Article

by Pavel Andrle

Freight forwarder documents are increasingly common in today's international transport practice. Their presentation is often allowed or requested in L/Cs. However, they have always been and, to some extent, are still somewhat troublesome from the point of view of a documentary credit practitioner. The aim of this article is to look at the treatment of freight forwarder documents under UCP 600, summarizing the issues and pointing out the remaining questions.

Documents issued (signed) by freight forwarders

Documents can be issued and signed by a freight forwarder in essentially two different ways:

- in the capacity of the carrier or in the capacity as the named agent for or on behalf of the named carrier;

- in the capacity of the mere freight forwarder.

If the (transport) document is issued and signed by a freight forwarder as a carrier or as an agent for or on behalf of the carrier, then it is a transport document, and the respective transport article of UCP 600 (articles 19, 20, 21, 22, 23 or 24) will apply. The period for presentation which includes this transport document will also apply - as stated in the credit, in the SWIFT MT700 field 48 or by the virtue of sub-article 14 (c) of UCP 600.

In this situation, we should not be talking about freight forwarder documents at all. These are transport documents issued by a carrier or a named agent for or on behalf of the named carrier.

However, it is more confusing when documents are issued and signed by a freight forwarder in the capacity of a mere freight forwarder.

The first possibility

From a bank practitioner's point of view, in this situation there are three different situations that can arise. The first occurs when the credit requests a transport document (for instance, a bill of lading) and allows for presentation of the corresponding freight forwarder's document (i.e., if the credit, for example, states "Freight Forwarder's Bill of Lading acceptable").

How to interpret this condition according to international standard banking practice is described in ISBP 681. The ISBP explains the meaning of the above phrase and similar provisions in respect of multimodal transport documents (paragraph 72) and air transport documents (paragraph 138). There is nothing similar in ISBP 681 concerning road, rail or inland waterway transport documents, because in practice these documents are not signed by freight forwarders in their capacity as mere freight forwarders.

The relevant provisions of the ISBP conclude that the document must comply with all provisions of the respective transport article of the UCP 600, the ISBP and the terms of the credit - with only two exceptions: the document could be signed by a freight forwarder in the capacity of a freight forwarder without the need to identify itself as carrier, or as an agent for the named carrier and without the need to show the name of the carrier (so identified).

For example, a freight forwarder's bill of lading presented under the credit which allows a presentation as mentioned above would be examined against article 20 of UCP 600 with these two above-mentioned exceptions. The presentation would have to take place within the period for presentation (as per L/C conditions or within 21 calendar days as per sub article 14 (c) of UCP 600). All respective conditions of the credit applying to the B/L would also fully apply to the freight forwarder's B/L. If the credit is issued using a SWIFT MT700 the following fields would fully apply:

- 43P Partial Shipments,

- 43T Transhipment,

- 44E Port of Loading,

- 44F Port of Discharge,

- 44C Latest Date of Shipment,

- 44D Shipment Period and

- 48 Period for Presentation.

The second possibility

The second possibility arises when a credit requests a freight forwarder document, but the document is of the type normally issued by a carrier or a master, or an agent for or on behalf of a carrier or a master, i.e., if the credit calls for a "Freight Forwarder's Bill of Lading".

Interestingly, this particular situation is not addressed in ISBP 681, and it was only a matter of time before the question arose. It was finally touched on at the ICC Banking Commission meeting in Athens in April 2008, and an Opinion (470/TA 651rev, reproduced in the last issue of DCInsight) has been issued. The conclusion of the Opinion reads: "Where a credit requires or allows the presentation of a 'House' bill of lading or air waybill, the document must comply with the terms and conditions of the credit and the requirements of the respective transport article, with the exception that the document may be signed by the freight forwarder in its capacity as freight forwarder and need not show the name of the carrier [emphasis added]."

In my view, this conclusion would apply to credit conditions of the same nature in respect of the following documents:

- house air waybill, freight forwarder's air waybill,

- house bill of lading, freight forwarder's bill of lading,

- freight forwarder´s multimodal transport document, freight forwarder's combined bill of lading (or similar phrases).

In other words, the examination of freight forwarder documents of this kind (usually issued by carriers, masters or agents for them) by a documentary credit practitioner should be the same regardless of whether the credit requires a corresponding freight forwarder's document or allows for its presentation instead of the respective transport document. This is surely the logical conclusion.

The third possibility

The third possibility arises when a credit requests a freight forwarder document of the kind only issued by a freight forwarder in the capacity of mere freight forwarder (for instance, if a credit requests a "Freight Forwarder's Certificate of Receipt").

How to interpret this credit condition is found in paragraph 19 of ISBP 681, which says that this type of document is not a transport document, and therefore UCP 600 articles 19-25 would not apply, nor would sub-article 14 (c). Such a document will be examined in the same manner as other documents for which there are no specific provisions in UCP 600, i.e., under sub-article 14 (f ).

In practice, however, there are different and rather conflicting views concerning which credit conditions apply to the examination of these "pure" freight forwarder documents.

In my view, if this kind of document is requested, all of its data should be clearly stated in the field 46A, Documents Required. All other fields used for stating conditions for transport documents should be left blank. But what happens if they are not left blank? Do these conditions of the credit apply to these kinds of freight forwarder documents? If the credit is issued using SWIFT MT 700, which fields would apply?

- 43P Partial Shipments?

- 43T Transhipment?

- 44A Place of Taking in Charge/Dispatch from ... /Place of Receipt? n 44E Port of Loading/Airport of Departure?

- 44F Port of Discharge/Airport of Destination?

- 44B Place of Final Destination/For Transportation to ... /Place of Delivery?

- 44C Latest Date of Shipment?

- 44D Shipment Period?

Unfortunately, the SWIFT manual does not provide clear rules for the use of these fields. In my view, "partial shipments" would be interpreted to mean partial deliveries of the goods/services/ performances described in the credit, so this would apply to virtually any presentation. "Transhipment" would clearly not apply. What about the other fields?

Many practitioners argue that these fields do not apply to mere freight forwarder documents. They consider them to be non-documentary conditions and argue that these fields only apply to transport documents (as covered by articles 19, 20, 21, 22, 23 or 24 of UCP 600). I have sympathy for this view, as it is clear, simple and puts the onus on the issuer of the credit to be clear and precise. The debates concerning the Position Paper on non-documentary conditions and the treatment of these troublesome conditions during the revision of UCP were signs that the position of the Banking Commission on this point would be stricter from that point on. On the other hand, it must be admitted that there is nothing to support this view in the SWIFT manual. Moreover, the Banking Commission, at its last meeting in Athens, discussed this issue, and Opinion TA 644rev (UCP 600) has now been approved. It is useful to quote from its conclusion: " ... details such as the places, ports or airports from which the goods are to be shipped from and to and the latest shipment date may be disregarded for the purpose of determining a complying presentation and need not be stated in any other stipulated document that is presented. However, the data in the other stipulated documents will still be subject to review under sub-article 14 (d) to ensure that any data is not conflicting with the data in the credit. According to sub-article 14 (h), banks will deem a nondocumentary condition as not stated, (on the basis that there is no necessity for the beneficiary to provide any evidence of compliance) and will disregard it. Should the beneficiary, nevertheless, elect to insert such data on any other stipulated document then they must ensure that it does not conflict with the data in the credit. The view of the Banking Commission is that sub-article 14 (h) is not absolute and is qualified by the content of sub-article 14 (d) [emphasis added]".

The function of the freight forwarder document is to reflect the fact that the cargo has been taken in charge (or dispatched) from the place of taking in charge/dispatch to the/place of receipt, or from the port of loading/airport of departure to be shipped to the port of discharge/airport of destination, or from the place of final destination/for transportation to the place of delivery. Therefore, the relevant data for these actions will appear in the respective freight forwarder document. The document will also show the date when this cargo has been taken in charge by the freight forwarder (most likely by the pre-printed wording linked to the date of issuance).

According to Opinion TA 644rev noted above, documentary credit practitioners are then obliged to examine this data against the non-documentary conditions stated in the credit. In my view, this interpretation of sub-articles 14 (d) and 14 (h) of UCP 600 is very cumbersome and troubling. It effectively says that a practitioner will be only able to determine whether the non-documentary conditions in the credit are to be disregarded when examining the presentation of documents.

A major purpose of the UCP revision was to streamline and simplify the examination of documents. This Opinion, in my view, achieves quite the opposite.

Pavel Andrle is an international trade finance trainer and consultant and Secretary to the ICC Czech Republic National Committee. His e-mail is pa@cmail.cz