Commercial Invoice show goods free of charge

[LeThao]

Dear all,
Thanks very much for yr meaning ideas at my first entry (different of copy & photocopy)

I'm the negotiating bank and ask you some help
LC permitted partial shipment. In the second presented document, Commercial Invoice attached goods which was the compensation for first delivery shipment and be showed free of charge. The issuing bank determined that a discrepancy (Commercial Invoice show goods free of charge) and charged discrepancy fee
I also agreed with issuing bank based on Article 64 ISBP 681-2007 ICC.
However, some previous presented document same as above, we sent to other banks, they waived that discrepancy and also assumed all terms of documents complied, didn't charge fee.
Can you help me examine that problem, and how to advise for the document of export in the case of delivering the compensation attached with the goods and how to show it attached in the commercial invoice avoiding discrepancy.

thanks and regards.

[picant]

Hi Pal,

all is possible, laws permitting.
In your case you can insert in l/c the possibility that invoice shows goods free of charge . Problems could arise at Customs if the value of those goods is higher than permitted.

Other comments appreciated

Ciao

[cristiand969]

I would like to add that ISBP deal with MERCHANDISE NOT CALLED FOR IN THE CREDIT even it is stated free of charge.
.
So if the goods in the credit is what was stated in invoice but free of charge I would see document complying (unless the credit states a price for the product in question)
.
regards
Cristian

[narisa]

Dear LeThao
As long as the goods,which shown in commercial invoice as free of charge,is as called for in credit
it will be acceptable but must not conflict with other dox.
rgds.

[iLC]

I would like to add that ISBP deal with MERCHANDISE NOT CALLED FOR IN THE CREDIT even it is stated free of charge.
.
So if the goods in the credit is what was stated in invoice but free of charge I would see document complying (unless the credit states a price for the product in question)

regards
Cristian

cristiand969 is right. the ISBP says

b. merchandise not called for in the credit (including samples, advertising materials, etc.)
even if stated to be free of charge.

there are two parts of this line. the first one is saying that merchandise not called for in the credit is not acceptable and in the 2nd part the position is further strengthen saying even if stated to be free of charge. if goods not called in the credit is shipped, then the importer may face problem with the customs.

there is no dicrepancy

[Navi]

Dear friends,
.
I have some questions in my mind. What's the logic behind prohibiting invoice from stating goods not called in the credit even they are free? I think extra goods may cause difficulties and extra formalities to importer while clearing goods from customs. From this point, isn't it possible that ISBP 62 should apply to all extra free goods regardless of their type? Let me give you examples of two situation:
.
1st case:
LC requires 10500 kg wheat unit price 1 USD/kg
LC amount: 10.500.- USD

Invoice presented states
10500 kg wheat ......1 USD/ kg Total: 10.500.- USD
100 kg rice free of charge
**************************************************
2nd case
LC requires 10500 kg wheat unit price 1 USD/kg
LC amount: 10.500.- USD

Invoice presented states
10500 kg wheat ......1 USD/ kg Total: 10.500.- USD
500 kg wheat free of charge
.
From the comments, I understand invoice of second case acceptable. If we refer to ISBP again, while stating "merchandise not called for in the credit..." does it mean only different goods? Cannot we consider 500 kg of extra wheat as "not called in the credit "as the LC requires only 10.500. kg?
.
Regards.

[cristiand969]

While I enjoyed your analithical point of view it is my understanding that the same goods quoted as free of charge could very likely be associated with some forms of discounts which is acceptable in ISBP
regards
Cristian

[shahriar]

i was just thinking what would be the case if the shipment was on FOB basis? these could create more problem for the importer.

[cristiand969]

In a FOB contract you know very well that the importer and carrier establish together terms and conditions of carriage and not the exporter.
First situation: quantity not stated in credit and exporter presumably send an extra qty but free of charge :
- when booking note is concluded for goods to be shipped through container there is no impact on such shipment as the freight rate is established by container
- when booking note is concluded on brakbulk cargo, there is a limitation for the carrier to load a certain quantity, space on the vessel and so on. In this situation a carrier would seek acceptance of an extra cargo from the importer.
2. Quantity stated in the credit but part of them shipped free of charge.
There is no impact on the importer For the banks unless the credit prohibit partial shipment, full qty is loaded but due to free of charge situation the value goes down under less 5% of credit, i see no problem.
In case you have something different in mind I would appreciate sharing with us.
best regards

[shahriar]

Dear cristian,
Good explanation. Actually i had noting particular in mind. Just wandering. I agree with you all the way but i was thinking (again!) what if there is a part shipment and the free goods is shipped at the first part? Without the invoice i dont think the carrier would have any idea of this free shipment.