Freight surcharge clause on B/L

[HOANGTHIANHTHU_invalid]

Dear all,

Your comments on the following case are highly appreciated:

L/C requirements:
- Full set of clean on board B/L, to order, blank endorsed, marked “Freight Prepaid' and notify applicant stating full address.
- Term of Delivery: CFR Rotterdam

B/L presented meets the requirements but it contains a clause on its face as follows: “Destination charges collect per line tariff and other charges to be collected from the party who lawfully demands delivery of the cargo without prejudice to the carriers rights against merchant".

The issuing bank refuses the documents stating that “on the B/L face appearing the freight surcharge clause “Destination charges collect per line tariff and other charges to be collected from the party who lawfully demands delivery of the cargo without prejudice to the carriers rights against merchant ' which is not allowed for delivery on CFR clause”.

To support their view the issuing bank also quotes ICC Opinion R191 (which I can’t trace on DCPro): '' Marine B/L presented under L/C for CFR or CIF deliveries and bearing a clause of this nature should be considered as not appearing on their face to be in accordance with the terms and conditions of the credit. This does not apply to deliveries on a FOB basis, since in this case the freight charges have to be born by the buyer (consignee) away ''

Is the discrepancy raised by the issuing bank valid?

I think the bill of lading bearing such a clause is acceptable, i.e. not discrepant. My view is based on ISBP para. 113 and UCP 600 Article 26 (c), which says: “A transport document may bear a reference, by stamp or otherwise, to charges additional to the freight”.

Looking forward to your comments.

Regards,
N.H. Duc



[edited 9/24/2009 4:50:25 AM]

[DanielD]

Actually, R191 appears in the "Opinions of the ICC Banking Commission 1989-1991" and the conclusions of M. Muller were accepted. This is strange in light of art. 31d. (UCP 400). A few years earlier the Banking Commission had refused to deal with this matter (R78). I think this opinion is now outdated. It is a pity that the Banking Commission does not publish a paper or something similar specifying the opinions which are no longer applicable
Daniel

[NigelHolt]

I have managed to track down a copy of the opinion which I think dates from June 1990. There is no denying that the opinion does seem to suggest that the Commission regarded the ‘price basis’ / ‘shipping ‘term’ / ‘Incoterm’ (call it what you will) as a possible relevant factor in determining the compliance of documents, something that I can of course only deprecate and regard as being wholly wrong. Overall, it seems to me that the decision shows very sloppy thinking indeed.


Turning to NHD’s query:
1. I certainly would not describe the clause quoted as being a 'freight surcharge clause' (as NHD does) as it does not seem to have anything to do with 'freight' but 'destination' and other unspecified charges.
2. it seems to me abundantly clear that the charges mentioned in the clause referred to by the issuing bank are ‘charges additional to FREIGHT’ [my capitals] and are therefore covered by UCP600 sub-Art. 26(c) and thus are expressly permitted by UCP600 and no opinion can override this. Furthermore, should the price basis be relevant -which I deny- on what basis can the issuing bank say that a CFR contract does not allow such 'destination' and other unspecified charges to be borne by the buyer? It is not as if the price basis quoted Incoterms 2000 so what is the source for its opinion? Furthermore, if one does look at Incoterms 2000 there is nothing that I can see that would be automatically incompatible with the -to me quite vague- BL clause quoted: see ‘Division of costs’ A6 & B6 in publication 560.

Overall, I have no doubt that the issuing bank is 100% incorrect.



[edited 9/24/2009 4:36:37 PM]

[HOANGTHIANHTHU_invalid]

Daniel and Jeremy,

Your inputs are really helpful. Truly appreciated.

Best regards,
N.H. Duc