Tips For Partial Drawings In Letter Of Credit Transactions

Article 31 UCP 600 permits the beneficiary to partially ship and draw on the letter of credit. As pleasant as this provision
is for the beneficiary, the applicant runs the risk that he does not receive all the goods/services/performance he ordered. Rather, the beneficiary is permitted to
ship only a portion of the agreed upon goods at the “last minute” before expiration of the LC
and still be able to draw under the LC. In case the Applicant wants to protect himself against “last minute” shipments, he should open the LC in such a way, that he either prohibits partial shipments or at least sets deadlines for partial shipments.

Not every shipment in several parts is considered a partial shipment. If the Beneficiary has several containers on the same ship, these several containers are not deemed to be partial shipments.
Article 31 b provides that a presentation of documents consisting of more than one set of transport documents evidencing shipment commencing on the same means of conveyance and for the same journey, provided they indicated the same destination will not be considered as covering a partial shipment. The fact that the shipping documents indicate different dates of shipment or different ports of loading, places of taking in charge or dispatch does not make these documents be acceptable as partial shipments.

The date of shipment is determined according to the latest date of shipment as shown on the presented shipping documents.

“Means of Conveyance” is the critical requirement that determines whether the beneficiary can partially
ship and draw on the letter of credit. If the same “means of conveyance” is used, no partial shipment
exists.

A Beneficiary presenting bills of lading from two different ships but only one set of
packing list, certificate of origin and invoice can – according to the International Chamber of Commerce- avail himself of the credit even though he did not present a complete set of documents for each partial shipment. The ICC thus:”Provided that the information contained in the documents (as a whole) met the terms of the credit, there is no justification for rejection.”

When using several trucks and issuing a waybill for each truck the ICC believes that each truck is a separate means of conveyance:”The term ‘means of conveyance’ has the meaning of single vehicle.”

However when using the railway, the ICC believes:” Transport documents, which evidence that the wagins were attached to the same train for the same hourney would not constitute a partial shipment,
as they are part of the same means of conveyance.” (see ICC Publication No. 632, R 477).

As always, when the law gets complicated, the parties to the transaction should specify in the contract what they want. For partial shipments, applicant and beneficiary should spell out, whether they want to allow partial shipments, what the deadlines are, and what constitutes partial shipment.

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