Petroleum L/C

[BilselTatar]

Most of the petroleum letter of credits include l/c terms such as:

QUOTE
39A ) 10/10
45A ) Covering 45,000 MT +/- 10 pct
Price: In US Dollars per metric ton FOB one safe port, one safe Berth Aliaga on bill of lading quantity, based on the platts European Marketscan mean quotations for 3.5 pct fuel oil under the heading FOB Med Italy as published on Platt’s Europen Marketscan valid on B/L date, the one preceding and the one following the B/L date (Total Three Quotation) plus USD 5.50 ( Five Point Fifty) per metric ton.
If no quotation published on B/L date, then only the preceding and following published quotations to apply (two quotations only).
If vessel does not tender nor within the agreed laycan period ( I.E. BTW 28-30 August 2006) Then the price will be based either on the prices published on the last day of laycan, or on the actual bill of lading date, whichever is higher.

47B ) The amount of this credit will automatically fluctuate up or down in accordance with the above price clause without any further amendments from our side.
UNQUOTE

Amendment
QUOTE
45A ) 39,500 MT +/- 10 PCT Of Fuel Oil instead of existing
UNQUOTE

Querry:

In view of above ,

• Whether presentation of documents more/less than the tolerance percentage indicated in field 39A will make the documents discrepant?
• Whether above mentioned amendment allows also a decrease in the L/C amount despite the amendment not showing any decrease in the L/C amount.
Thanks..


[edited 9/7/2006 2:29:49 PM: correction]

[NigelHolt]

Bilsel,

Regarding your first question, see the Singaporean court case Korea Exchange Bank v. Standard Chartered Bank -a summary of which may be found on DC-Pro- which dealt with exactly this question I believe.

(Search for "Korea Exchange Bank + Standard Chartered Bank" in the advance search)

Regarding your second question, firstly I assume ‘Covering 45,000 MT +/- 10 pct’ has been replaced by ‘39,500 MT +/- 10 PCT Of Fuel Oil’. Secondly I am afraid I do not understand what you mean by ‘allows also a decrease in the L/C amount despite the amendment not showing any decrease in the L/C amount’. Sorry.

Jeremy

[edited 9/7/2006 3:36:24 PM]

[RolandLeupi]

The documents must show a tolerance which must be in line with the credit requirement, i.e. within 10% more or less of M/T 39'500.
Since your transaction is Platt's related there is no problem about the amount, even if the decrease does not mention anything about L/C amount
Roland

[BilselTatar]

Thank you. DOCDEX NO 238 also clarifies my querry.