ICC Digital Library Forum

Lc issued with Incoterm 'CPT Dubai' and requires presentation of Truck Consignment Note stating 'Freight Prepaid upto Dubai'.
The TCN presented states 'Freight Prepaid' and 'CPT Dubai'. Will it be a discrepancy?

My opinion is that an express provision of the Credit has not been met and therefore the document is non-compliant. The supposed meaning of the abbreviation ‘CPT’ is in my view irrelevant.

Hi,

It may be a discrepancy in the eye of those who would practice checking documents under strict compliance doctrine. But it may not be a discrepancy in the eye of those who would check documents with a more relax approach.

CPT Dubai means the seller pays the freight for the carriage of the goods to Dubai.

In my opinion, the Truck Consignment Note is not discrepant as “Freight Prepaid” and “CPT Dubai” when read in combination can be understood as “Freight Prepaid upto Dubai”.
Other comments are appreciated.

Best regards,
N.H. Duc

If we consider that there are problems without solutions, that is in our field, the impossibility to tell if a document is discrepant or not, the only solution is to avoid the problems, here, to ask the carrier to put in the document what is required in the DC.
That said, and as ISBP force us to have a sound knowledge of the incoterms (par.61), I would accept the document as it is.
Daniel

Daniel,

I disagree that ISBP forces bankers to have a sound knowledge of the Incoterms and certainly cannot see that para 61 ISBP681 requires any knowledge of the possible 'meaning' of 'trade terms' (the expression used in para 61).

Nonetheless, I agree that one would expect bankers -involved in doc. credit operations- to be familiar with the main Incoterms. However, I do not see this as being relevant to the determination of the (non-) compliance of the documents.

Regards, Jeremy

As stated in ICC’s Guide to Incoterms 2000, a chosen
Incoterm is a shipping term that relates to the contract of sale and is meant to assist a buyer and a seller in clarifying the division of both the costs and risks associated with shipping merchandise. As a
guideline for buyers and sellers, it is invaluable and informative. In
the end, however, it is merely a guide. There are many instances in which the underlying contract of sale uses the buyer’s and seller’s negotiated meaning for a shipping term.
ISBP Article 61 mandates that when a "source" to the shipping term is stated in the LC, bankers should review the invoiced charges to ensure they are typically allowed by the stated trade term.
In the example provided, the LC only states a trade term and does not state its source so the invoice only has to reference it.
To ensure documentary compliance the Trucking Co. should have stated that the Freight was Paid to Dubai in line with the LC requirements. You could make a judgement call that the Freight was prepaid to Dubai based upon the CPT reference but given the CPT is only a guideline, your decision may have unexpected consequences.

Glenn,

I agree with much of what you say but wholly disagree that ‘ISBP Article 61 mandates that when a "source" to the shipping term is stated in the LC, bankers should review the invoiced charges to ensure they are typically allowed by the stated trade term’. I am convinced this is a complete misreading of the paragraph.

To me all it is saying is that if, say, a credit a Credit is for GBP10K and the ‘trade term’ quoted in the goods description is ‘FOB’ (whether or not any reference is made to Incoterms 2000), that all charges and costs shown on the invoice must be shown as being included in the FOB value of the goods, irrespective of whether or not they are permitted by Incoterms 2000.

A common mistake is that ‘trade terms’ in some way form part of the ‘terms and conditions’ of a Credit. They do not.

Regards, Jeremy

Jeremy,

I would agree with you if par. 61 did not state:"shown against the stated trade term". So it is my opinion (so far) that the charges and costs included in the value of the goods must not conflict with the Incoterm. But maybe I misunderstand the phrase "against the stated trade term".
Daniel

Daniel,

In my opinion you do.

Regards, Jeremy

Hi All, A number of years ago, I wrote an article on the subject of Incoterms and its relationship with UCP and Bankers. Incoterms states that it is merely a guide meant to facilitate the "underlying contract" (purchase order, proforma invoice) against which there may or may not be a LC. The beneficiary and Applicant can negotiate their own meaning to the term in their contract. Additionally, UCP Article 4 clearly reflects that banks are not concerned with any underlying contracts on which a LC may be based.
My opinion has not changed. Bankers should know enough to assist their clients in drafting the underlying contract. However, they should not become involved in any other aspect, especially when examining LC documents. UCP and Incoterms do not support this. ISBP Paragraph 61 does make it clear that document examiners should only be concerned with relative charges associated to a particular term when the LC itself incorporates the term's relative publication. However, when you consider that the Incoterm publication actively allows changes and does not address THC (terminal handling charges) the most common port charges, bankers are not on firm ground if they refuse documents solely to a perceived Inco. fee violation.