The importer and exporter should determine, when signing the sales contract, to allow or prohibit partial shipments.
Partial shipment can be defined as shipping the goods not whole at once, but in more than one smaller shipments.
Partial shipments total may be less than the total contract amount.
The letter of credit rules allow partial shipments and partial drawings. But, in some occasions, issuing banks tend to restrict partial shipments.
In order to understand, whether or not partial shipments are allowed under a documentary credit, you need to look at “Field 43P: Partial Shipments” within the swift message body.
- Field 43P: Partial Shipments: Allowed means that partial shipments are permitted
- Field 43P: Partial Shipments: Not Allowed means that partial shipments are not permitted.
If the issuing bank finds out that partial shipments have been effected, although the letter of credit prohibits partial shipments, then the issuing bank will raise a discrepancy, which is known as partial shipments discrepancy.
Sample Partial Shipment Discrepancy on a Bill of Lading under a Letter of Credit:
A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:
Letter of Credit Conditions
Field 43P: Partial Shipments: Not Allowed
Field 43T: Transhipment: Not Allowed
Field 45-A: Description of Goods: 24 Pcs of Food Sorting Machinery
Field 46A: Documents Required: Full set of original bill of lading laden on board marked freight collect made out to the order of HSBC Bank, USA notify applicant.
The beneficiary presented two set of documents containing two bills of lading among other documents with the following data:
Discrepancy: Partial Shipment Effected.
Reason for Discrepancy: The beneficiary presented two sets of documents within the same presentation. The issuing bank determined that partial shipment has been effected on contrary to the letter of credit terms, because goods have been dispatched with two different vessels.
How to Prevent a Partial Shipment Discrepancy?
- Check the letter of credit before shipment of goods, in order to determine whether or not partial shipment is prohibited.
- If partial shipment is allowed, you can make smaller shipments until you reach total letter of credit amount. Be careful with the latest date of shipment.
- If partial shipment is not allowed, but your intention to do so; then you must get in touch with your customer to amend the letter.