Most commercial letters of credit rely on shipment of goods to perform its role.
Under a typical commercial letter of credit, the exporter ships the goods, collects the documents including a transport document and makes the presentation to the issuing bank.
If the letter of credit requires presentation of a transport document, as most credits demand so, the shipment must be completed before the latest date of shipment indicated in the credit.
Consequently, the transport document must not be dated after the latest date of shipment.
If the exporter fails to complete the shipment before the latest date of shipment indicated in the credit, which requires presentation of a multimodal bill of lading as the transport document, then the issuing bank raises a discrepancy, which is known as late shipment discrepancy.
Sample Late Shipment Discrepancy on a Multimodal 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 44C: Latest Date of Shipment: 140631
Field 44E: Port of Loading/Airport of Departure: Port of Genoa, Italy
Field 44F: Port of Discharge/Airport of Destination: Port of Cape Town, South Africa
Field 44B: Place of Final Destination/For Transportation to …/Place of Delivery: 7460, Epping, Cape Town, South Africa
Field 46A: Documents Required: Full set of multimodal transport document issued by a shipping company marked freight collect made out to order of The Standard Bank of South Africa Limited marked notify applicant indicating that the goods have been dispatched, taken in charge or loaded on board.
The beneficiary presented a combined bill of lading with the following data:
Multimodal Bill of Lading
Port of Loading: Port of Genoa, Italy
Port of Discharge: Port of Cape Town, South Africa
Place of Final Destination: 7460, Epping, Cape Town, South Africa
The multimodal bill of lading is dated 31.June.2014.
In addition to issuance date of the multimodal bill of lading contains an on-board notation with the following wording: “SHIPPED ON BOARD AT PORT OF GENOA, ITALY ON VESSEL FAST IDAHO ON 02.JULY.2014“.
Discrepancy: Multimodal bill of lading shows a late shipment.
Although multimodal bill of lading date does not indicate a late shipment, the ship on board notation date shows a date which falls outside the allowed shipment period.
Reason for Discrepancy: If a letter of credit requires presentation of a transport document indicated in the UCP, the date of shipment stated on the transport document must not be showing a later date than the latest date of shipment stated in the letter of credit.