CIQ term for ore contract on LC

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synchron
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Joined: 12/22/2008
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Dear Experts,

In the game of chrome ore, payment is 95/5

95 at sight against load port results

5 percent agains CIQ results 

previously my bank allowed for a term that reads,

"if buyer fails to present to seller within 45 working days ciq certificate of quality and weight, supplier has right to claim 5% balance payment against load port certificate"

after a bad experience of supplier saying that they didnt receive ciq and used load port results anyways for final payment, the bank is not letting me include the above term anymore.

instead now, they have required me to put the following:

In the event that CIQ certificates are not made available to the Seller within  (45) days of completion of discharge at Discharge Port, the Seller shall be entitled to submit its sight draft against the said Letter of Credit for payment with a declaration from Seller that the CIQ certificates have not yet been received, accompanied by the following documents

-Sellers signed final commercial invoice in three (3) copies.
-Beneficiary Certificate to declare the non-availability of the Inspection Certificates issued by CIQ within  (45) days after completion of discharge.

giving the suppliers the ability to get final payment against load port results only if i give them a declaration of non receipt of CIQ.  They need this declaration as one of the required docs for final payment if they dont get ciq.

I dont want to rock the boat, its like 100% of the chinese still using the original lc term, and where my bank, for my protection is demanding a term that suppliers will WIDELY NOT ACCEPT.

please tell me a workaround... urgently

 

Thanks

Synchron

 

 

 

Frammi
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Joined: 08/17/2007
I don't understand why you are so keen to pay 100%

I always thought that such a ciq-document  is for your protection to make sure that 95 percent is paid when the test results are not satisfactory and 100 % is only paid when the test results are satisfactory.

In case such a test result cannot be presented, I assume that the quality is not okay. The buyer can still pay the 5% on a clean payment basis.

   -Each long journey starts with a small step-

Best regards

Frammi

Anup Sinha
Offline
Joined: 12/02/2008
100% Payment

Dear Frammi,

Normally in case of iron ore import by China, buyers pay 95% or 97% against loadport result and balance amount is paid on the basis of CIQ result (i.e. at discharge port on behalf of Chinese buyer's).

But in some cases, discharge port draft survey and sampling & analysis is not conducted for many reasons. In such cases, it is a general practice to release balance 5% or 3% payment on the basis of loadport result.

To cover such cases, contracts / LC provides for " if CIQ analysis certificate is not received within ......."

Best Regards,

Anup Sinha

smebruke
Offline
Joined: 02/19/2009
%95/ %5

Dear Anup,
What happens if CIQ report doesn't meet the requirements? Does the company receives %95 which is done at loading port or receives nothing?

anupsinha
Offline
Joined: 12/22/2008
Non-receipt of CIQ certificate

Exact Date of Discharge is known to shipper / beneficiary. Hence according to me, contract clause should be re-drafted as under:

“In the event, CIQ report (discharge port weight and analysis report issued by CIQ) is not made available to the Seller within …. days ( 60 days or any number of suitable date) from the date of Bills of Lading , Seller shall have the right to drawn final residual value on the basis of loadport result. SELLER’S CERTIFICATE IN THIS REGARD NON-RECEIPT OF CIQ REPORT WITHIN …. DAYS FROM THE DATE OF BILLS OF LADING WOULD BE FINAL.”

In the last line “Seller certificate ….would be final” can be changed as “Buyer’s Certificate” and l/c can be suitably drafted accordingly.

Regards,

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