Best Trade Solution

A documentary credit is issued with the following terms
ð Partial shipment not allowed
ð Goods:
10000 MT of sugar – EUR 950,000
Freight charges - EUR 50,000
Total CFR - EUR 1,000,000

Which of the following presentations by the beneficiary is acceptable?

a) Documents evidencing shipment of 9500 Mts of sugar for EUR 925000 and freight charges EUR 50000 – Total EUR 975, 000
b) Documents evidencing shipment of 9500 Mts of sugar for EUR 900000 and freight charges EUR 45000 – Total EUR 945,000
c) Documents evidencing shipment of 10200 Mts of sugar for EUR 915000 and freight charges EUR 35000 – Total EUR 950,000
d) Documents evidencing shipment of 10500 Mts of sugar for EUR 997500 and freight charges EUR 52500 – Total EUR 1,050,000

i) A Only
ii) A & B
iii) B, C & D
iv) A & C

Why D is not acceptable, it is under a+5% tolerance according to UCP 600 article 30 b.

Hi Pal,

D is not acceptable due to the freight amount.
For other, let me check.
Ciao

Hi
So the freight amount should be the same with EUR 50,000 or less than it in 5%? From which article in USP or ISBP?

I guess answer is i) A only

HI gegeeee, can you explain for the freight amount of D

Dear Etnie,

Total CFR is EUR1,000,000.

In answer D, the calculation resulted EUR1,050,000 which exceeds EUR1,000,000 so it is not correct answer i guess.

Please also write which one is correct answer.

Hi All Friends:

Allow me to share my view on this question.

This question is relating to UCP600 articles 30(a/b/c).

Option A, B & C complied with UCP 600 article B
Option C also complied with UCP600 articles C.
Option D does not complied with UCP600 articles A, B nor C.

UCP600 articles 30 A, B & C are mutually exclusive. Meaning the presentation are allowed to enjoy a "+/-5" tolerance on the quantity (provided the conditions are met in accord with article 30B) OR enjoy "-5%" tolerance on the credit value (provided the conditions are met in accord with article 30C).

Option C which complied with both articles 30B & 30C are not allowed.

This left us with Option A and B which complied exclusively with article 30B.

Answer is: ii

Please advise if my take is correct. Thanks.

Does the unit price come into play - Should we take the unit price as Eur 95 per MT.

+/-5 Tolerance is on the quantity and the credit should not be overdrawn and the tolerance is not on the freight amount

I think the answer should be A

Hi,

Answer is simple. Without considering Article 30, straightaway we can consider A is the answer. Because Freight amount should exactly match with the L/C condition. (As partial shipment not allowed).

Also note, no tolerance allowed in Freight amount and its not prorata basis in this L/C.

Any other opinion welcome.

Senthil.

It seems that art 30(b) and 30 (c) may be applied here simultaneously.

Thanks for the insight and apologise for the late reply.

UCP600 article 30 A/B/C as I understand them to be is mutually exclusive. Meaning if article 30A applies, article 30B and 30C cannot be applied and vice versa.

Article 30A is pretty straight forward as it mentions about keywords “about” & “approximately” to mean a tolerance of +/-10% on the unit price/quantity/documentary credit value. In this question, article 30A does not apply.

Article 30B is about allowing the quantity to fluctuate +/-5% subjects to 2 condition (1) quantity must not be expressed in term of packing unit and/or individual items. (I think it to refer to goods like rice, sugar, coffee, oil etc. which cannot be counted as 1 rice, 1 coffee, 1 oil) & (2) total drawing(s) must not exceed the documentary credit value. Option A, B & C fulfilled these 2 conditions.

Article 30C is about allowing a tolerance of -5% on the drawings on documentary credit even if partial shipment is not allowed; subjected to 2 conditions (1) Unit price if stated must not appear to be reduced & (2) the quantity stated must be shipped out in full. Option C fulfilled this condition.

Option D failed to meet criteria of articles 30A, B & C.

Option C met the conditions of articles B & C. However, articles 30B and 30C are mutually exclusive. Hence, option C cannot be the answer.

We are left with Option A & B which both fulfilled article 30B.

Article 30B only allows for the tolerance of +/-5% on the quantity and nothing else. While examining option B we would notice that the freight charges of USD45,000 instead of the stated freight charges of USD50,000 in the documentary credit. As article 30B only allows the quantity to fluctuate +/-5%, everything else (i.e. Freight charges) should stay the same.

I also agree that the correct answer should be only option A.

Can someone please confirm that the -5% tolerance allowed on the drawing(s) under a documentary credit as mentioned by article 30C also applies to non-cargo value such as freight charges? Meaning to say, as in this question, freight charges (if stated on presented invoice) are also allowed to enjoy a tolerance of -5% under article 30C (assume unit price not reduced and full quantity shipped)?

Thanks everyone.

Alex.

Answer is A as per article 30c.

Hi All:

I read the question again and this time i also make reference to UCP600 article 18B which provide for case of overdrawing on documentary credit.

Option A/B/C complied with article 30B. Option C & D complied with article 30C. However, option D involve over-drawing which can be a discrepancy if the issuing bank or nominated banks don't accept the over-drawing. Option C is out as it cannot comply with both aricle 30B and 30C at the same time. 30B and 30C is mutually exclusive, this is explicitly mentioned under article 30C.

Potential answers are Option A, B & D. But such answer combination is not available, and hence Option A and B will be the answer.

Also, i had found out the the "-5%" tolerance on the DLC value as allowed under article 30C applies to all - both cargo value and freight charges (if included in invoice).