units

[PGauntlett]

L/C calls for '3 units fork lift truck XX model'.
Taking into account the dictionary definition of the word 'unit' would a packing list showing '3 units shipped in 7 pieces' be acceptable?

[AbdulkaderBazara]

I believe it is acceptable. A single unit could have parts. As for the truck it could be the head, the trailer and the forklift to make it one complete unit.

regards

[NigelHolt]

Phil,

It is just this sort of conundrum that makes, for me, the documentary credit such an unattractive instrument. My personal views, without any liability/responsibility (or great enthusiasm) are:

In the context of the goods description, and my impression of commercial practice, the expression units seems to be used simply to mean ‘quantity’. Therefore, that the goods description can be reasonably interpreted as '3 fork lift trucks XX model'. Consequently, the fact that the documents indicate that the trucks have not been shipped completely assembled is not a transgression of the credit provisions, as the documents do indicate '3 fork lift trucks XX model’ have been shipped. However, I recognise such reasoning may be open to attack (for example, ‘if the issuing bank meant '3 fork lift trucks XX model', why didn’t it say so?’; my answer would be because of the poor standard of English used in -among other things- commercial transactions.).

Glad its not me that has to make the decision.

Regards, Jeremy

P.S. I’ll be in touch next week.

[larryBacon]

I tend to agree with Jeremy that this could be a poor use of English, but it may also be borne of complacency or lack of foresight.

If this consignment reflects an ongoing business where the transaction always involves the FLT being shipped partially asembled, the applicant and/or issuing bank may, over time, become complacent over this aspect.

If the applicant is in the business of dealing in both fully and partially assembled FLTs, it requires a minimum of foresight to differentiate these as "fully built up" or "partially assembled" or similar.

Laurence

[AbdulkaderBazara]

Is it possible to define a unit, in the context of a letter of credit, depending on the nature of the goods, equipment etc. the shipping method and the cost associated in assembling them? For example an ordinary passenger car must be shipped fully assembled. We can not have the motor and the body of car separated. It would cost to assemble them at destination. As for a truck, one could have the trailer and the head separated since they could easily be assembled, probably easier to ship and would not cost much to join them.

Appreciate your views.

[larryBacon]

Every industry in the world has its own ideas on what constitutes a unit. Therefore one has to rely on the wording and context of the L/C to determine a reasonable definition for each case.

An exception may be ISO standards, e.g. 20 foot container is regarded in the shipping industry as a unit, but should not be confused with twenty foot equivalent unit (TEU).

Laurence

[VinodR]

I would go with Jeremy, usually the credits involving motor vehicles and industrial machinery indicate terms such as SKD,CKD & CBU(semi knocked down,completly knocked down, completely builtup. in the absence of such details I would accept the documents, as the quantity shipped conforms to the credit.
regards, Khalid

[AbdulkaderBazara]

I don’t believe the query refers to SKD or CKD. When we talk abt motor vehicle units the norm is to ship CBU vehicles rather than SKD or CKD. When such thing is required, the letter of credit will specifically say so. The price and the underlying contract will also regulate this though it may not be visible through the letter of credit.

Luckily, in the routine business of letters of credit, we don’t often have to go into the hassle of interpreting "a unit" since such deals are usually concluded between corporate companies who are generally reasonable, reliable and responsible organization.

[edited 2/16/02 11:40:05 AM]

[larryBacon]

In this particular case (FLT), it would be normal to detach the "forks" for transport (space-saving). Thus, although three units were shipped (three FLT), there would be more than 3 pieces.

Laurence

[NigelHolt]

I wonder if the discussions might be calling upon specialist knowledge that a bank document checker should not be expected to have, or indeed be allowed to apply. At the risk of re-opening previous discussions (particularly with Laurence & T.O.), I am pleased to note that in section 7.1 of ‘Documentary Credit Law throughout the world, ICC publication 633, it is stated:

“Article 13 of UCP500 says that documents have to be examined with “reasonable care”. This means the reasonable care of the banker, not of an expert in the business of the underlying transaction, nor one who specialises in the kind of goods or services paid for by the credit. The bank’s examination is generally a LIMITED one ……’. [emphasis added]

I nonetheless accept that there is still room for debate as to what non-specialist/general knowledge a bank document checker ought to be able to apply as a result of his/her department’s day-to-day activities.

Jeremy