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SWQ_102
20.5.2008 |
Currency in Freight Invoice |
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Question: |
Name: Syed Murtuza
Dear Sir,
An LC issued subject to UCO 600 calls for various
documents such as B/L, Freight Invoice, V. Certificate, Commercial Invoice,
Certificate of Origin and Packing List.
The Description of good and/or services specified
under this LC is as follows:
500 MT Rice
FOB Amount usd.100,000/-
Freight Amount usd.10,000/-
Total CFR Amount usd.110,000/-
.............................
Under Additional Conditions the LC requires that the
documents must issued be in English.
Scenario:
Documents presented to the nominated bank for
negotiation includes Freight Invoice which indicates "Freight Amount as
Eur.8000/-“.
The negotiating bank refused to negotiate the
documents and send refusal notice stating that the "Freight Invoice" is not
issued in the currency of the LC, and that the amount conflicts with the "Commercial
Invoice".
The Commercial Invoice was issued as per the LC
stating description of goods and/or services as:
500 MT Rice
FOB Amount usd.100,000/-
Freight Amount usd.10,000/-
Total CFR Amount usd.110,000/-".
The LC specifies under documents required that the
Freight Invoice must be issued by the shipping company in 1 original and 1
copy - without stating that it must be issued in the same currency as the LC.
1. Please advise if the negotiating bank is correct
in its refusal
2. Also let me have your opinion with regard to
issuance of the freight invoice as it is issued by third party (Neither
issued by Carrier nor by the issuer of the transport Document) can be
accepted..
Looking forward for your kind opinion.
Regard
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Answer
(from Bogdan Ilie) |
ISPB681
paragraph 60 states
"...unit
price(s), if any, and currency shown in the invoice must agree with that
shown in the credit...".
Also paragraph
60 begins with the following: "an invoice must evidence the value of the
goods shipped or services or performance provided".
So, I think the
intention of Drafting Group was to cover all types of invoices, either being
commercial invoices or any other type of invoices such as freight invoice.
Nowhere is it specified that the types of invoices that paragraph 60 is
referring to are exclusively those issued by the beneficiary in the name of
applicant, as per UCP600 article18, as article18 is titled "Commercial
invoice".
Furthermore, a
document checker cannot verify the exchange rate freight invoice's issuer
took into consideration upon issuing the freight invoice and/or it isn't
checker's obligation to verify such thing.
Also if we
agree that the currency of a credit can be considered "data", then we have
sub-article 14(d) of UCP600 saying that "data in a document, when read in
context with the credit, the document itself and international standard
banking practice, need not be identical to, but must not conflict with, data
in that document, any other stipulated document or the credit".
Concerning the
freight invoice's issuer I would accept it issued by other party than the
carrier or agent signing the b/l if the freight invoice is making reference
to the carrier's name or to carrier's agent's name.
If no
reference is made to carrier's/agent's name, only someone also dealing with
transport industry is capable to say if sub-article14(d) of UCP600 applies
or not. If I think to article14(f) of UCP600, I have to think to "...appears
to fulfil the function of the required document and otherwise complies with
sub-article 14(d)". The function is fulfilled but does "otherwise
complies with sub-article 14(d)"?
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Answer
(from Kim Christensen) |
This is indeed
a tricky case – and no doubt the best advice to the beneficiary would be to
make the amount/currency of the freight paid match between the commercial
invoice and the freight invoice.
That being said
I would analyze the matter as follows:
- The freight
amount charged to the buyer is based on the requirements in the LC (in the
“Description of goods” field) - and duly reflected in the commercial
invoice with correct currency and amount.
Therefore that requirement is complied with.
- The LC calls
for a Freight Invoice and such is presented.
A central question is what kind of document a Freight Invoice is for the
purpose of examination under an LC.
I would not consider this a document covered by article 18 – and
consequently not covered by ISBP (2007) 57-67 either.
Therefore my evaluation would be to base the examination on the LC terms
and relevant provisions, e.g. article 14 of the UCP 600.
This means for example that the Freight Invoice must “fulfill the required
function”.
In this case a “Freight Invoice issued by Shipping Company” must be taken
to mean that it must show the “freight amount paid to the shipping
company” – i.e. not necessarily the freight amount charged to the buyer.
As such “freight” is a wide term – and there may be good reasons that the
amount paid by the shipper to the shipping company is not identical to the
amount charged to the buyer in the commercial invoice.
- As for the
currency/amount in the Freight Invoice – the principle is that it need not
be identical to the LC/other docs - but must not conflict – and further
must be “read in context”.
Given;
* That there may be a difference between the freight amount paid to the
shipping company by the shipper and charged to the buyer in the invoice,
and
* That there is no requirement that the currency of freight charged in the
Freight Invoice is that of the LC,
I would not personally consider this "a conflict" ...
As for the
issuer, the LC stipulates that it must be issued by “shipping company”.
There is an old ICC Opinion addressing this matter; namely R161. Some
relevant quotes from that one reads:
…
… that the term
"shipping company" is not a specific term as such, but means a "carrier".
The shipping industry specifically asked for this.
The Commission
agreed that a request for a document issued by a shipping company shall be
deemed to be a request for a document issued by a carrier or the agent of a
named carrier.
…
It should be
noted that it is issued subject to UCP 400 and dates back to 1988.
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Answer
(from Don Smith) |
We have previous ICC Opinion regarding
language of the documents - only applies
to documents completed by the bene, not govt dox, not preprinted forms,
etc.
Currency shown on the freight invoice is irrelevant as long as the
drawing and commercial invoice are in the currency of the credit. The
amount does not conflict as it is a different currency and it is not the
issuing bank's position to create the rate of exchange.
Kim has addressed the question of who issued the freight invoice.
Regards,
Don
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Answer
(from T.O. Lee) |
There is an area for improvement in the wordings used
in this LC to avoid
confusions and disputes.
Since this LC calls for CFR, it should not have listed FOB value and freight
breakdown, unless the import authority or customs require such declaration.
The term (maybe Incoterms 2000 but this is not an issue here) used is CFR.
So the issuing bank needs not know the freight breakdown that is already
included in the CFR value. The freight amount, in whatever currency, is not
a payment liability of the applicant. It is immaterial as far as CFR is
concerned. So it is given here just as an additional information, although
it si also "wrongly" stated in the LC.
The fright amount can be presented in any currency, subject to the decision
of the carrier, not the shipper. So the shipper has no choice. The
beneficiary should not be liable for the currency that is not under his
control.
So I agree with Don that this is not a valid discrepancy. |
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Answer
(from ND George) |
Agree with Don. In addition to what Don mentioned, I
would like to add that, in my view "Freight Invoice" is a document that has
to be examined in accordance with Article 14 (f). If the issuing bank
wanted that document to show USD, it should have specified so in the invoice.
In the absence of it, there is no responsibility for anyone beyond ensuring
that the dollar value of the freight stated in Commercial Invoice
approximates to the value stated in the Freight Invoice issued by the
carrier.
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Answer
(from Bogdan Ilie) |
It is a matter
not only of experience but also of interest:
A negotiating bank might accept freight invoice based on article14
(f) willing to satisfy his client and being sure that their logic is the
right one.
An issuing bank might reject the freight invoice based on article14(d) not
exclusively willing to delay payment, but possible because are thinking are
right.
This is indeed
a case where the differences between real world and written rules are
evidenced.
What was issuing bank's/applicant's intention upon asking for presentation
of freight invoice : to have a prove of the fact that freight has been paid.
The freight invoice evidence this but a checker cannot establish if the
amount of freight stated on the freight invoice it is the right equivalent
of the freight amount stated in the l/c and/or commercial
invoice.
Let take an
example:
Partial shipments not allowed
The LC ask for invoice to show :
FOB: USD 100.000,00
FREIGHT: USD 10.000,00
CFR: USD 110.000,00
The commercial invoice is issued for CFR value USD 110.000,00
comply Freight invoice
show cost of freight: EUR 3.000,00
It is easy to
see that EUR 3.000,00 is not the equivalent of USD 10.000,00 (maybe only in
America's worst nightmare).
Would the
documents be acceptable, in this case, in respect of article14 (f)?
Article14(f) states :"...and otherwise complies with sub-article 14(d)"
Under 14(d) we have the word "data". Is currency a "data" ?
May I consider
that data in freight invoice (EUR) conflict with data in commercial
invoice and the credit (USD)?
As you can see I am not longer answering to the question of Syed, but I am
the one asking for an answer.
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