Tolerance

Tolerance is the allowable deviation in the quantity or value of goods shipped as specified in the sales contract or letter of credit.

In international trade, tolerance defines acceptable variations in shipment quantities. Shipping contracts (like CIF, FOB) and letters of credit often stipulate tolerance percentages, typically 5% or 10%. These variations account for differences between ordered and delivered goods due to shipping practicalities.

For example, if a contract specifies the shipment of 1,000 units with a 5% tolerance, the permissible range is 950 to 1,050 units. This flexibility helps manage expectations and reduce disputes.

Banks and customs authorities check tolerance adherence during document verification. Exceeding tolerance limits may lead to payment issues or contract breaches. Ensuring accuracy in shipment quantities against contract terms is crucial for compliance.

Entities involved in international shipping must be familiar with industry-standard terms concerning tolerance to avoid legal complications.