Unsigned Commercial Invoice in LC: Is It a Discrepancy? UCP 600 Rules

Unsigned Commercial Invoice in LC: Is It a Discrepancy? (UCP 600 Rules + Case Examples)

"A $500,000 LC payment was delayed because the commercial invoice lacked a signature—even though the LC didn’t require it. Was the bank right to reject it? Let’s decode UCP 600 rules and how to avoid this trap." 

UCP 600 Rules: The Official Answer

Under UCP 600 Article 18, a commercial invoice:

• Must appear to be issued by the beneficiary (exporter).

• Does not explicitly require a signature—unless:

  • The LC demands it (e.g., “Signed commercial invoice required”).

  • The invoice template includes a pre-printed signature line (per ISBP 745 A21).

Key Exception: Banks follow “strict compliance”—if the document looks incomplete (e.g., blank signature field), they may reject it.

Real-World Bank Practices

• Rejection Risk: 80% of banks treat unsigned invoices as discrepancies unless the LC waives the requirement.

• Case Study: A Turkish exporter’s LC was rejected for an unsigned invoice. They appealed, citing ISBP 745 A21, and won—but delays cost them $15,000 in storage fees.

3 Ways to Avoid This Discrepancy

1. For Exporters:

   • Add this clause to your LC: “Unsigned commercial invoice acceptable.”

   • Remove signature lines from invoice templates if unnecessary.

2. For Importers:

   • Specify in the LC: “Invoice may be unsigned unless otherwise stated.”

3. For All Parties:

   • Use PDF invoices (no blank fields) or e-signatures if allowed.

Pro Tip: Always Check These 2 Things

1. LC Wording: Does it mention signatures? If silent, assume banks may reject unsigned invoices.

2. Invoice Format: Delete unused signature lines to prevent “incomplete document” flags.

What to Do If Your LC Is Rejected

• Dispute: Cite UCP 600 Art 18 and ISBP 745 A21 (if applicable).

• Check the Reason for Rejection: First, take a close look at why the bank rejected the LC. Common reasons include missing signatures, incorrect dates, or discrepancies between the documents and LC terms.

• Reach Out to the Issuing Bank: Contact the bank to get a clear explanation of the rejection. Sometimes, it's just a small error that can be fixed by resubmitting the correct documents.

• Talk to Your Trading Partner: Let the other party know about the issue. If the rejection is due to mistakes on their side, like incorrect documentation, they'll need to correct it and resend the papers.

• Double-Check Your Documents: Go over your documents again to ensure everything matches the LC terms exactly. Small details, like a missing signature or wrong date, can lead to rejection.

• Fix the Errors: If the rejection was due to a minor mistake, like an unsigned document or wrong date, just correct it and send the documents back to the bank.

• Consider Amending the LC: If the issue is more serious, you may need the buyer to amend the LC to align with the agreed terms. This ensures both sides are on the same page.

• Ask for a Reconsideration: If you feel the rejection was unjust, you can ask the bank to reconsider their decision. You might also provide additional documents or clarification to support your case.

• Get Expert Help: If the issue is complicated, consider getting advice from a trade finance expert or an international trade lawyer. They can help you understand your options and avoid future problems.

• Plan for Delays: Rejection can cause delays in payments and shipments. While you're sorting things out, let everyone involved know that there might be some delays and manage expectations.

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CPT Incoterms 2020: Carriage Paid To – Full Explanation with Case Study

CPT Incoterms 2020 – Carriage Paid To is one of the most commonly used trade terms defined by the International Chamber of Commerce (ICC). Under CPT, the seller pays for transportation to the agreed destination, but the risk shifts to the buyer once the goods are handed over to the first carrier. This article explains seller and buyer responsibilities under CPT, compares it with similar Incoterms, and presents a practical case study from Bangladesh to France.

Illustration explaining CPT Incoterms 2020 showing risk transfer point, seller and buyer responsibilities, with case study on garments export from Bangladesh to France


CPT (Carriage Paid To) is one of the 11 Incoterms 2020 rules published by the International Chamber of Commerce (ICC). This term is applicable to all modes of transport — especially relevant in global trade where multimodal transport is used.

What Does CPT Mean?

CPT – Carriage Paid To means the seller is responsible for arranging and paying for the transport of goods to a named destination (e.g., a port or terminal). However, the risk transfers to the buyer as soon as the goods are handed over to the first carrier. This distinction between cost and risk is what makes CPT unique.

Key Responsibilities of the Seller Under CPT:

• Packing and labeling goods for export
• Export documentation and formalities
• Transportation to the agreed destination (main carriage)
• Paying freight charges to the named place of destination

Key Responsibilities of the Buyer Under CPT:

• Import clearance and duties at the destination
• Insurance (optional but recommended, as risk shifts early)
• Unloading and onward transport after destination

Risk vs. Cost in CPT

Although the seller pays for freight, the risk of loss or damage transfers to the buyer once the goods are delivered to the first carrier. This is a critical point to understand for cargo insurance and responsibility handling.

Real-World Case Study: Exporting Garments from Bangladesh to France

Scenario: A garment manufacturer in Dhaka exports 1,000 units of ready-made garments to a fashion retailer in Paris under CPT Incoterms.

• Named place of destination: Charles de Gaulle Airport (CDG), Paris
• Seller’s obligation: The seller arranges air freight via DHL and pays all charges up to CDG.
• Risk transfer point: When DHL receives the goods in Dhaka

Outcome: During transit, a portion of the cargo is damaged. Since the goods were damaged after being handed to the carrier, and CPT was agreed upon, the buyer bears the risk and must handle insurance claims.

This example shows how important it is for buyers to arrange insurance when using CPT terms.

When Should You Use CPT?

CPT is suitable when the seller has better access or cheaper rates with carriers and can manage export formalities. It is often used for air freight, road transport, or multimodal shipments where control over main carriage is needed.

Advantages of CPT:

• Sellers can optimize freight cost through preferred carriers
• Works well with consolidated or multimodal logistics
• Applicable to both domestic and international trade

Disadvantages of CPT:

• Buyers bear risk earlier than expected
• Insurance is not the seller's responsibility

Difference Between CPT and CIF/CIP

• CPT vs. CIF: CIF is only for sea freight and includes insurance (from seller). CPT is for all transport modes and doesn’t include insurance.
• CPT vs. CIP: CIP is similar to CPT but includes seller-paid insurance.

 Risk Transfer Under CPT Incoterms 2020

Correct and precise explanation:

Under CPT (Carriage Paid To), the risk transfers from the seller to the buyer once the goods are handed over to the first carrier at the agreed place of shipment. This risk transfer happens even though the seller pays for transportation to the named place of destination.

It is essential to understand that the first carrier may be a freight forwarder, trucking company, or logistics provider who collects the goods from the seller’s warehouse or facility.

Example:
If a seller in Dhaka ships garments to Paris using DHL under CPT terms, the risk passes to the buyer the moment DHL receives the goods in Dhaka—not when they arrive in Paris.

Suggested contract phrase: 
"Risk shall pass to the buyer when the goods are handed over to the first carrier at the agreed place of shipment, in accordance with CPT Incoterms® 2020." 

When handling payments under CPT (Carriage Paid To) terms using a Letter of Credit (LC), things are generally smoother compared to FCA. That’s because under CPT, the seller arranges and controls the carrier, especially within their own country, making documentation and compliance easier.

In the LC (using SWIFT MT700), the place of receipt should still be clearly stated in Tag 44A—this is important because that’s where delivery is considered to have taken place under CPT. As for timing, the latest shipment date (Tag 44C) or shipment period (Tag 44D) should ideally be extended by a few days—often about 21 days. This is because CPT focuses on when the seller hands over the goods to the carrier, not when the goods physically leave the country.

Since the seller controls the transport arrangement, they can easily get a transport document from the carrier, showing themselves as the shipper or consignor. If it’s a sea shipment, they can even get an onboard bill of lading—though the onboard date might be later than the date when they handed over the goods. According to ICC Incoterms 2020 guidelines... source (e.g., iccwbo.org)

Frequently Asked Questions (FAQ)

What does CPT stand for in Incoterms?

CPT stands for "Carriage Paid To". It means the seller pays for transport to the agreed destination, but risk shifts to the buyer once goods are handed over to the first carrier.

Is CPT applicable to sea freight only?

No, CPT applies to all modes of transport, including road, rail, air, and sea — especially useful in multimodal shipping.

Does the seller need to provide insurance under CPT?

No, under CPT, the seller is not obligated to provide insurance. It's the buyer's responsibility to insure the goods if necessary.

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Incoterms for Air Freight: 2025 Guide for Traders and Logistics Professionals

Introduction

In international trade, clear definition of responsibilities between buyers and sellers is critical for efficient operations. Air freight, with its rapid transit times and global connectivity, presents unique logistical considerations. The International Chamber of Commerce's Incoterms® 2020 rules provide the standardized framework for allocating costs and risks in these transactions.

While references to "2025" appear in industry discussions, it is important to note that the current Incoterms® 2020 edition remains the authoritative version, with no revisions scheduled until approximately 2030. This guide examines the most relevant Incoterms for air freight operations and their proper application in contemporary trade.

Understanding Incoterms Structure

Incoterms serve three primary functions in international contracts:

Defining the point of risk transfer between parties

Allocating transportation and ancillary costs

Specifying documentation responsibilities

The eleven Incoterms are divided into two categories:

Rules for any mode of transport (including multimodal): EXW, FCA, CPT, CIP, DAP, DPU, DDP

Rules for sea and inland waterway transport only: FAS, FOB, CFR, CIF

Air freight transactions should exclusively use the multimodal rules, as air shipments typically involve combined transport modes (road-air or air-road).

Key Incoterms for Air Freight Operations

EXW (Ex Works)

The seller makes goods available at their premises. The buyer assumes all transportation responsibilities and costs, including:

Export packaging and loading

Pre-carriage to airport

Export clearance procedures

Main air carriage

Import clearance and final delivery

Risk transfers when goods are made available at seller's location. This term places maximum obligation on the buyer and is generally not recommended unless the buyer has strong logistics capabilities in the seller's country.

FCA (Free Carrier)

The seller delivers goods, cleared for export, to the carrier or another party nominated by the buyer at a named place. This could be:

The seller's premises

A freight forwarder's warehouse

Airport cargo terminal

Risk transfers when goods are handed to the first carrier. FCA is particularly suitable for air freight as it:

Allows flexible carrier selection

Clearly defines export clearance responsibility

Provides balanced risk allocation

CPT (Carriage Paid To)

The seller pays for carriage to the named destination but risk transfers when goods are delivered to the first carrier at origin. Key characteristics:

Seller arranges and pays for main carriage

Buyer assumes risk during transit

Buyer handles import clearance

This term is useful when sellers want to control transportation costs while buyers manage destination procedures.

CIP (Carriage and Insurance Paid To)

Similar to CPT but with added requirement for seller to procure minimum insurance coverage (110% of cargo value). Important considerations:

Insurance must cover the buyer's risk during transit

Policy terms should be clearly specified in contract

Recommended for high-value or sensitive shipments

DAP (Delivered at Place)

The seller delivers goods to a named place in the buyer's country, ready for unloading. Critical aspects:

Seller bears all risks and costs until arrival at destination

Buyer responsible for import clearance and unloading

Useful when sellers have strong destination logistics networks

DPU (Delivered at Place Unloaded)

Replaced DAT in Incoterms 2020. The seller must unload goods at the named destination. Key features:

Seller assumes unloading costs and risks

Risk transfers only after successful unloading

Requires seller to have unloading capabilities at destination

DDP (Delivered Duty Paid)

The seller bears maximum responsibility, including:

All transportation costs

Export and import clearance

Duty and tax payments

Final delivery to buyer's premises

This term is complex but provides turnkey solution for buyers. Sellers must have thorough knowledge of import regulations in buyer's country.

Operational Considerations for Air Freight

Documentation Requirements

Air Waybill (replaces Bill of Lading)

Commercial invoice with correct Incoterm

Packing list

Certificates of origin

Special permits (for restricted items)

Risk Management

Verify insurance coverage terms

Confirm liability limits with carriers

Document cargo condition at each transfer point

Cost Allocation

Clearly define responsibility for:

Fuel surcharges

Security fees

Airport handling charges

Storage demurrage

Regulatory Compliance

Stay current on:

Export control regulations

Customs modernization acts

Security requirements (e.g., ACC3 for EU)

Dangerous goods regulations (IATA)

Conclusion

Proper selection and application of Incoterms is essential for efficient air freight operations. While the 2020 rules remain current, their effective implementation requires:

Clear contractual specification of chosen term

Precise naming of delivery locations

Alignment with payment terms and insurance provisions

Understanding of local regulatory requirements

FCA and CIP generally provide the most balanced solutions for air shipments, while DAP and DDP offer more comprehensive seller-managed options. Regardless of term selected, all parties should ensure complete understanding of their respective obligations to avoid disputes and delays in this time-sensitive transport mode.

Understanding Incoterms is essential when dealing with international air cargo. These rules, published by the International Chamber of Commerce (ICC), define responsibilities between buyers and sellers. This guide focuses on the key Incoterms relevant to air freight in 2025.

🔑 Key Incoterms for Air Freight

• EXW (Ex Works): Buyer handles everything from the seller's premises onward.
• FCA (Free Carrier): Seller delivers goods to the carrier at a named location, commonly used for air freight.
• CPT (Carriage Paid To): Seller pays freight to destination airport, but risk transfers once goods are handed to the first carrier.
• CIP (Carriage and Insurance Paid To): Similar to CPT, but the seller also covers insurance.
• DAP (Delivered At Place): Seller delivers to destination; buyer handles import clearance.
• DDP (Delivered Duty Paid): Seller handles everything including duties and taxes.

📌 Best Incoterm for Air Freight

FCA and CPT are commonly preferred in air cargo transactions due to their flexibility and clarity in responsibility division. CIP is beneficial when insurance is critical.

✈️ Real-World Case Study: Exporting Electronics from Bangladesh to Germany

A Dhaka-based electronics company exports 500 units of consumer electronics to Berlin under the CPT Incoterm.

• Named Place: Berlin Brandenburg Airport (BER)
• Seller’s Obligation: The seller arranges air freight via Qatar Airways and pays all transport charges up to BER.
• Risk Transfer Point: When Qatar Airways receives the goods in Dhaka
• Outcome: The goods arrive safely. If damage had occurred during transit, it would be the buyer’s risk under CPT.

📖 Why Incoterms Matter in Air Freight

• Avoids disputes over shipping responsibilities
• Clarifies customs, insurance, and delivery duties
• Boosts efficiency and transparency in global logistics

❓FAQs About Air Freight Incoterms

Which Incoterms are not suitable for air freight?

Incoterms like FAS (Free Alongside Ship) or FOB (Free on Board) are intended for sea freight and are not appropriate for air cargo.

Does CIP require insurance?

Yes, under CIP, the seller must provide insurance coverage with minimum conditions (as per ICC Clause A, unless otherwise agreed).

Can DDP be used for air freight?

Yes, but sellers must be familiar with the import rules and taxes of the buyer’s country to fulfill DDP obligations.

Is EXW risky for buyers?

Yes, because the buyer bears all costs and risks from the seller’s premises onward, including export formalities.

🌐 Learn More

Explore the full Incoterms 2020 rules at the official ICC website: ICC Incoterms 2020

and more on Incoterms.

All 11 Incoterms for Air Freight: What Do They Mean?

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