Letter of Credit Forum

Hello Francisco

If you understand your terms, as a SELLER in a C-prefixed sale, your ‘right to be paid’ arises in the country of origin. Although your costs end in the country of destination, the risk of non-arrival is the buyer’s not the seller’s.

In a CIP/CPT sale, the seller’s contract ends on handover to the first carrier in the country of supply.

Although there is no connection between the seller’s commercial terms and the elected payment mechanism, the ‘credit’ is a common choice. The beneficiary gets paid by the bank for documents evidencing dispatch of the goods, freight prepaid. The arrival of the cargo is irrelevant.

Gold medal under CIP: the beneficiary is asked to tender a transport document ‘evidencing the taking in charge’ of the goods by a named carrier. The seller now contracts with their elected carrier, hands over at the seller’s ‘works’ and receives a freight prepaid multi-modal transport document (or similar) issued by the named carrier. The beneficiary now takes that to the bank and if all is found compliant etc, the beneficiary gets paid under the conditions of the credit. If this is 60-days from presentation or on presentation, it is a matter of finance only. Payment is 'guaranteed', regardless of whether the buyer gets the goods.

My concern is your mention of payment linked to ‘arrival at destination’. If this is a condition of the credit, then it is inconstant with your intentions as a seller i.e. it is no longer a CIP (or any C-prefixed) contract, but more of a D-prefixed contract.

If you really are selling on a C-prefix, arrival is not a condition you need to contemplate.

I hope this helps…

cheers

phill doran

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