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SWQ_71
11.4.2008 |
UCP 600
sub-article 30(b) |
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Question: |
Name: Jinugu
Ravi Kumar
Article 30 Tolerance in Credit Amount, Quantity and Unit price.
b. A tolerance not to exceed 5% more or 5% less than the quantity of the
goods is allowed, provided the credit does not state the quantity in terms
of a stipulated number of packing units or individual items and the total
amount of the drawings does not exceed the amount of the credit
Can you site a scenario where the drawings would not exceed the amount of
the credit despite the shipment being made in excess quantity. (Except in
situation where there is a deduction in terms of discount etc.)
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Answer
(from T.O. Lee) |
This refers to
the situation where the invoice indicates the CIF value by
splitting it up into cost, freight and insurance.
In the quotation, the seller may have made some buffer, say 5% more, to
cover the projected increases in freight and insurance premium due to
foreign exchange fluctuations, fuel price hikes and other inflation factors.
If after completing the shipment, the seller finds that there is no such
fluctuation, he, as an honest merchant, will try to adjust the CIF price by
deduction of these 5% provisions in the invoice.
ICC Banking Commission encourages such honest trade practice and hence even
if the shipped quantity and the unit price have not changed, the drawing
amount can be 5% less (but not more) than the DC amount.
Best regards,
T. O.
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Answer
(from Kim Christensen) |
Dear Jinugu Ravi Kumara
Article 30 of the UCP 600 is a tricky one (just as
article 39 of UCP 500).
Here is my interpretation (or rather rule of thumb):
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Article 30 Tolerance in Credit Amount, Quantity and Unit Prices |
Kim's "Rule of Thumb" |
| a.
The words "about" or "approximately" used in
connection with the amount of the credit or the quantity or the unit
price stated in the credit are to be construed as allowing a tolerance
not to exceed 10% more or 10% less than the amount, the quantity or the
unit price to which they refer.
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Deals
with approximately"
or "about"
interpreted to mean
"+/-
10%"
whatever it refers to usually quantity and/or amount. |
| b.
A tolerance not to exceed 5% more or 5% less than
the quantity of the goods is allowed, provided the credit does not state
the quantity in terms of a stipulated number of packing units or
individual items and the total amount of the drawings does not exceed
the amount of the credit.
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A variation of 5% in
quantity is allowed.
This is usually used bulk situations.
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| c.
Even when partial shipments are not allowed, a
tolerance not to exceed 5% less than the amount of the credit is allowed,
provided that the quantity of the goods, if stated in the credit, is
shipped in full and a unit price, if stated in the credit, is not
reduced or that sub-article 30 (b) is not applicable. This tolerance
does not apply when the credit stipulates a specific tolerance or uses
the expressions referred to in sub-article 30 (a). |
You ship what you are to
ship (quantity) but receive less (amount).
The
variation refers the amount and is usually used in a CIP/CIF situation
where the amount includes an estimated freight amount/insurance premium
that turns out to be lower than expected.
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To
answer your question (on 30(b)):
The
situating could be a bulk consignment where the LC stipulates the full
quantity (e.g. 1000 MT) but no price per MT.
In such
case the beneficiary is permitted to ship in the range of 950 MT to 1050 MT
but must now draw in excess of LC amount.
I hope
this helps you.
Best regards
Kim
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Answer
(from Zahoor N. Dattu) |
LC has been opened as under:
LC Amount USD 5,455,000 CIF Dubai
Covering 10,000 MT of Iron Scrap at the rate of USD
500/- per MT FOB USD 5.000,000
Freight USD 400,000
Insurance USD 55,000
Total CIF Dubai USD 5,455,000
Documents presented:-
| Quantity
10,500 MT |
USD |
5,250,000 |
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| Freight |
USD |
200,000 |
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| Insurance |
USD |
4,000 |
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| Total CIF |
USD |
5,454,000 |
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In this way a presentation can be made.
When the offer was made there was a fear of war and
hence the freight rates were high and so was the Insurance premium. However,
when the actual shipment was effected, the fear of war was over and hence
freight and insurance premium were stable.
Regards
Zahoor
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