial contract. Which we of course are not to check. ISBP para. 68 points out, that even though it is free of charge additional goods are not acceptable. It does not say that goods “free of charge” are not acceptable.
So if it appears to be detailing the goods description, I would accept it. From your de-scription (without having seen the actual document) I think that would be the case here.
I hope this qualifies me to have futures queries replied here
Have a nice weekend
Best regards
Kim
Since I belong to the last group: the one that hope that you may respond to my future queries, I think that I better give you my view of this one
So without responsibility – my personal view is:
This is a tricky, and in many cases illogical paragraph.
I think that one may distinguish between
1) the goods description in the invoice being detailed further than in the L/C – and
2) other items (not part of the L/C text) being added.
The first is in my view ok – while the other is not. I do not think that you can determine anything from the fact that one item is “free of charge”. It could perfectly well be so, already in the commercial contract. Which we of course are not to check. ISBP para. 68 points out, that even though it is free of charge additional goods are not acceptable. It does not say that goods “free of charge” are not acceptable.
So if it appears to be detailing the goods description, I would accept it. From your de-scription (without having seen the actual document) I think that would be the case here.
I hope this qualifies me to have futures queries replied here
Have a nice weekend
Best regards
Kim
Merchandise not called for
When a credit contains a "general" goods description,
there is greater latitude as to how the goods can be
described in the invoice(s).
The LC goods desription you indicate here is general -
so there is wide scope as to what is acceptable.
I agree with Kim that the fact that the goods are free
of charge in itself does not mean that they were not called for
in the credit.
And, I don't see from the descriptions provided how one could
know if the invoices were relating to goods that were not called for by the credit.
As long as the description of the goods in the invoices correspond
with the goods description in the credit then there is no discrepancy.
I believe in your post that you indicate that the general desrcitpion
was included on the invoices. I don't believe that the additional detail should be seen as a discrepancy.
there is greater latitude as to how the goods can be
described in the invoice(s).
The LC goods desription you indicate here is general -
so there is wide scope as to what is acceptable.
I agree with Kim that the fact that the goods are free
of charge in itself does not mean that they were not called for
in the credit.
And, I don't see from the descriptions provided how one could
know if the invoices were relating to goods that were not called for by the credit.
As long as the description of the goods in the invoices correspond
with the goods description in the credit then there is no discrepancy.
I believe in your post that you indicate that the general desrcitpion
was included on the invoices. I don't believe that the additional detail should be seen as a discrepancy.
Merchandise not called for
Jeremy, Kim and Leo
I also want to reserve a place in the last group especially as valuable offers like this do not come around every day
Examining the information on the invoice presented with reasonable care I can only determine that the description of the goods in the commercial invoice corresponds with the description in the Credit.
The description of goods in the credit made reference to 'AS PER ORDER NO etc'
With the description of the goods in the commercial invoice corresponding with the description in the Credit the document checker should not worry his or her little head surmising what may or may not have been in the 'ORDER'
It would not be uncommon for contractual documents such as quotations or a proforma invoice or for that matter a purchase order to include some items free of charge or at '0'.
Have a great weekend.
Vin
I also want to reserve a place in the last group especially as valuable offers like this do not come around every day
Examining the information on the invoice presented with reasonable care I can only determine that the description of the goods in the commercial invoice corresponds with the description in the Credit.
The description of goods in the credit made reference to 'AS PER ORDER NO etc'
With the description of the goods in the commercial invoice corresponding with the description in the Credit the document checker should not worry his or her little head surmising what may or may not have been in the 'ORDER'
It would not be uncommon for contractual documents such as quotations or a proforma invoice or for that matter a purchase order to include some items free of charge or at '0'.
Have a great weekend.
Vin
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Merchandise not called for
The key to answering this question lies in the construction of the invoice. When FOC goods are shipped with chargeable goods, there are three basic variations in the preparation of the requisite invoice/s :
1. Commercial invoice for chargeable goods plus a separate Proforma invoice for FOC goods.
2. Commercial invoice listing the chargeable goods and sub-totalling their value; this is followed by the listing of FOC goods which also shows their value for Customs purposes.
3. Commercial invoice mixing chargeable and FOC goods, showing no Customs value for FOC goods and with the total invoice value restricted to the sum of the chargeable goods.
The last of these options is an incorrectly completed invoice and is not acceptable for commercial or Customs or LC purposes.
The other two options make a clear distinction between chargeable and FOC goods. If the benef decides to present using option 1 above, he will present a set of Commercial invoice plus Proforma invoice. I am guessing that the LC in question does not mention a requirement for Proforma invoice. This may be disregarded as a document not called for in the LC, except that if it is excluded and also contains information (as with the Commercial invoice) on quantities of goods, which may be compared with other documents for consistency, that consistency may not be present unless the quantities in the PI are added to the CI.
In option 2 above, by the same rationale as option 1, the CI proper finishes with the total chargeable value of the goods. The remaining information on FOC goods is not used for CI purposes. Therefore this extra information should be regarded as extraneous in the same way as the separate PI, but it still leaves the same problem as alluded to above.
Laurence
1. Commercial invoice for chargeable goods plus a separate Proforma invoice for FOC goods.
2. Commercial invoice listing the chargeable goods and sub-totalling their value; this is followed by the listing of FOC goods which also shows their value for Customs purposes.
3. Commercial invoice mixing chargeable and FOC goods, showing no Customs value for FOC goods and with the total invoice value restricted to the sum of the chargeable goods.
The last of these options is an incorrectly completed invoice and is not acceptable for commercial or Customs or LC purposes.
The other two options make a clear distinction between chargeable and FOC goods. If the benef decides to present using option 1 above, he will present a set of Commercial invoice plus Proforma invoice. I am guessing that the LC in question does not mention a requirement for Proforma invoice. This may be disregarded as a document not called for in the LC, except that if it is excluded and also contains information (as with the Commercial invoice) on quantities of goods, which may be compared with other documents for consistency, that consistency may not be present unless the quantities in the PI are added to the CI.
In option 2 above, by the same rationale as option 1, the CI proper finishes with the total chargeable value of the goods. The remaining information on FOC goods is not used for CI purposes. Therefore this extra information should be regarded as extraneous in the same way as the separate PI, but it still leaves the same problem as alluded to above.
Laurence
Merchandise not called for
Pleased to report I had a good weekend, thanks; the Pertemps Bees beat Otley (just) -at rugby (union)- leaving us top of the (English) NL1 table with 25 out of 25 points.
Thanks to all of you for expressing your views. I also cannot see that the fact that goods are free of charge can, on its own, being taken as prima facie evidence that ‘merchandise not called for in the credit’ has been shipped. Actually, in this case, the FOC goods were asterisked with a footnote, ‘Item short packed on previous shipment now supplied free of further charge’. As this was the first presentation I took the view that it was clear merchandise not called for in this particular credit was being shipped; thus the documents were discrepant. However, I wondered what the position would have been had this footnote not been present (our examiners seemed to think the goods being FOC were grounds alone for refusal).
Incidentally, I’d like to know how those of you out there who claim that all discrepancies must be based on the UCP or the express terms of the credit would have phrased the discrepancy.
Finally, Laurence, I’m not trying to be awkward, but I could not follow your line of reasoning, particularly regarding example 3. I just cannot see how one could justify refusing an invoice that had FOC goods simply because it did not show a customs value for them. The invoice in this case certainly did not.
Anyway, thanks again to you all for your thoughts and I’ll keep it in mind for the future.
[edited 10/4/2004 9:50:33 AM]
Thanks to all of you for expressing your views. I also cannot see that the fact that goods are free of charge can, on its own, being taken as prima facie evidence that ‘merchandise not called for in the credit’ has been shipped. Actually, in this case, the FOC goods were asterisked with a footnote, ‘Item short packed on previous shipment now supplied free of further charge’. As this was the first presentation I took the view that it was clear merchandise not called for in this particular credit was being shipped; thus the documents were discrepant. However, I wondered what the position would have been had this footnote not been present (our examiners seemed to think the goods being FOC were grounds alone for refusal).
Incidentally, I’d like to know how those of you out there who claim that all discrepancies must be based on the UCP or the express terms of the credit would have phrased the discrepancy.
Finally, Laurence, I’m not trying to be awkward, but I could not follow your line of reasoning, particularly regarding example 3. I just cannot see how one could justify refusing an invoice that had FOC goods simply because it did not show a customs value for them. The invoice in this case certainly did not.
Anyway, thanks again to you all for your thoughts and I’ll keep it in mind for the future.
[edited 10/4/2004 9:50:33 AM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Merchandise not called for
Jeremy,
a commercial invoice is, as its name suggests, a document detailing a commercial transaction. Since FOC goods are not part of a commercial transaction, strictly, they have no place in a CI. Where the CI indicates an international transaction, it must be acceptable to the relevant authorities in both countries.
This is where the water gets somewhat muddied. I know that some countries insist on separate CI and PI where a consignment contains both FOC and chargeable goods; some countries accept a CI with a separate declaration of value for the FOC goods. I do not know of any country which officially permits a zero value for valuation purposes for FOC goods. If anybody does know of such, I would be interested to hear about it.
I'm sorry that you could not follow my rationale. An example might help -
commercial invoice shows 99 tons of steel charged and 1 ton FOC. In my view, the commercial transaction represented by this invoice is limited to 99 tons. The information about the FOC is additional and superfluous and should properly be shown on a separate PI. Since the CI should only list chargeable goods, the total quantity of (chargeable) goods in this invoice is 99 tons.
Since other documents may show a total shipped quantity of 100 tons, this would be inconsistent with 99 tons in the CI.
A letter of credit also represents a commercial transaction. Where such LC permits partial shipment of FOC goods, this is an exception and should be detailed as such in the LC. In the absence of such an exception, one is entitled to regard the LC as an exclusively commercial (chargeable) transaction.
Laurence
a commercial invoice is, as its name suggests, a document detailing a commercial transaction. Since FOC goods are not part of a commercial transaction, strictly, they have no place in a CI. Where the CI indicates an international transaction, it must be acceptable to the relevant authorities in both countries.
This is where the water gets somewhat muddied. I know that some countries insist on separate CI and PI where a consignment contains both FOC and chargeable goods; some countries accept a CI with a separate declaration of value for the FOC goods. I do not know of any country which officially permits a zero value for valuation purposes for FOC goods. If anybody does know of such, I would be interested to hear about it.
I'm sorry that you could not follow my rationale. An example might help -
commercial invoice shows 99 tons of steel charged and 1 ton FOC. In my view, the commercial transaction represented by this invoice is limited to 99 tons. The information about the FOC is additional and superfluous and should properly be shown on a separate PI. Since the CI should only list chargeable goods, the total quantity of (chargeable) goods in this invoice is 99 tons.
Since other documents may show a total shipped quantity of 100 tons, this would be inconsistent with 99 tons in the CI.
A letter of credit also represents a commercial transaction. Where such LC permits partial shipment of FOC goods, this is an exception and should be detailed as such in the LC. In the absence of such an exception, one is entitled to regard the LC as an exclusively commercial (chargeable) transaction.
Laurence
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Merchandise not called for
Par 43 states that the content of a document must appear to fulfill the function of the required document. Par 59 makes a clear distinction between commercial invoice & proforma invoice. The main difference is in their functions.
Laurence
Laurence
Merchandise not called for
Interesting group of messages. Shipment of merchandise not called for in the credit may stop the entire shipment from clearing customs in the importer's country - hence, either amend the credit to show the additional goods or do not ship them with the credit goods.
Showing the price of goods as Free of Charge does NOT necessarily means they are goods not called for in the credit. The credit may permit partial shipment, the first shipment may inadvertently have been short-shipped while the documents may have not have reflected the fact of short-shipment (a whole other set of problems of course), and the missing goods sent with the 2nd shipment FOC.
Regards,
Don
Showing the price of goods as Free of Charge does NOT necessarily means they are goods not called for in the credit. The credit may permit partial shipment, the first shipment may inadvertently have been short-shipped while the documents may have not have reflected the fact of short-shipment (a whole other set of problems of course), and the missing goods sent with the 2nd shipment FOC.
Regards,
Don
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Merchandise not called for
Don,
your suggestion to change the LC to include the extra goods (FOC) may only half solve the problem. It's about 20 years since I completed a US Customs invoice, but I seem to remember that only chargeable goods could be entered on it. Is this correct ? If so, in the case of US imports, an additional document (proforma invoice) may be necessary for the FOC items.
Laurence
[edited 10/7/2004 11:34:40 PM]
your suggestion to change the LC to include the extra goods (FOC) may only half solve the problem. It's about 20 years since I completed a US Customs invoice, but I seem to remember that only chargeable goods could be entered on it. Is this correct ? If so, in the case of US imports, an additional document (proforma invoice) may be necessary for the FOC items.
Laurence
[edited 10/7/2004 11:34:40 PM]