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.

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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.