Definition of Transshipment: Transhipment means unloading from one means of conveyance and reloading to another means of conveyance during the carriage as enrouted in the letter of credit.
Definition of Partial Shipment: If a beneficiary under a letter of credit ships the credit amount in a single lot, which is corresponding to the whole credit amount, loaded with a single means of conveyance; then this can be defined as a complete shipment.
All other shipments, which are not complete and/or loaded with more than one means of conveyance, can be defined as partial shipments.
What are the Important Points of Transshipment?
- Transshipment is not regulated under cash in advance payment, open account or documentary collections rules.
- Letter of credit rules have special articles covering transshipments.
- Air transportation mostly requires couple of transshipments before the cargo arrives to the airport of destination. Prohibiting transshipment in air transportation may result undesired consequences.
- Multimodal transportation must require at least one transhipment. Prohibiting transhipment in multimodal transportation should be avoided.
What are the Important Points of Partial Shipments?
- Partial shipment is not regulated under cash in advance payment, open account or documentary collections rules.
- Letter of credit rules have special articles covering partial shipments.
- Disallowing partial shipments may huge impact on exporter’s shipment flexibility, as a result it must be used very carefully.
- If letter of credit amount can not be shipped in a single truck and requires more than one truck usage, partial shipment should not be prohibited when road transportation will be used.
Why Transhipment is not Allowed by Banks?
Transhipment is getting more important for the importers and banks when they are dealing with sanctions, embargoes and trade restrictions. Importers and banks may want to prevent the cargo entering any unwanted country, seaport, airport etc by prohibiting the transshipment.
Other than that the importers may try to prohibit transshipments for their own commercial interests.
Why Partial Shipment is not Allowed by Banks?
Partial shipment will be prohibited by banks mainly on commercial basis. Most of the times the importers request from the issuing banks not to allow partial shipments.
Both partial shipments and transshipments are important concepts in their own way of effecting the process of letters of credit transactions.
Importers should refrain prohibiting both partial shipments and transshipments as long as legal or commercial conditions dictates so.