Article

by Sheilar T. Shaffer

With the rapid growth of freight forwarders, it is not surprising that transport documents issued by freight forwarders represent a considerable percentage of the documents presented to banks. Nor is it surprising that freight forwarders often act "as carriers". Their dual role as agent and/or carrier, how ever, still puzzles some bankers, which keeps the issue of forwarder transport documents in the spotlight.

UCP 500 article 30 stipulated the circumstances under which a freight forwarder's transport document could be acceptable. Even though UCP 600 makes no reference to freight forwarders, the new sub-article 14 (l) states that the issuer of a transport document can be any party other than the carrier, provided it meets the requirements of the transport articles in the rules.

However, what continues to concern bankers is the fact that many L/Cs subject to UCP 600 require that a bill of lading incorporate the additional condition "forwarder's bill of lading not acceptable". In my view, this condition adds no value, clouds the transparency of the credit, is apt to be confusing and hinders the efficiency of L/C processing.

Case study

Recently, an L/C required a bill of lading with the additional condition "forwarder's bill of lading not acceptable" The presented bill complied with UCP 600 article 20 and was signed as follows: ABC Logistics on behalf of the carrier: APL. The document was dishonoured by the confirming bank, which stated "forwarder's bill of lading presented".

The beneficiary obviously disagreed and argued that it never had indicated that the document was a "house bill of lading", and therefore it should not be treated as a freight forwarder document. However, the con firming bank said it should have been signed by the carrier if the credit required a bill of lading and simultaneously stated "freight forwarder's bill of lading unacceptable". It also argued that if this was not the case, why did the L/C need to add such an additional condition?

My point is not to debate whether this was a valid discrepancy, but to draw attention to the causes that led to this conflict.

ISBP

ISBP is silent about the phrase "forwarder's bill of lading not acceptable"; indeed, freight forwarder is never defined in the ISBP. However, its reverse counter part, the terminology "forwarder's bill of lading acceptable" is addressed. ISBP 681 paragraph 95 states that when an L/C allows for a forwarder's bill of lading, a freight forwarder can sign the B/L in the capacity of a freight forwarder without identifying itself as carrier or as agent for the named carrier, i.e., a forwarder bill of lading can be silent about the carrier. However, if an L/C requires a bill of lading but says "forwarder bill's of lading not acceptable", several questions arise:

- How does one identify a freight forwarder?

- Should the B/L be signed "as carrier" only?

- Can the B/L be signed as "an agent for a named carrier"?

- Is a forwarder barred from signing the document?

These questions can be divided into two categories, the first linked to the issuer's identity, the second to the issuer's function, i.e., the capacity in which it is acting.

Differing perceptions

There can be a number of answers depending on one's perceptions. In its reading of the case above, the beneficiary read the phrase on its face and assumed that the B/L should not be entitled a "house bill of lading". However, the bankers took it differently. They argued that since a presented document, however named, was the principle governing UCP articles19-25, the title of the B/L was irrelevant.

When an L/C requires a bill of lading and is silent as to a freight forwarder, UCP 600 article 20 would be applicable. A presented document that complies with UCP 600 article 20 and is signed by a forwarder as an agent for the named carrier (as above) was surely acceptable, since UCP 600 sub-article 14 (l) explicitly permits a transport document to be issued by any party other than the carrier provided it complies with the applicable transport articles.

However, what concerned us was the combination of the phrase "forwarder's bill of lading not acceptable" with the requirements of UCP 600 article 20. Such a link appeared to open a variety of possibilities and to create some unexpected problems.

UCP 600 articles 19-25 are silent as to the issuer of a transport document; they only stipulate how to sign them. Therefore, in this case the wording "forwarder's bill of lading not acceptable" gave some bankers a hard time figuring out how to apply the rules of UCP 600 in examining documents.

Some bankers who linked the phrase to the issuer's identity might treat it as overriding UCP 600 sub-article 14 (l) and article 20, i.e., they could claim the B/L should not be signed by a forwarder even if it signed as carrier or agent for a named carrier. In other cases where the phrase was considered to be linked to the capacity of the issuer, the confirming bank's position in the case study, the condition was taken as evidence that the B/L should be signed "as carrier", which would be another way of overriding article 20.

One wonders, therefore, how all this will turn out if each party draws a different conclusion from this phrase. In some situations, when an L/C involves a confirming bank that bears some operational risk in document examination, the bank will be more exposed if the situation is too difficult to predict.

ICC perspective

Several ICC opinions address the questions raised by "forwarder's transport document unacceptable", but they mainly respond to specific cases and may not cover all situations that can arise from the use of this phrase. Among these, Opinion TA 572 is typical.

In this case, the L/C called for an ocean bill of lading with an additional condition that "transport document issued by freight forwarder not acceptable". The presented document was entitled "FBL BIFA Negotiable FIATA Multimodal Trans port Bill of Lading" and was signed "as carrier". It was refused by the issuing bank on the grounds that the document was issued by a forwarder. The question was whether this was a justified refusal.

The ICC Banking Commission said that the terminology "transport document issued by freight forwarder not acceptable" was an ambiguous term that does not clearly define the type of document that would be acceptable. With regard to this enquiry, the Banking Commission said that the bank would be obliged to accept a bill of lading that was signed "as carrier" irrespective of any knowledge it may have as to the capacity of the issuer.

This raises the question: what if the document had been signed "as the agent of a named carrier"? Would it be still compliant?

A complementary opinion was Opinion TA 621. The L/C required a master air waybill. The document was signed by an IATA agent as the agent of a named carrier. The air waybill was refused for a similar reason: "HAWB presented". Was this a valid discrepancy? The Banking Commission's conclusion was: "The underlying letter of credit called for a 'Master Air Waybill'. The intent behind such a condition is unknown nor are the expectations of the issuing bank in relation to its issuance or signing... The document would not be considered as discrepant for the reason stated."

Note that this document was actually signed by a forwarder as the agent of a named carrier. As ICC Opinion TA 621 (the master air waybill case) and ICC Opinion TA 572 (transport document issued by freight forwarder not acceptable) are, by their nature identical, this document was also compliant for reasons similar to those outlined in TA 572 1.

The conclusions of these opinions appear to indicate that the phrases "freight forwarder transport document not acceptable" or "house bill of lading unacceptable" or similar wording will be treated as ambiguous. A document signed by a forwarder would be acceptable provided it complies with the applicable transport articles.

Conclusion

In sum, the phrase "forwarder's bill of lading not acceptable" is too vague to be effective in L/C operations. Based on the current ICC opinions, to incorporate this term in an L/C is insufficient to prevent a bill of lading from being signed by a forwarder; it only leads to confusion due to the parties' different concerns and misinterpretations.

Still, the ICC position on this issue has not yet been clearly perceived and universally accepted by L/C users. In fact, many L/Cs still incorporate the phrase. To achieve predictability and more certainty in L/C processing, ICC's position should be underlined when ISBP 681 is revised.

Sheilar T. Shaffer is Senior Documentary Manager of Import/Export Documents at the International Department of Agricultural Bank of China, Shantou Br.
Her e-mail is sheilar@sina.com

1. DC World Volume 11, Number 7 (July/August 2007): "the Logic of UcP Logic", by kim christensen.