I request someone to help me understand the reason for existance of Art.30 c of UCP 600.
Is it applicable only when:
1. Credit prohibits partial shipment?
2. Quantity is stated in the credit and that quantity is shipped in full even when stated in quantities like Metric Tons etc?
3. Unit price if stated in the credit is unaltered in the invoice?
What is the reason for allowing a negative tolerance of 5% and why is it insisting on quantity to be shipped in full?
If quantity and unit price cannot be allowed then how the invoice can be drawn for >=95% <100%?
Kindly help
Reason for existance of Art.30 c
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KBalasubramanian
- Posts: 8
- Joined: Fri Apr 05, 2019 5:13 pm
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HOANGTHIANHTHU_invalid
- Posts: 189
- Joined: Fri Apr 05, 2019 5:15 pm
Reason for existance of Art.30 c
Hi,
Sub-article 30 (c) covers the situation where the terms are CFR or CIF and the price quotation is based on a hypothetical or soft quotation on the insurance premium and/or the freight charges. Upon presentation of the documents, the beneficiary invoices for the actual insurance and freight costs, which conceivably are less than those quoted originally in the purchase order. Therefore, a 5% tolerance is allowed in the beneficiary's invoice, always provided that the quantity of the goods, if stipulated in the credit, is shipped in full, and a unit price, if stipulated in the credit, is not reduced (see R367).
I just give an example to illustrate the point:
• LC details:
Credit amount: Not exceeding USD150,000
Goods: 10 trucks
Unit price: USD12,000/unit
Delivery term: CFR Da Nang Port, Vietnam
Freight charges as per actual freight invoice but not exceeding USD30,000
• Invoice presented:
Goods: 10 trucks
Unit price: USD12,000/unit
Freight charges: USD23,000.
Total invoice amount: USD143,000 CFR Da Nang Port, Vietnam
• Conclusion:
Draft drawn for USD143,000 is acceptable as per UCP 600 sub-article 30 (c).
Best regards,
N.H.Duc
Sub-article 30 (c) covers the situation where the terms are CFR or CIF and the price quotation is based on a hypothetical or soft quotation on the insurance premium and/or the freight charges. Upon presentation of the documents, the beneficiary invoices for the actual insurance and freight costs, which conceivably are less than those quoted originally in the purchase order. Therefore, a 5% tolerance is allowed in the beneficiary's invoice, always provided that the quantity of the goods, if stipulated in the credit, is shipped in full, and a unit price, if stipulated in the credit, is not reduced (see R367).
I just give an example to illustrate the point:
• LC details:
Credit amount: Not exceeding USD150,000
Goods: 10 trucks
Unit price: USD12,000/unit
Delivery term: CFR Da Nang Port, Vietnam
Freight charges as per actual freight invoice but not exceeding USD30,000
• Invoice presented:
Goods: 10 trucks
Unit price: USD12,000/unit
Freight charges: USD23,000.
Total invoice amount: USD143,000 CFR Da Nang Port, Vietnam
• Conclusion:
Draft drawn for USD143,000 is acceptable as per UCP 600 sub-article 30 (c).
Best regards,
N.H.Duc
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KBalasubramanian
- Posts: 8
- Joined: Fri Apr 05, 2019 5:13 pm
Reason for existance of Art.30 c
Hi,
Thank you so much for your reply. I too agree that actual charges can vary than what was agreed earlier between the buyer and seller but still my doubt is: the actuals can vary even if partial shipments are effected. When this being the case why does Art.30 c requires quantity to be shipped in full?
Secondly why is the tolerance restricted to 5%? does this mean any discounts that can be offered should also be restricted within the 5% -ve tolerance?
Thank you so much for your reply. I too agree that actual charges can vary than what was agreed earlier between the buyer and seller but still my doubt is: the actuals can vary even if partial shipments are effected. When this being the case why does Art.30 c requires quantity to be shipped in full?
Secondly why is the tolerance restricted to 5%? does this mean any discounts that can be offered should also be restricted within the 5% -ve tolerance?
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HOANGTHIANHTHU_invalid
- Posts: 189
- Joined: Fri Apr 05, 2019 5:15 pm
Reason for existance of Art.30 c
Hi,
Not sure my interpretation is correct but one thing I can assure is that if one full shipment is made it will be easier for the seller to negotiate with the shipping company for better freight charge which is within the maximum freight charge agreed with the buyer. Where partial shipments are made, the seller would fear that freight charges for subsequent shipments may rise higher making total actual freight charges exceed the maximum freight charge agreed with the buyer.
5% is an arbitrary figure but it is an acceptable tolerance. The fact that shipping cost fluctuation affects the price of goods within the tolerance of plus/minus 5% is reasonable.
I would appreciate other comments.
Best regards,
N.H.Duc
[edited 1/22/2013 10:51:48 AM]
Not sure my interpretation is correct but one thing I can assure is that if one full shipment is made it will be easier for the seller to negotiate with the shipping company for better freight charge which is within the maximum freight charge agreed with the buyer. Where partial shipments are made, the seller would fear that freight charges for subsequent shipments may rise higher making total actual freight charges exceed the maximum freight charge agreed with the buyer.
5% is an arbitrary figure but it is an acceptable tolerance. The fact that shipping cost fluctuation affects the price of goods within the tolerance of plus/minus 5% is reasonable.
I would appreciate other comments.
Best regards,
N.H.Duc
[edited 1/22/2013 10:51:48 AM]