UCP600 Article 30 Explained
Clause (a)
Clause: The words “about” or “approximately” used in connection with the amount of the credit or the quantity or the unit price stated in the credit are to be construed as allowing a tolerance not to exceed 10% more or 10% less than the amount, the quantity or the unit price to which they refer.
Explanation: When a credit uses terms like “about” or “approximately” concerning the credit amount, quantity, or unit price, it permits a deviation of up to 10% above or below the stated figure to which they refer . This provides flexibility in fulfilling the credit terms, accounting for minor variations in shipment or pricing.
Example: If a letter of credit specifies “approximately USD 100,000,” the beneficiary can present documents for an amount between USD 90,000 and USD 110,000. Similarly, if it states “about 1,000 units,” shipment quantities between 900 and 1,100 units would be acceptable.
Clause (b)
Clause: A tolerance not to exceed 5% more or 5% less than the quantity of the goods is allowed, provided the credit does not state the quantity in terms of a stipulated number of packing units or individual items and the total amount of the drawings does not exceed the amount of the credit.
Explanation: A 5% tolerance in the quantity of goods is permissible as long as the credit does not specify the quantity in exact packing units or individual items. Additionally, the total drawings under the credit must not exceed the credit amount.
Example: If a credit requires the shipment of 2,000 tons of a product but does not specify packaging units, shipping between 1,900 and 2,100 tons is acceptable, provided the total amount drawn does not exceed the credit’s limit. If the credit amount is USD 500,000, the total value of shipped goods should not surpass this amount.
Clause (c)
Clause: Even when partial shipments are not allowed, a tolerance not to exceed 5% less than the amount of the credit is allowed, provided that the quantity of the goods, if stated in the credit, is shipped in full and a unit price, if stated in the credit, is not reduced or that sub-article 30 (b) is not applicable. This tolerance does not apply when the credit stipulates a specific tolerance or uses the expressions referred to in sub-article 30 (a).
Explanation: If partial shipments are prohibited, a 5% tolerance less than the credit amount is allowed, provided the full quantity of goods is shipped and the unit price, if mentioned, is not reduced. This tolerance is void if the credit specifies a different tolerance or uses terms like “about” or “approximately.”
Sub-article 30 (c) addresses scenarios where terms are either CFR or CIF, and the price quotation is based on estimated or provisional insurance premiums and/or freight charges. When the documents are presented, the beneficiary invoices for the actual insurance and freight costs, which may be lower than those initially quoted in the purchase order. Consequently, a 5% tolerance is permitted in the beneficiary’s invoice, provided that the full quantity of goods specified in the credit is shipped and the unit price remains unchanged.
Example: A credit for USD 200,000 that does not permit partial shipments and requires the shipment of 500 units at USD 350 per unit (500*350 = USD 175,000. Balance 25,000 freight charges) will allow a shipment of the full 500 units at USD 350 per unit even if the total invoice amount is as low as USD 190,000 (5% less than USD 200,000). If the credit used terms like “approximately,” the 10% tolerance from clause (a) would apply instead.