Why did I lose the money under Export LC? By Isaac Tudu
Why did I lose the money under Export LC?
A typical case of Instalment Credit and applicability of Article 32 of UCP
Export LC details:
• Partial shipment: Allowed
• Shipment period indicates as under:
• 200 Computers to be shipped in February 2022
• 200 Computers to be shipped in March 2022
• 200 Computers to be shipped in April 2022
• The first presentation was done for the shipment of 150 Computers shipped on 20th February 2022 for USD150,000 and payment was received from issuing bank.
• The second shipment of 200 Computers was done on 10th March 2022 for USD200,000 but the beneficiary was informed that the presentation was not compliant.
• Issuing bank had sent a notice of refusal stating that the shipment period stipulated in the LC was not observed as per UCP 600 article 32 and therefore, LC is seized to be available for the beneficiary.
• Beneficiary had a different view on this. The LC allowed partial shipments. Partial shipments, even within individual instalments, were not prohibited in the LC. Therefore, the company was of the opinion that the affected shipment (150 Computers on 20th February 2022 and 200 Computers on 10th March 2022) was compliant.
• The question is who is right? Beneficiary or Issuing Bank?
• This was a typical case of instalment shipment, where UCP 600 article 32 was applicable.
• When partial drawings or shipments are allowed, any number of drawings or shipments is permitted within each instalment.
• Conclusion: If a shipment has not been made within a given period fully and in due time (shipped only 150 Computers on 20th February 2022 against the schedule of 200 Computers in February 2022), the LC ceases to be available for that and any subsequent instalment. The opinion expressed by issuing bank is correct.
• I have examined the above case in detail in this video.
Isaac Tudu is an ex-banker with SBI & ICICI Bank and helps bankers to clear CDCS Exam through “CDCS Exam Preparation Online Course”.
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