Field 43P (Partial Shipment) is an optional field. The presence of this field would depend on the trade agreement between buyer and seller. Partial shipment is, in simple words, delivery of an order in two or more consignments, if allowed and mutually agreed upon by both parties, buyer and seller. The seller has the advantage to ship any quantity or amount lesser than the original order or as indicated in the LC in few shipments until fully delivered to the buyer.
For example, if the amount indicated under field 32B (Currency Code, Amount) is USD10,000.00, the seller may ship the goods worth of USD 3,000.00 in the first shipment, second shipment, USD5,000.00 and third shipment USD2,000.00.
Seller should always request that the LC specify whether partial shipment is allowed in order to avoid unexpected problems. In case partial shipment is allowed, the validity of the LC will not be affected even if a problem arises in meeting the delivery date. The total shipment of USD10,000.00 must be fully delivered within the expiry of the LC.
Under this field, either one of these words:
‘ALLOWED’ or
‘NOT ALLOWED’
should be indicated. If ‘NOT ALLOWED’ is indicated, the seller is to ship the whole order in one shipment only. The word ‘PROHIBITED’ sometimes is used instead of ‘NOT ALLOWED’.
For example, if the amount indicated under field 32B (Currency Code, Amount) is USD10,000.00, the seller may ship the goods worth of USD 3,000.00 in the first shipment, second shipment, USD5,000.00 and third shipment USD2,000.00.
Seller should always request that the LC specify whether partial shipment is allowed in order to avoid unexpected problems. In case partial shipment is allowed, the validity of the LC will not be affected even if a problem arises in meeting the delivery date. The total shipment of USD10,000.00 must be fully delivered within the expiry of the LC.
Under this field, either one of these words:
‘ALLOWED’ or
‘NOT ALLOWED’
should be indicated. If ‘NOT ALLOWED’ is indicated, the seller is to ship the whole order in one shipment only. The word ‘PROHIBITED’ sometimes is used instead of ‘NOT ALLOWED’.
What happens if cannot ship the full goods within LC expiry date . For Example LC Value is USD 10,000 but only able to ship goods for 8000 USD in 2 or 3 Parts.
ReplyDeleteThere are two separate issues involved here. One, the capability to perform under contract by the seller and the second, the principle of autonomy of the letter of credit.
ReplyDeleteA letter of credit, by virtue of its nature, purpose and function, does not in any way guarantee that the seller will ship the goods or in your case, the correct quantity. If the seller fails to fully ship the goods as ordered by the buyer, the buyer is to take this matter separately free from the involvement of the bank.
The disputes arising from the underlying contract will not implicate the banks to any extend unless a court injunction is obtained.
The principle of autonomy of letter of credit clearly says that the payment obligation of the banks would only be detached upon proof of fraud. In other words, as long as the documents tendered to the bank are found to be in conformity, the obligation of the bank to make payment to the seller stays intact.
The seller is not obligated under the contract of letter of credit to perform his duties as outlined in the sales contract. It is the sales contract that imposes the obligation on the part of the seller to fulfill his obligation. Therefore, the failure of the seller to perform, has nothing to do with contract of payment that is letter of credit.