The Conditions Of UCP 600 And ISBP For Acceptance Of Bills Of Lading Indicating Container Transhipment Under Letters Of Credit
Given the legal requirement for including statements about transhipment in the Bills of Lading for containerised shipments and concerns of banks regarding the meaning of such statements, ICC published a number of advisory opinions and guidance rules, known as UCP 6001 and ISBP2.
On the question of transhipment, the article 20 paragraph (c) of UCP 600 has the following provisions:
"c. i. A bill of lading may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same bill of lading.
ii. A bill of lading indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment, if the goods have been shipped in a container, trailer or LASH barge as evidenced by the bill of lading."
What they mean to say is that the Bills of Lading with statements about transhipment can be accepted provided that the named carrier undertakes the responsibility for the entire transport. In practice this means that there must no disclaimer on the face of the Bill of Lading for any part of carriage. Furthermore, the Bills of Lading for containerised goods that indicate transhipment during the carriage can be accepted, even if the letter of credit prohibits transhipment.
The article 20 of UCP 600 and ISBP also refer to the situations when the Bills of Lading show the port of transhipment as port of loading, respectively as port of discharge.
Indeed, there are carriers who, when they sub-contract the pre-carriage, show in their Bills of Lading the port where the container was loaded on board the feeder vessel as "place of receipt" and the port where the container is to be transhipped for further carriage by the line-haul vessel as "port of loading". They do this because their vessel loads the container at the port of transhipment.
If the port stated in letter of credit as "port of loading" is shown in the Bill of Lading as "place of receipt", the meaning of article 20 (a) (iii) of UCP 600 is that the Bill of Lading must have an "on board" notation indicating the name of feeder vessel on board of which the container was loaded at the port stated as "place of receipt", such port as "port of loading” and the shipment date, as shown below:
"SHIPPED ON BOARD DATE: AUGUST 27, 2010
PORT OF LOADING: ……………
VESSEL NAME: …(name of feeder vessel performing the pre-carriage) …"
This meaning of article 20 (a) (iii) of UCP 600 is made clear in the ISBP paragraph E6(e) which has the following provisions on this matter:
"The named port of loading, as required by the credit, should appear in the port of loading field on a bill of lading. However, it may also be stated in the field headed “Place of receipt” or words of similar effect, provided there is a dated on board notation evidencing that the goods were shipped on board a named vessel at the port stated under "Place of receipt" or words of similar effect."
There are carriers, particularly in Indonesia, which use Bill of Lading forms with a "pre-carriage" box to indicate the name of feeder vessel performing the first part of sea carriage. If the port where the container was loaded on board the feeder vessel is shown in such Bills of Lading as "place of receipt" and such port is the one stated in letter of credit as "port of loading", then provided the Bills of Lading have an "on board" notation indicating the port where the container was loaded on board the feeder vessel as "port of loading", the date of shipment and the name of feeder vessel, such Bills of Lading are acceptable by banks under letters of credit. If, however, the port of loading stated in letter of credit is indeed shown in such Bills of Lading as "port of loading", an "on board" notation indicating the date of shipment and the name of feeder vessel on board of which the container with goods has been loaded at the port of loading is deemed sufficient. An example is the Bill of Lading form used by the former Hanjin Shipping which had a separate box for "Shipped On Board" notation wherein it had to be stated both the date of shipment on board and the name and voyage number of feeder vessel performing the pre-carriage.
Other carriers use to state the port of transhipment in the "port of discharge" box and the actual port of discharge in the "place of delivery" or "place of final destination" box, because their vessel discharges the container at the regional transhipment hub port whereupon the container is carried on board the feeder vessel to the place of final destination.
The ISBP paragraphs E8 (a) and (b) have the following provisions on this matter:
"a. The named port of discharge, as required by the credit, should appear in the port of discharge field within a bill of lading.
b. However, the named port of discharge may be stated in the field headed "Place of final destination" or words of similar effect provided there is a notation evidencing that the port of discharge is that stated under "Place of final destination" or words of similar effect. For example, when a credit requires shipment to be effected to Felixstowe, but Felixstowe is shown as the place of final destination instead of the port of discharge, this may be evidenced by a notation stating "Port of discharge Felixstowe"."
Such Bills of Lading need to indicate that the on-carriage from the port of transhipment to the port of discharge was performed by a vessel as in the example below:
"CARGO TO BE TRANSHIPPED AT ... (port of transhipment shown in Bill of Lading as port of discharge) ... INTO THE VESSEL ... (name and voyage number of feeder vessel performing the on-carriage) OR SUBSTITUTION WITH FINAL DESTINATION ... (port of discharge shown in Bill of Lading as place of delivery)."
There was some debate in the past between the banks and shipping community on the question of acceptance of Bills of Lading showing the port of transhipment as "port of discharge". The banks fear that this might mean that carrier`s responsibility for cargo is limited only to the period up to transhipment so that if the cargo is lost or damaged during the carriage from the port of transhipment to the actual port of discharge the third party Bill of Lading holder may not be able to recover the loss from the carrier named in Bill of Lading or that the carrier cannot be held liable in case of wrongful delivery of cargo. Accordingly, ICC Banking Commission proposed carriers to indicate separately on the face of Bill of Lading the port(s) were transhipment would occur and show the port of discharge just as "port of discharge".
Mr. Peter Jones, the Chairman of the Advisory Body Legal Matters of FIATA, published on January 22, 2000 on Forwarderlaw.com website in the article "Deviation and Transhipment – A Forwarder`s Liabilities for Deviation"3 an advisory opinion issued by ICC Banking Commission on May 10, 1999 concerning the Bills of Lading showing the port of transhipment as "port of discharge" and port of discharge as "place of delivery". The ICC opinion stated that when a letter of credit asks for a Bill of Lading showing shipment from SYDNEY to SHANGHAI and the Bill of Lading indicates SYDNEY as port of loading, HONG KONG as port of discharge and SHANGHAI as place of delivery, then such Bill of Lading is discrepant. That ICC opinion concerned the interpretation of art. 23 of UCP 500 but the issue remains the same because art. 20 of UCP 600 is silent on this matter. The ICC advisory opinion states that:
"The issue of the vessel calling at Hong Kong can be covered by inclusion in the port of discharge box as "Shanghai via Hong Kong" or by a statement in the bill of lading showing that transshipment would occur at Hong Kong."
Commenting the ICC Opinion, Mr. Chris Gillespie, the Chairman of FIATA at the time, said the following:
"Experienced transport practitioners will recognize that neither proposal reflects current transport documentation practice. In other words, the ICC Banking Committee is grappling with making transport practice fit their Rules, and the result is an advisory opinion that is Banking oriented.
The essential problem is that the article is inappropriately worded (or interpreted) depending on how you look at it. It is ABSURD that anyone considering the "spirit" of the L/C transaction between two parties who agree to transhipment should take issue with the destination shown in the "port of discharge" field.
The key is to ensure that the contract of carriage submitted represents a commitment on the part of a carrier to deliver the cargo to the destination required in the L/C and that is what an insertion into the field "place of delivery" will do.
This problem results from literal interpretation of the following words (which I capitalize) in Article 23 (b): "For the purpose of this Article, transhipment means unloading and reloading from one vessel to another vessel during the course of ocean carriage from the port of loading to the PORT OF DISCHARGE STIPULATED IN THE CREDIT."
Therein lies the problem: banks interpret the Rule to mean that the port of discharge in the case of transhipment when the carrier discharges at a port it services (and not the final destination that it does not service) must read as the port of discharge shown in the credit! UCP 600 will have to deal with this issue, meanwhile we will all have to accommodate the banks with variations on their solutions.
If the ICC Solution is adopted, I think would the insurance industry should issue an advisory to their insured pointing out that they should NOT issue B/L`s as many still do NOT SHOWING the transhipment port."
As the Bills of Lading forms used by container shipping lines or Non-Vessel Operating Common Carriers either state on their face that the named carrier is responsible for the entire sea carriage or incorporate such terms from the carrier`s terms and conditions, the banks` concerns and grounds for rejection of Bills of Lading showing the port of transhipment as "port of discharge" are unjustified.
by Vlad Cioarec, International Trade Consultant
This article has been published in Commoditylaw`s Coffee & Cocoa Trade Review Edition No. 1.
Endnotes:
1. The Uniform Customs and Practice for Documentary Credits (UCP 600), ICC Publication No. 600.
2. International Standard Banking Practice for the Examination of Documents under Documentary Credits subject to UCP 600 (ISBP), ICC Publication No. 745E.
3. The article can be found in the section "Commercial Issues" of Forwarderlaw.com web site.