Prohibited Partial Shipment and a Late On-Board Date: Frozen Dumplings to Long Beach
Hanbit Foods, a Busan dumpling maker, sells three 40-foot reefer containers (FOB Busan, USD 186,000) to a Los Angeles importer under an irrevocable sight credit issued by Pacific Commerce Bank. Terms: latest shipment 15 March 2025; expiry 31 March 2025; presentation within 21 days after shipment; partial shipment prohibited; transshipment allowed; bill of lading must show 'shipped on board'. On 14 March Hanbit loaded two containers onto the MV Hanjin Pioneer at Busan New Port. A cold-chain inspection delayed the third container, which was loaded on 18 March onto a different vessel. The forwarder issued one combined bill of lading covering all three containers, marked 'shipped on board 18 March' and noting 'cargo carried in two lots'. The export declaration had been filed on 13 March for the full USD 186,000. Hanbit's shipping clerk intends to present the documents to its negotiating bank on 2 April.
1. List every discrepancy the negotiating bank is likely to raise and explain the UCP 600 basis for each.
Read the worked answer
1. Late shipment. Under UCP 600 article 20(a)(ii) the date of shipment is the date shown in the on-board notation. The only on-board date on this bill of lading is 18 March, three days after the 15 March latest shipment date. The 14 March loading does not cure it, because the document being examined shows a single on-board date.
2. Partial shipment. The credit prohibits partial shipment. Article 31(b) provides that several sets of transport documents covering the same means of conveyance and journey are not a partial shipment - the corollary is that carriage on two different vessels is one. The notation 'cargo carried in two lots' invites the examiner to raise it. Article 31(b) also states that where several sets are presented, the latest date evidenced is the shipment date, which points to 18 March again.
3. Presentation after expiry. Documents must be presented by the expiry date (31 March) as well as within the 21-day period. Presentation on 2 April is after the credit has expired. The 21-day window would have run to 8 April, but expiry is an independent deadline and cannot be extended by the presentation period.
4. Data conflict. Under article 14(d) data must not conflict across documents. If the invoice or packing list states a single shipment or a single vessel, it conflicts with the bill of lading.
Not discrepancies: transshipment is allowed; the export declaration is not a credit document; the combined bill of lading need not be split.
2. Hanbit cannot change the facts. Rank its options, and explain how it should manage the frozen cargo while the documents are in dispute.
Read the worked answer
Option 1 - amendment before presentation. Ask the applicant to amend latest shipment to 20 March, expiry to mid-April and partial shipment to 'allowed'. The amendment must be issued by the issuing bank and accepted by Hanbit, and must reach Hanbit before it presents. Because the goods are already at sea the buyer has little incentive, but if it needs the dumplings for a promotion it may agree. This is the only route that produces a clean presentation.
Option 2 - present as drawn and request a discrepancy waiver. The negotiating bank can forward the documents and ask the issuing bank to approach the applicant for a waiver (article 16). A waiver is not an amendment: the issuing bank is bound only when it accepts, and it has five banking days to examine. Ask the negotiating bank to obtain a tested waiver message and, if the amount justifies it, a payment undertaking.
Option 3 - present on a collection basis or under reserve. Most negotiating banks will either decline or negotiate with recourse to Hanbit, which shifts the issuing-bank risk back onto Hanbit and effectively turns the deal into D/P.
Never ask the forwarder to re-issue the bill with an earlier on-board date. A false on-board notation is documentary fraud; it voids cargo and credit insurance and exposes staff to criminal liability.
Cargo management. Frozen product degrades and reefer plug-in and storage charges accrue daily. In parallel Hanbit should (a) get written confirmation from the buyer that it still wants the goods, (b) instruct the carrier to keep the containers plugged in at destination, and (c) price the fallback - re-sale in the US or return freight - before conceding anything on price. The bank must be given written instructions on how to handle any refused documents, since it is entitled to hold or return them pending instruction.
3. What procedural corrections are needed on the export side, and can a Korea–US FTA origin document still be obtained for this shipment?
Read the worked answer
Export declaration. The declaration was filed on 13 March for the full USD 186,000 as a single shipment, but the goods actually left on two vessels on 14 and 18 March. Korean practice requires the declaration to precede shipment and its particulars - shipment date, vessel, quantity, amount, settlement method - to match what actually happened. Where they diverge the exporter files a correction with the customs office through the same electronic system, and should do so before the export proceeds are received, because the repatriation report is matched against the declaration. An uncorrected mismatch becomes a foreign-exchange compliance issue that has nothing to do with the letter of credit and cannot be fixed retrospectively by the bank. If the buyer ends up taking only part of the goods, the declaration and the commercial invoice must both be reduced to the amount actually collected.
Origin document. A Korea–US FTA certification of origin does not have to be issued before shipment; the exporter may generally complete it after export and the US importer makes its import declaration on the basis of that certification. What matters is accuracy, not timing. Because this shipment moved on two vessels on two dates, the certification must describe both, and the invoice number, HS heading and origin criterion must match the commercial documents exactly. Keep the bill of materials and production cost records: US Customs can verify years later, and an unsupported certification exposes the importer to duty recovery plus penalties, which the importer will pass straight back to Hanbit. If Hanbit cannot document a preferential origin criterion, it should issue a non-preferential certificate rather than overstate origin.