Partial Drawing

Partial shipments, partial drawings and partial payments are very closely related terms in letters of credit transactions.

A beneficiary can make partial shipments, if the letter of credit allows partial shipments explicitly; or else it is silent in regards to the partial shipments.

If a letter of credit disallows partial shipments, this means that the beneficiary can not make any partial shipments under that letter of credit.

After reading this article, you should understand the connection between partial shipments, partial drawings and partial payments under letters of credit.

Example:

A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:

• 32B: Currency Code, Amount
  Currency : USD (US DOLLAR)
  Amount : #300.000,00#
• Field 43P: Partial Shipments: Allowed
• Field 43T: Transhipment: Not Allowed
• Field 45-A: Description of Goods: 3 Pcs of Olive Oil Processing Machinery
• Field 46A: Documents Required:
  • 1 original signed commercial invoice and 1 copy.
  • 1 original packing list and 1 copy.
  • Full set of original bill of lading clean on board marked freight collect made out to the order of Issuing Bank, notify applicant.

Analysis:

The beneficiary has to ship 3 olive oil processing machinery under this sample letter of credit.

Shipping only 1 olive oil processing machinery is a partial shipment.

After shipping 1 olive oil processing machinery, the beneficiary collects the shipping documents and makes the presentation to the issuing bank.

The beneficiary demands 100.000,00 USD from the issuing bank. This is the partial drawing as the beneficiary demands not the full credit amount.

The issuing bank checks the documents, and if the documents are complying then the issuing bank pays 100.000,00 USD to the beneficiary, which is the partial payment.

Conclusion:

It is possible to get partial payments under the letters of credit, when partial shipments have been effected. Actually it is why partial shipments exist at the first place.

Partial shipment and partial drawing terms are usually used with the same meaning in export and import transactions.

But this is not necessarily the case especially in standby letters of credit and bank guarantees.

On this post you can find the definitions of both partial drawings and partial shipments, as well as the differences between partial shipments and partial drawing via examples.

Definition of a Partial Drawing: A presentation which is made for less than the full amount available will be defined as a partial drawing.

Definition of a Partial Shipment: If a beneficiary under a letter of credit ships the credit amount in a single lot, which is corresponding to the whole credit amount, loaded with a single means of conveyance; then this can be defined as a complete shipment.

All other shipments, which are not complete and/or loaded with more than one means of conveyance, can be defined as partial shipments.

Example:

A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:

Important Note: The letter of credit is silent about the partial shipments and transhipments.

Field 45A-Description of Goods: Quantity: 2,000 M/Ts Material: Hot Rolled Steel Plates -Size: -20.00MM x 2000 MM x 1000 MM – 500 M/Ts 25.00MM x 2000 MM x 1100 MM – 1500 M/Ts

Field 46A: Documents Required:

• 1 original signed commercial invoice and 1 copy.
• 1 original packing list and 1 copy.
• 1 original forwarder’s certificate of receipt issued to the name of the issuing bank bearing a clause that goods have been assumed control by the named forwarder with irrevocable instructions to be forwarded to the consignee and marked freight payable at destination.

Analysis:

The letter of credit is silent in regards to the partial shipments and partial drawings.

In these kinds of situations, where the L/Cs are silent about the partial shipments and partial drawings, we need to look at the latest letter of credit rules.

UCP 600, which is the latest set of letter of credit rules, tells us that the partial shipments and partial drawings are allowed if the letter of credit is silent in this regard.

In the above example, it is understood that the letter of credit is requesting a FCR (Forwarder’s Certificate of Receipt).

According to the letter of credit rules, FCR is not a transport document. It is not possible to make partial shipments under the letters of credit, which do not demand a transport document.

However, it is possible for the beneficiaries to demand partial drawings from the issuing banks.

Conclusion:

Partial shipment is related to the transport documents. If the letter of credit do not request a transport document, then technically you can not make a shipment.

Which means that it is not possible to make a partial shipment under the letter of credit, that do not request a transport document.

However, it is possible to demand less than the full letter of credit amount from the issuing banks under such circumstances. Which is called the partial drawings.

Most of the stand-by letters of credit and bank guarantees do not require presentation of an original copy of the transport document.