Incoterm and LC

silver · Post by **silver** » Wed Feb 11, 2009 9:43 am

Hi my friends

Pls help me to solve my problem:

LC required:
- F44E: A port, ThaiLand
- F45A: .....
unit price: usd10.00 FOB Thailand (incoterms 2000)

I think that is normal. Because Incoterms stipulated "the seller must deliver the goods ...at the port on board the vessel nominated by the buyer". So, port of loading is A port, unit price must be FOB A port. It's not accepted when port of loading is A port, Thailand, but unit price is FOB B port, Thailand

But my friend do not agree with me. She think that, If LC not showing specific unit price as FOB A port, Thailand, she will accept docs with BL showing Port of loading A, Thailand, anh Invoice showing unit price FOB B port, Thailand. Because the LC stipulated in general terms of unit price and the shipper can use any transportation fee of any port within Thailand.

Thanks so much!!!

shahriar · Post by **shahriar** » Wed Feb 11, 2009 9:09 pm

dear silver,

i agree with both of you

. FOB thailand does allow shipment from any port of thailand, but since the LC specifically calls for A port, BL must show A port as the port of loading. in that case if the invoice shows FOB B port, that would mean that shipment was made at B port and that would be a clear data conflict and therefore not acceptable. in fact, even if the lc is silent in naming the port of loading, the invoice must correspond with the bill of lading.

cristiand969 · Post by **cristiand969** » Wed Feb 11, 2009 9:28 pm

First of all, my question is why someone wish to put additional information in the documents which could create a possible discrepancy? If the Trade Terms is FOB THAILAND why should additional Port B inserted. Altough some ambiguity was created in the credit, the expectation of the issuing bank and ultimately the applicant is that the risks and expenses are transferred at Port A and this is what the credit conveys.
Form the practical point of view, the applicant would provide seller in FOB conditions with a named vessel in port A and not in port B. Given the fact that contract of carriage is between buyer and carrier I don't see how carrier may change this without buyer's consent for the benefit of seller (i.e. to provide vessel in port B) .
On the other hand from theoretical point of view (documents checking), it must be a consistence between data in document. While Port A in BL indicates by B/L that seller effected the shipment (no more action required, except documents) , the invoice shows seller obligations ending up at port B. This is a discrepancy. FOB PORT B would indicate that additional costs would be incurred (for account of buyer) between B and A. This is inconsistent with paragraph 61 last sentence of ISBP.
regards
Cristian

shahriar · Post by **shahriar** » Wed Feb 11, 2009 10:29 pm

Dear Cristian,

about ISBP 61, how can we be so sure about which port did the ship visit first? :?

cristiand969 · Post by **cristiand969** » Thu Feb 12, 2009 3:36 pm

Dear Shahriar,
My answer is A from the perspective of the applicant (buyer) who has contractual relationship with carrier.
Why? Common sense ! I don't expect the seller to fight with FOB PORT B unless he has an advantage from this (i.e. to try optimizing his shipment by cutting costs). Do you feel that seller would want to pay more than his contract with buyer (FOB A + charges until port B) if B is farther for him and closer for the buyer and to experience trouble with documents. The more risk the more reward, this theory functions very well here.
We shouldn't stop just at the door of the documents checking but must look at the transaction in its entirety if we want to have a good standing. Remember that this is the approach ICC considers all the time. I'm sure you have come accross at least once to such a way so far when reading ICC oppinions

iLC · Post by **iLC** » Thu Feb 12, 2009 9:02 pm

to me the issue is very tricky. we are dealing with a FOB here. so whatever port is written on the invoice is not going to have an impact on the price. so all our concern should be around the shipping cost and only Bill of lading can give you the idea of it. if we are talking about liner vessel here, then almost all the liner vessel have structured charges. if it is written on the Bill of lading that port of loading is port A, then i am not sure whether the carrier could charge extra. but i wonder things would have been complicated if the Bill of lading shows port B as the place of receipt. :?

okeyxtra · Post by **okeyxtra** » Sat Feb 14, 2009 12:15 am

SINCE THE LC SPECIFIED PORT A IN THAILAND, AND INCOTERM SAYS ANY PORT IN THAILAND, IF THE BENE EVENTUALLY SHIPS FROM THE STIPULATED PORT, HE HAS SATISFIED BOTH THE INCOTERM AND THE LC. BUT THE PROBLE WILL ARISE WHEN HE SHIPS FROM ANOTHER LOCATION, IN WHICH CASE HIS INCOTERM IS GOOD, BUT THE DOCUMENT IS DEISCREPANT AS PER THE LC TERMS

ybattia · Post by **ybattia** » Wed Feb 25, 2009 6:57 pm

Incoterms, are mainly used to define all costs incured during the movment of goods all the way from the buyer to the seller, and in my opinion it should not relate to the L/C terms.

A good example to this is;

An LC mentioned FOB or CFR in the discreption of good, generally no insurance certificate would be required, but what if an Insurance was required under "documents required" to be presented from the beneficiary's side?

totally different matters! I hope I have made my point clear.

zelot66 · Post by **zelot66** » Thu Feb 26, 2009 6:44 pm

First of all, the issuing bank must take every possible steps to ensure the LC is correctly issued so as not to raise any ambiguous statement like in your example. When field 44E (Port of Loading/Airport of Departure) is described with a specific port name in the country of the seller, any other description such as field 45A (Description of Goods and/or Services) should also correspond with field 44E. Description in field 45A is ambiguous in nature because it does not clearly stated as "FOB port A, Thailand".

However, taking both fields into consideration, it brings an understanding that the price basis is FOB port A, Thailand. This is so, because field 44E is served as the confirmed place of delivery in Thailand. So the field 45A refers to the same port in Thailand. This is to say that, any change of port in Thailand would amount to a discrepancy. If, field 45A mentioned another port in Thailand, the seller must obtain confirmation, perhaps an amendment.

Issuing LC in this manner is not advisable because it can subject to too many interpretations and may cause unnecessary discrepancy, most probably serious disputes.

silver · Post by **silver** » Fri Feb 27, 2009 1:20 pm

Thanks so much for all of your sharings.

I myself keep my opinion because some reasons:

1. LC stipulated FOB Thailand (incoterms2000) ---> incoterm is one of the condition of this LC and all docs must be comlied with each others and LC
2. The importer usually buys insurance for his goods from that port of loading and risks will transfer from exporter to importer at the ship's rail at the named port of loading...So, what is happen when goods shipped in B port and risks transfer from A port...
3. If LC required wider
F44E: Port of loadng: Any port in thailand
F45A: .....
unit price: usd10.00 FOB Thailand (incoterms 2000)
In this case, unit price must be matching with port of loading on BL.

That's my opinion...Pls point your views...
Regards

Incoterm and LC

Incoterm and LC

data conflict

One answer

which port comes first?

A comes first of course..

i find it tricky

GIVES ROOM FOR DISCREPANCY

Totally 2 different matters, Incoterms vs LC terms.

INCOTERMS problem

Incoterm and LC