Dispute between Letter of Credit and Commercial Invoice

I have a dispute between Letter of Credit and Commercial Invoice

Letter of credit disputes are commonplace in the trading arena..
I received below from a reader based in Singapore.. Can someone knowledgeable in this field assist with an answer please ..??

Hi,

I am a bit novice to trading. Just wondering,

questions

  1. Is there any problem if the amount of commercial invoice submitted to bank after shipment is less than the amount on LC.
  2. Bank will accept without any discrepancy?
  3. After bank accepts invoice, what happen? Bank will keep balance amount for future use of that LC?
  4. Bank accepts or not is related with partial shipment allow or not allow inside LC?

Lets help out the reader, all constructive comments welcome.. Thanks..

What did you think of the above article..?? Comment below..

10 comments on “Dispute between Letter of Credit and Commercial Invoice

  1. WAWANG says:

    @ the reader based in Singapore:
    Is there any problem if the amount of commercial invoice submitted to bank after shipment is less than the amount on LC.

    “”” as long as LC condition is “PARTIAL SHIPMENT : ALLOWED” your export documents will be Okay even there is no clause ” +/- xx % in amount and quantity”. You can enjoy +/- 5% for it. “”””

  2. WAWANG says:

    @ John Alan
    what happens if the exporter would like to send in the same container goods covered by L/C in addition to some other goods.
    Should the carrier issues two bill of lading? or mentioning in the same B/L the good under L/C and goods that aren/t is enough?

    “”” Yes, you have to issue 2 (two) sets of exports documents ( 2 sets of : BL, Commercial Invoice, etc). First set for serve the LC and Bank, the 2nd for non LC. You must couriered the 2nd set directly to the Buyer.

  3. John Alan says:

    hi there,

    I would like to submit a doubt I have:

    what happens if the exporter would like to send in the same container goods covered by L/C in addition to some other goods.
    Should the carrier issues two bill of lading? or mentioning in the same B/L the good under L/C and goods that aren/t is enough?

    thanks for your answers and your super useful blog!

  4. Arvind says:

    first of all, I really enjoyed and studied beautifully with the great hand & help of Hariesh Manaadiar sir.

    there is no need to buy & read high costly book for the brief shipping Knowledge if you Google this site.

    Thanks & really appreciate to Hariesh Manaadiar Sir,

    Secondly i would like to ask a question ” How can we define shortly a description of Letter of Credit?

    my another one question is
    i read your brief page of Bill of Lading details. but if we want short answer only in five to six sentence
    what is Bill of Lading?

    Thanks n regards,
    Arvind

    1. Hi Arvind, if you have to define Bill of Lading very simply, it may be defined as :

      An important trade and shipping document that has 3 roles

        1.Evidence of Contract of Carriage
        2.Receipt of Goods and
        3.Document of Title

      You can read the explanation of these roles here..

      Letter of Credit is a form of documentary credit and is a guarantee of payment in which an issuing bank (overseas) accepts to pay the shipper, via the nominated bank, the value of the goods upon receipt of proof of shipment by providing relevant documents like Bill of Lading (here it will be a document of title), Commercial Invoice, Insurance policies, any other regulatory documents..

  5. Conrado Couto says:

    There wont be any problem. Pay attention in case that l/c prohibit the partial shipment. If this is so, it’s also possible to reduce the quantity and the amount in 5% less.

  6. Ahmed Fadl says:

    Hi
    1-Conerned to first point bank will accept documents after bank ensure that your payer must accept documents as it is
    2- Paritical shipment an important clause in LC so documents and shippng must to be according LC .

  7. SUNIL MENON says:

    questions

    1) Is there any problem if the amount of commercial invoice submitted to bank after shipment is less than the amount on LC. — there is no problem till such time the bank accepts the PO / LC basis – part shipment being allowed.

    2) Bank will accept without any discrepancy? – the issuing bank will send it to the receiving bank and the receiving bank will cross check with the payee. if payee agrees for the same and the necessary bank charges are settled to the bank, then it can be done…

    3) After bank accepts invoice, what happen? Bank will keep balance amount for future use of that LC? – bank has to credit the balance amt if “lc is at sight” after deducting their charges. else in case of partial shipment, the amt will be adjusted in the next invoice.

    4) Bank accepts or not is related with partial shipment allow or not allow inside LC? – yes this will play a major factor…

    pls do let me know if any more queries at sunil0505@gmail.com

  8. Mahesh says:

    Hi!

    The “Letter of Credit” is an independent contract concerning Buyer-Bank-Seller and not in any way obligatory to the “Sale Contract” between the “Seller-Buyer”.

    The Bank honors the LC only when the documents required are complying with the terms of the LC along with other conditions regarding the goods.

    If the shortfall in the quantity is within 5% to 10%, the Buyer can instruct the Bank to release LC by waiving the terms regarding the goods, which is a normal practice in international trade.

    If the shortfall in quantity is large and the LC prohibits partial shipment, it all depends on the Buyer to accept the documents (Bill of Lading) or reject the documents.

    Normally, the balance amount will not be available to the Seller under the LC for follow-up shipment to complete the original quantity required by the Buyer as LC stands fully discharged even when partial amount is released.

    With regards,

    Mahesh

    1. Dandana says:

      beneficiary asked me to add new point in document required, which is say (Credit note relating to commercial invoice) what dose it mean?

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