Month: February 2018

Incoterms Discrepancy

Ozgur Eker (CDCS) Commercial Invoice Discrepancies, Letter of Credit Discrepancies , , , ,
incoterms discrepancy

The Incoterms are a standard set of trade terms used worldwide mostly in international trade. It is also possible to use them in domestic contracts of sale.

The rules define the obligations, costs and risks of sellers and buyers in connection with the delivery of goods.

When exporters and importers mutually agreed on the trade terms by stipulating them on a sales contract or proforma invoice, they are bound by these terms as a material part of the contract.

As a result, issuing banks often include these trade terms in to the letters of credit, generally under field 45-A: Description of Goods and Services.

Examples: FOB Shanghai Port, Incoterms 2010, FCA New York Container Terminal, Incoterms 2010 etc.

If the letter of credit incorporated a trade term, as mentioned above, the commercial invoice must indicate them precisely. Otherwise, banks raise a discrepancy, which is known as Incoterms not stated on the commercial invoice.

Sample Incoterms not Stated on the Commercial Invoice Discrepancy under a Letter of Credit:

A letter of credit has been issued in SWIFT format, subject to UCPURR latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: Kitchen cabinets as per applicant’s purchase order no. D12020 dtd 01.06.2014, Ex-works Montelabbate Italy, Incoterms 2010.

Field 46A: Documents Required: Manually signed commercial invoice in one original plus one duplicate, the original must be certified by chamber of commerce. The commercial invoice must show 100 pct. value of goods shipped, less pro-rata deduction of advance payment made as per clause no. 1.

The beneficiary presented a commercial invoice without stating the trade terms on it.

Commercial Invoice

commercial invoice discrepancy incoterms

Commercial invoice does not indicate trade term as required by the letter of credit. Presentation is discrepant. “Ex-works Montelabbate Italy, Incoterms 2010.” is missing on the invoice.

Discrepancy: Trade term not identified on the commercial invoice. As per letter of credit conditions commercial invoice should have shown “Ex-works Montelabbate Italy, Incoterms 2010.”

Reason for Discrepancy: When a trade term is stated as part of the goods description in the credit, an invoice is to indicate that trade term.

Bill of Lading Discrepancies

Ozgur Eker (CDCS) Bill of Lading Discrepancies, Letter of Credit Discrepancies , , ,
bill of lading discrepancies

On this post, you can find most common bill of lading discrepancy examples.

Discrepancy can be defined as an error or defect, according to the issuing bank, in the presented documents compared with the documentary credit, the UCP 600 rules or other documents that have been presented under the same letter of credit.

Bill of lading is a transport document. UCP 600 defines 4 types of bills of lading:

  • Multimodal Transport Document: Multimodal transport document is covering shipments by at least two different modes of transport. This document should be treated as a multimodal bill of lading, only when one transportation leg is carried out by sea.
  • Ocean Bill of Lading: Issued by container liners for port-to-port sea shipments.
  • Charter Party Bill of Lading: Shippers may, when large or bulk cargoes are concerned, lease the carrying vessel for a stated time or specific voyage under a charter party contract with the owner. Goods carried are then covered under a form of bill of lading issued by the charterer and indicate as being shipped, subject to the term and conditions of the charter party.
  • Non-Negotiable Sea Waybill: Works just like the ocean bill of lading, other than that this transport document is not a title of property.

The discrepancies on this post are related to ocean bill of lading.

Bill of Lading Discrepancies

Tips to Prepare Discrepancy Free Bills of Lading:

  • According to latest UCP 600 letter of credit rules a marine bill of lading should not bear any indication that it is subject to a charter party.
  • A bill of lading should indicate the number of originals that have been issued. All original marine bills of lading issued by the carrier must be presented to the issuing bank by the beneficiary.
  • Transshipment is defined as the unloading and reloading of goods from one vessel to another during the carriage of goods from the port of loading to the port of discharge. A bill of lading indicating that transshipment will or may take place is acceptable, even if the credit prohibits transshipment, if the goods have been shipped in a container, trailer or lash barge as evidenced by the bill of lading.
  • Bill of lading should be regarded as a negotiable transport document unless it is consigned to a named consignee.
  • More than one notify parties could be stated in a bill of lading without any problem.
  • ‘To Order’ or ‘To the order of shipper’ means that bill of lading should be endorsed by the shipper as per letter of credit instructions.

Intended Vessel Discrepancy

Ozgur Eker (CDCS) Bill of Lading Discrepancies, Letter of Credit Discrepancies , , , , ,
intended vessel discrepancy

There are two main types of bills of lading available on the market, in terms of shipment notations: “Received for shipment…” bill of lading and “Shipped … on board” bill of lading.

If you want to understand, which type of bill of lading you have in your hand, please simply look at the right bottom or right top corner of the bill of lading.

You will (most probably) see a small rectangular, which contains an abstract of contract of carriage.

Please keep in mind that full details of the terms and conditions of the carriage will be placed on the back side of the bill of lading, of course, if it is not a blank-back or short form bill of lading.

  • If the abstract of contract of carriage contains a phrase like “Received by the carrier…“, then the bill of lading is a “Received for shipment…” bill of lading;
  • If the abstract of contract of carriage contains a phrase like “Shipped, in apparent good order and condition…“, then the bill of lading is a “Shipped … on board” bill of lading.

Received for shipment bill of lading confirms that the carrier has taken charge of the goods.

However, received for shipment bills of lading do not confirm that the container has been shipped on board a named vessel. As a result, these kind of bills of lading require an additional “shipped on board” notation.

Because of the fact that the name of the actual vessel is not determined at the time of the issuance of the received for shipment bill of lading, the carrier may define the vessel as an “intended vessel“.

Unfortunately, the letter of credit rules accept intended vessel notation as a discrepancy in the absence of an on board notation.

The only way to get your payment from the issuing bank under letter of credit transaction is to make a discrepancy free presentation. So, you must understand what an intended vessel discrepancy is.

Why Intended Vessel Clause Inserted on the Bill of Lading?

The actual vessel may not be determined when the carrier receives the goods from the shipper, especially in “Received for shipment” types of bills of lading.

It has therefore become common practice to indicate the name of an intended vessel in the bill of lading, thus making it clear that a different vessel finally be selected.

Therefore, the bill of lading, as originally issued, does not indicate that the goods have been shipped on board a named vessel. (Gary Collyer, The Guide to Documentary Credits, 3rd Revision, Page: 205)

What the Letter of Credit Rules Say About Intended Vessel?

According to UCP 600 “If the bill of lading contains the indication “intended vessel” or similar qualification in relation to the name of the vessel, an on board notation indicating the date of shipment and the name of the actual vessel is required.”

Absence of such an on board notation will make the bill of lading discrepant.

Example intended vessel discrepancy on a bill of lading under a letter of credit:

A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:

Letter of Credit Conditions

Field 46A: Documents Required: Full set of original bill of lading shipped on board marked freight collect made out to the order of Bank Millennium S.A, Poland notify applicant.

The beneficiary presented a bill of lading among other documents as shown on the below picture:

intended vessel clause