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conditional LC at sight

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Sat, 08/21/2010 - 06:21
Aidateo
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Hi,

We just concluded a S&P contract. Our predicament arise when the buyer insisted on ETA clause to be stipulated in the LC as the cut-off timeline for goods to arrive. Should the shipments arrive 3 days later than the ETA, goods will be rejected.

Our past 10 experience, we guaranteed on ETD at port of loading but never ETA at port of discharge as we have no control of shipping times.

How do we overcome this problems ? 

Thanks and b/rgds.

Nik

 

 

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Sun, 08/22/2010 - 09:34
#1
cvrkswami
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conditional LC at sight

It is a prudent business practice, not to get committed on something on which you do not have a control. No guarantee can be given by a shipping company also in this aspect, as voyages are controlled by nature. Would strongly suggest that you be on the look out for an alternate buyer and do not waste time on this issue. The buyer many not be genuine.

Regards,

CVRK

An exbanker, into education now! ( can undertake select syndication) 

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Sun, 08/22/2010 - 08:50
#2
Aidateo
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SOS

SOS

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Sat, 08/21/2010 - 06:56
#3
pan
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Joined: 09/13/2007
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proof

Hi Friend,

a part it will be logic to ask a shipping line that have a regular service, so you could be quite sure that goods will be at discharging port in time.

What document will be stipulated in l/c to satisfy the ETA request?

Please let us know?

Ciao

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Sun, 08/22/2010 - 08:47
#4
Aidateo
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No control of shipping time

Hi,

Custom Clearance docs as a proof of ETA but no shipping company can guarantee us on vessel shipping times as any delay might be caused by an unforseen circumstance ( though they are regular sea freight provider to our route and sure of ETA will be met).

Llyods Insurance confirmed no Perfomance Bond can guarantee on the shipping times too. Our buyer resisted our offer of discount should the timeline is not met.

Is there any other ways to overcome the ETA ?

Thanks.

Nik

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Mon, 08/23/2010 - 01:26
#5
phill doran
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pause for thought

Hello Nik
Just to add to some of the valid comments already posted;

The reason you are having difficulty with this model is that the credit is fundamentally the sale of documents evidencing despatch of the underlying goods (hence ‘last shipment date’) and you are trying to ‘twist’ it into a mechanism triggered by ‘arrival’.
I am not saying it cannot be done, but it is not really what the instrument is all about and I would suggest you find a more suitable device rather than to continue trying to put the round peg in the square hole.

At the heart of this is the distance between the seller’s expectations and the buyer’s. Clearly, in preferring a credit, the seller’s expectation is to be paid against paper – equally clearly, the buyer appears to want to pay against cargo. There is the mis-match and if you do not overcome this you will have ‘tears before bedtime’ I am sure.

I am not a banker – however: get the applicant to set up a standby against default and offer them an open account: or any of the other bonds and guarantees your bank may have in their battery of payment instruments.
The credit is a payment instrument – but not all payment instruments are credits.

Just some thoughts...
cheers

phill doran

 ...thus: another step on the road to mercantile enlightenment...

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Sun, 08/22/2010 - 15:11
#6
pan
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I am curious!

Hi Friend,

In which way buyer takes up the  goods, if documents are refused or unaccepted, and pass the customs controll?

Is it the l/c claused that issuing bank liability will cease against a Port Authority declaration or Customs certificate that goods arrived after ETA.

Please clarify, l/c plays with documents.

Ciao

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Mon, 08/23/2010 - 02:59
#7
Aidateo
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LC pays against ETA clause

Hi Pan,

As long as the custom docs do not pass the ETA timeline, they have no reason to refuse/deny other documents such as packaging lists and our invoices.

Yes, the issuing bank's liability cease upon issuance of Customs certificate.

Thanks.

Nik

 

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Mon, 08/23/2010 - 03:45
#8
phill doran
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a pedant writes

Hello
Sorry, but just so I can understand:
Customs clearance may precede or post-date arrival, but not prove it. What I mean is that clearance though customs is a separate event than the arrival of the vessel. Goods can clear customs and not discharge, or goods can discharge and not clear customs – they are not synonymous events.
Accordingly, arrival is no longer a condition of the credit, only clearance – am I reading this correctly? Could you explain what a 'customs certificate' is in this context?
cheers

phill doran

 ...thus: another step on the road to mercantile enlightenment...

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Mon, 08/23/2010 - 07:13
#9
Aidateo
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Can't put the cart before the horse

Hi,

Over here in Italy, I do not think the custom clearance could occur before the arrival of goods. In fact,upon discharge at the port, containers are randomly scan through or by manual inspection.  After receipt of payment of all duty and taxes, goods are then allow to clear from customs frontier with a certified documents by the Customs.

Until this point, our part are done. Yea, the arrival (ETA) is more of the timeline the goods arrival at the collection point after customs clearance.

The so-called 'Customs Certificate' is just a document certified that the goods met compliances and taxes are paid.

Thanks.

Nik

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