Letter of Credit Forum

Hi Friend,

it is very difficult to "translate" sale's contract clause in terms and conditions of an l/c.

Someone is inserting clause in l/c as follows:

-shipment later than the date indicated, if accepted by the applicant and issuing bank, will be subjected to a penalty of EUR

  ... for each day.....

This type of condition is under applicant consent.

or

-shipment later than the date indicated in the l/, but within the expiry date, acceptable under a penalty of EUR.. per day

to be deducted automatically by proceeds.

this condition works automatically.

So, all is possible, if accepted by the beneficiary and, even, by the banks. The wording must be clear and not ambiguos.

We have customers using different penalty clause, in advising the receipt of documents, compliant or not, we ask if we have to deduct this penalty charges.Sometime the aèèlicant said no, as it has been agreed with beneficiary.

Other comments appreciated

Ciao

Hello again
I am not a banker so I cannot help you here, but could you perhaps clarify two points which may assist other contributors to guide you;

Firstly, is the penalty ‘date’ linked to sailing or arrival – i.e. is it a penalty for late shipment or late delivery?

Secondly, if it is for late delivery, how will this be measured, how will the bank gauge compliance or not?
I imagine that what you require can be achieved – perhaps the credit will need to be twisted out of shape to do it – but I think the issue is always (as with any credit) the detail of the documentation which will measure the performance (or lack thereof).

Again, I wish you well
 
Cheers

phill
“...in the kingdom of the blind; what you see is what you get...”