art 37
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josyanegeneste
- Posts: 1
- Joined: Fri Apr 05, 2019 5:20 pm
art 37
Is is possible to accept an invoice showing any discount of 15 % ?
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khalilhamad
- Posts: 9
- Joined: Fri Apr 05, 2019 5:21 pm
art 37
I think yes, as far as other terms and conditions are not violated. (i.e. drawings, partial shipment, specific dc conditions forbidding such a discount). There is a query in which the banking commission did not see any reason for not accepting an invoice showing a deduction for advance payment (Pls. refer to the full response to the query). Personally I had a problem with my bankers when I presented an invoice showing a very small discount (and I think that the amount of discount is not relevant and the principle is the same). My bankers claimed that the L/C did not authorize giving a discount, I claimed that the L/C did not forbid giving the discount.
Khalil Hamad
Khalil Hamad
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georgenedumparambil
- Posts: 6
- Joined: Fri Apr 05, 2019 5:18 pm
art 37
Giving discount is a normal trade practice. Invoice being a memo of cost where else can a discount be shown? Unless the Credit specifically prohibited it, a discount would be acceptable. However, beneficiaries seeking to indicate discount in their invoice have to be careful that their generosity does not result in the creation of other arguable discrepancies. Specially in situations where the Credit has specified a unit price, I would advise beneficiaries not to juggle with that. For example, goods description in the Credit is "Thai Rice at USD250.00 per Metric Tonne CFR Dubai".Beneficiary produces an invoice with description "Thai Rice at USD260 per Metric Tonne CFR Dubai". Then, at the end of the invoice, it shows an adjustment on account of discount of USD10. One can argue endlessly whether a discrepancy had been created or not. So, rather than getting into mud and try to wash if off, it is better not to get into mud in the first place!
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
art 37
If the LC does not call for a discount, I would rather go for a credit note provided with the documents to cover the discount. The draft would then be issued for the invoice value less the credit note. The reason is that the applicant for some reason or the other may not want to show the discount on the invoice. The discount could be for a compensation of another deal etc.
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RajivGupta
- Posts: 6
- Joined: Fri Apr 05, 2019 5:25 pm
art 37
Whether 15% discount is applicable or not will depend on the local foreign exchange regulations. For eg in India, the trade discount cannot exceed 12.5%. Thus any discount in excess of that will be a violation of the law. Higher discount requires a specific permission. As far as letter of credit is concerned there does not seem to be a problem till the time it does not violate L/C conditions & discount is not prohibited under the L/C.However, if local rules dont permit higher discounts then it should be brought to the notice of the L/C beneficiary so that necessary action is taken.
art 37
This query is too simple and lack of more specific data to warrant a correct answer.
If (i) the LC is not over or under drawn, (ii) the shipped quantity is the same as LC, (iii) the unit price is not indicated in the LC, then showing a discount in the commercial invoice after reduction from the gross amount (greater than LC amount) should be OK if the disounted amount matches that of the LC.
This is in fact a "sister" scenario of that indicated by sub article 39 (c) of UCP 500, where the amount is allowed to be up to 5% less than the LC CIF amount, to reflect savings from insurance and freight.
The underlying principle for this 15% discount scenario is the same, to allow the beneficiary to show the net cost of the goods. Otherwise the applicant has to pay more import tax if based on the gross amount.
The example in sub-article 39 (c) takes care of "savings" and this "15% discount" scenario takes care of "discount". Both are talking about reduction in the total drawing amount. This is different from "underdrawing" as often referred to by the LC community. In these two scenarios, the beneficiary is honest and returns what he does not entitle back to the applicant for savings and discount. Underdrawing is that he draws a lesser amount than what he deserves under the LC. However, the other difference is that ICC limits savings up to 5% less only.
I am from www.tolee.com
[edited 5/22/01 3:24:26 PM]
If (i) the LC is not over or under drawn, (ii) the shipped quantity is the same as LC, (iii) the unit price is not indicated in the LC, then showing a discount in the commercial invoice after reduction from the gross amount (greater than LC amount) should be OK if the disounted amount matches that of the LC.
This is in fact a "sister" scenario of that indicated by sub article 39 (c) of UCP 500, where the amount is allowed to be up to 5% less than the LC CIF amount, to reflect savings from insurance and freight.
The underlying principle for this 15% discount scenario is the same, to allow the beneficiary to show the net cost of the goods. Otherwise the applicant has to pay more import tax if based on the gross amount.
The example in sub-article 39 (c) takes care of "savings" and this "15% discount" scenario takes care of "discount". Both are talking about reduction in the total drawing amount. This is different from "underdrawing" as often referred to by the LC community. In these two scenarios, the beneficiary is honest and returns what he does not entitle back to the applicant for savings and discount. Underdrawing is that he draws a lesser amount than what he deserves under the LC. However, the other difference is that ICC limits savings up to 5% less only.
I am from www.tolee.com
[edited 5/22/01 3:24:26 PM]