Credit Amount Tolerance vs Quantity

XENON · Post by **XENON** » Fri Nov 25, 2016 5:35 am

Dear All,

I have a serious issue regarding to a huge commodity shipment on qunatity tolerance.

32B Currency Code, Amount: USD 1.500.000
39A Percentage Credit Amount Tolerance: 10/10
45 A Description of goods and/or services: 15.000 mts of XXXX (commodity material)
*) There is no unit price indicated on the LC
**) transhipment+partial shipment prohibited

We made the shipment as 16.500 mts (+10%) Unfortunately our sleeping bank just woke up when we submitted the LC docs and stated that the quantity is exceeding the quantity limits. So they found this shipment volume discrepant.
Customer needs the cargo as 16.500 mts and has no problem with that, in fact it was agreed to make that quantity from the very beginning.
I notified the buyer and asked for a quick amendment on the quantity they said just release the docs as they are and they will accept the discrepancy on the quantity since the vessel is on the way to final destination.
This is our 3rd shipment with the same buyer and I trust them somehow however I do not want to take any further risk in this case. The amendment will take some time and we may be late for presenting the revised docs as well that I don't want to rely on the amendment that much. On the other hand the vessel has 5-6 days left to arrive the POD that I will face to issue LOI in order to avoid from demurrage.

I can change the LC docs complying with the given LC amount tolerance limit by increasing the unit price and keeping 15.000 mts fixed. But the excess quantity (1500 mts) in the vessel will be some risk factor in this case.

So I wonder:

1) If the buyer accepts the docs as they are presented would it solve the problem? I'm worried that the Applicant's bank might treat the quantity as overdrought.
2) Issuing LOI is another risk and problem that might complicate everything.
3) Is it %100 true that LC amount tolerance does not apply on the quantiy as decribed in this case?

Any ideas,advises will be highly appreciated for this case.

Thx in advance.

gondem · Post by **gondem** » Fri Nov 25, 2016 1:54 pm

1) it seems that the most practical way to solve this problem is a waiver from the buyer to its issuing bank. You mention that the buyer is already need the quantity 16500 mts and so it is going to accept to give a waiver stating that the quantity is acceptable as it is. in this way you don't have to try to revise the documents.
3) tolerance clauses apply about the term(s) which they refer. in this case it refers only l/c amount. so the quantity you shipped is discrepancy.

CristianD · Post by **CristianD** » Mon Nov 28, 2016 5:52 pm

Another option is to split the presentation (and of course B/L) in two ones : One for 15.000 mt and the other for the tolerance. By doing so, the risk is somehow mitigated and you have to deal with approval of the second presentation (the 10% excess). If I am not wrong the only discrepancy will be the overshipment but not partial shipment as the second B/L will show the same vessel, same destination and same voyage.

XENON · Post by **XENON** » Tue Nov 29, 2016 4:29 am

Thx for the replies.
As Gondem explained at no 3 its the offical UCP 600 regulation. Although it does not really make proper sense in real trade buss. but it is still he offical regulation that puts you in the arms of the buyer..
Its basically the outcome of UCP designed and regulated by bankers not by the real traders!

Greetings to Turkey bro..

@ChristianD you have some strong commercial point but it comes with some big risks. Partial shipment is smt else which can be covered and avoided.
I did smt like what you said and that went through without fully surrendering. Being LC expert is smt. but being trade expert is also smt.
Now the vessel is in North Africa just started to discharge without any problem.
thanks to all..

eftapasixos · Post by **eftapasixos** » Thu Dec 01, 2016 12:54 am

As it is not clarified, I suppose that the 1500 exceeding pieces have the extra of the lc value, which is 1500 X 100 = 150.000$.
I think that the only way to ensure the extra amount is to have 2 sets of documents. The 1st one will include all the docs that are required by the lc and only for the 10.000pieces. This set of docs will be presented to the bank.

The second set of documents will include only the exta 1500 pieces.

By this way the bank will never get noticed the overloading that you made and will accept the documents according to lc terms.

Credit Amount Tolerance vs Quantity

Credit Amount Tolerance vs Quantity

Another option

Opinion