Short Shipment Discrepancy

If a letter of credit prohibits partial shipments, the beneficiary must ship the goods in full quantity under a single shipment. Contrary acts will be punished by banks either with partial shipments effected or short shipment effected discrepancies.

0
327

Partial shipment can be defined as shipping the goods not whole at once, but in smaller consignment(s).

Partial Shipment Examples: Let us assume that letter of credit requires shipment of 10 buses.

If the shipper dispatches;

  • 8 buses under 1 shipment, makes a partial shipment
  • 4 buses under 1st shipment and 5 buses under 2nd shipment, makes a partial shipment
  • 5 buses under 1st shipment and 5 buses under 2nd shipment, makes a partial shipment.

Letter of credit rules allow partial shipments and partial drawings, which means that an exporter could make partial shipments under a letter of credit as long as the credit terms do not dictate the contrary.

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 a letter of credit prohibits partial shipments, the beneficiary must ship the goods in full quantity under a single shipment. (Please be noted that there are some tolerances exist in the letter of credit rules. Refer UCP 600 Article 30-c).

Contrary acts will be punished by banks either with partial shipments effected or short shipment effected discrepancies.

Discrepancy Example: Short Shipment Discrepancy 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 50: Applicant : Auto Paint Importer Co. Ltd. 1800 Arnold Industrial Place 94520 CA USA

Field 43P: Partial Shipments: Not Allowed

Field 43T: Transhipment: Allowed

Field 45A: Description of Goods and or Services: Supply of 100% Acrylic Premium Quality Latex (Water Based) paints packed in 55 Gallon Drums. Price : 300 USD / drums Quantity: 80 Drums. As per Proforma Invoice No 100 dated 10.02.2014. Delivery Terms: CIF Long Beach Seaport California Incoterms 2010.

Field 46A: Documents Required: 3 original signed commercial invoices and 3 copies.

The beneficiary presented a commercial invoice as shown on the below picture.

Commercial Invoice

short shipment discrepancy letter of credit

Discrepancy: Short shipment effected. Letter of credit prohibits partial shipments. As a result, the beneficiary should have shipped 80 drums of paints in 24.000,00 USD full amount, but instead the beneficiary shipped 70 drums of paints corresponding to 21.000,00 USD, which is a partial letter of credit amount.

Reason for Discrepancy: Letter of credit prohibits partial shipments. Beneficiary should have shipped the goods in full quantity as called for in the credit under a single shipment.

Letter of Credit Consultancy
Letter of Credit Consultancy:
Struggling with letters of credit. We can help. We check the credits, prepare draft documents and control them before presentation. With competitive prices. 10 years of experience, more than 300 hundred references. Please click here for more details.