I would appreciate some comments and advice for the following situation:
Doccredit was issued covering shipment by air with AWB consigned to the issuing bank. Discrepancies were found in the documents, which were refused in a timely and correct manner. Although the presenting bank has been contacted, no instructions have been received. Meanwhile the goods are held in storage incurring expense.
Questions : Who is liable for any and all expenses in such a case? URC 522 art 10 is not applicable, firstly because the documents are presented under UCP 500, and also since the documents were made out in the name of the issuing bank as per its instructions (the beneficiary would not accept having the AWB consigned to the applicant anyway). What about insurance after the usual warehouse to warehouse + 60 days clause runs out? For the time being this is just a theoretical question, but I can forsee it coming up, and forewarned ....
Responsibility towards goods when documents are refused
-
JudithAutié
- Posts: 195
- Joined: Fri Apr 05, 2019 5:20 pm
Responsibility towards goods when documents are refused
Judith,
My assumption is that the issuing bank has not arranged any insurance or storage itself, post the goods arriving.
My personal views, without any liability/responsibility, are:
Regarding the first question, I believe that the consignor, rather than the consignee, would be liable for any costs incurred by the company currently storing the goods, although I must stress this is an area in which I do not have any expertise. (I imagine Laurence might.) My understanding is that if the charges are not settled the storer may have the right to sell the goods to recoup them.
Regarding the second question, I do not see that the issuing bank has any responsibility to the presenter to take any action to protect the goods. Therefore should they be damaged/stolen etc that is the presenter’s problem and not the issuing bank’s.
Jeremy
P.S. Did you have a jolly time on Friday at the hotel Ambassador (assuming you went)?
[edited 3/25/03 5:20:26 PM]
My assumption is that the issuing bank has not arranged any insurance or storage itself, post the goods arriving.
My personal views, without any liability/responsibility, are:
Regarding the first question, I believe that the consignor, rather than the consignee, would be liable for any costs incurred by the company currently storing the goods, although I must stress this is an area in which I do not have any expertise. (I imagine Laurence might.) My understanding is that if the charges are not settled the storer may have the right to sell the goods to recoup them.
Regarding the second question, I do not see that the issuing bank has any responsibility to the presenter to take any action to protect the goods. Therefore should they be damaged/stolen etc that is the presenter’s problem and not the issuing bank’s.
Jeremy
P.S. Did you have a jolly time on Friday at the hotel Ambassador (assuming you went)?
[edited 3/25/03 5:20:26 PM]
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Responsibility towards goods when documents are refused
If Incoterms is used, this should determine the responsibility for storage charges etc, but bear in mind that variations can apply to the standard 13 terms.
A bank which issues a DC consigning goods to itself appears to be ignoring Article 4 of UCP. Judith has said that the goods are consigned directly to the issuing bank under an AWB. This is asking for trouble. Undoubtedly the DC will call for an invoice to be charged to the applicant, but the AWB contradicts this, being consigned to the bank. Therefore even if the storage issues are resolved, there is discrepant (unmatched) documentation which may prevent Customs clearance. This is similar to the issue of AWB being issued to order of the issuing bank. Some time ago I wrote an article in DC Insight against this practice, which I am happy to say has now been recognised in par. 154 of ISBP. DC Insight articles are all available in DC-PRO.
Laurence
A bank which issues a DC consigning goods to itself appears to be ignoring Article 4 of UCP. Judith has said that the goods are consigned directly to the issuing bank under an AWB. This is asking for trouble. Undoubtedly the DC will call for an invoice to be charged to the applicant, but the AWB contradicts this, being consigned to the bank. Therefore even if the storage issues are resolved, there is discrepant (unmatched) documentation which may prevent Customs clearance. This is similar to the issue of AWB being issued to order of the issuing bank. Some time ago I wrote an article in DC Insight against this practice, which I am happy to say has now been recognised in par. 154 of ISBP. DC Insight articles are all available in DC-PRO.
Laurence
-
JudithAutié
- Posts: 195
- Joined: Fri Apr 05, 2019 5:20 pm
Responsibility towards goods when documents are refused
Thanks for both of your replies.
Yes, Jeremy, I was at the Hotel Ambassador (and giving a short talk on ISBP as a matter of fact) and did have a good time.
I realize that doccredits deal in documents, however real life also hits sometimes. Beneficiaries are often loath to have AWB's in the name of the applicant, insisting on putting the bank's name as consignee. (The same beneficiaries don't have problems with truck shipments directly to the applicants -- so that shows that people are unpredictable).
Everyone agrees that AWB's "to order" are not correct. However when I was in Mauritania, and pointed this out to some of our correspondants, they simply replied that it was customs regulations that required this, so that the banks would be implicated in the exchange controls -- all transport documents, regardless of their nature, have to be to the order of a bank. So I suppose that until some training is vigorously pursued even outside the banking fields, we'll still see such requirements in our credits.
Surprised that T.O. Lee hasn't been online for quite a while -- he must have decided he is too busy earning his noodles, as he was fond of saying.
Thanks again for your input.
Yes, Jeremy, I was at the Hotel Ambassador (and giving a short talk on ISBP as a matter of fact) and did have a good time.
I realize that doccredits deal in documents, however real life also hits sometimes. Beneficiaries are often loath to have AWB's in the name of the applicant, insisting on putting the bank's name as consignee. (The same beneficiaries don't have problems with truck shipments directly to the applicants -- so that shows that people are unpredictable).
Everyone agrees that AWB's "to order" are not correct. However when I was in Mauritania, and pointed this out to some of our correspondants, they simply replied that it was customs regulations that required this, so that the banks would be implicated in the exchange controls -- all transport documents, regardless of their nature, have to be to the order of a bank. So I suppose that until some training is vigorously pursued even outside the banking fields, we'll still see such requirements in our credits.
Surprised that T.O. Lee hasn't been online for quite a while -- he must have decided he is too busy earning his noodles, as he was fond of saying.
Thanks again for your input.
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Responsibility towards goods when documents are refused
Judith,
I agree that the same beneficiaries who use DCs to send AWB consignments to banks also send truckloads to applicants. This conundrum may be explained if they do not fully understand the security implications of the documents being used. An example I have in mind is that they may be using Truck B/L for goods sent directly to applicants, thinking that a truck B/L has the same qualities of title and negotiability as a maritime B/L. In fact a truck B/L is closer to an AWB than a sea B/L in relation to title and negotiability.
Laurence
I agree that the same beneficiaries who use DCs to send AWB consignments to banks also send truckloads to applicants. This conundrum may be explained if they do not fully understand the security implications of the documents being used. An example I have in mind is that they may be using Truck B/L for goods sent directly to applicants, thinking that a truck B/L has the same qualities of title and negotiability as a maritime B/L. In fact a truck B/L is closer to an AWB than a sea B/L in relation to title and negotiability.
Laurence
Responsibility towards goods when documents are refused
Laurence,
Some remarks on your first posting for you to unwind to, although I notice your home relatively early tonight so presumably not too hard a day.
1. If I understand correctly, your DCI article & ISBP para 154 are about goods consigned ‘to the order of a bank’, as opposed to goods simply being consigned to a bank as in Judith’s example.
2. I can see how one might argue that allowing goods to be consigned to a bank might not reflect Article 4, but it is not a view I would agree with. To me Article 4 is just one of those articles making clear that the bank’s obligations are governed by the documents and not the goods, and no more.
3. I can accept that consigning goods to a bank may cause customs problems (this is not an area in which I have any expertise). However, I would simply observe that it is a widespread practice, particularly on inward documentary collections (i.e. imports into the U.K.), sellers in the Indian sub-continent are particularly guilty of this practice, and export documentary credits (exports from the U.K.). It is also something we allow on import documentary credits should the applicant request, but it’s not that common for them to do so.
4. Presumably Incoterms are not relevant where the applicant has validly rejected the goods and documents, and -in the absence of agreement to the contrary with the carrier- the consignor or goods is/are liable for storage costs.
Jeremy
Judith,
Pleased to hear you had a good time. I’m giving a talk on an ICC UK ISBP seminar in June. Therefore, I may be in touch by e-mail for some views, if that’s alright. (Others may also find me pestering them as well.)
Jeremy
[edited 3/26/03 9:21:22 PM]
Some remarks on your first posting for you to unwind to, although I notice your home relatively early tonight so presumably not too hard a day.
1. If I understand correctly, your DCI article & ISBP para 154 are about goods consigned ‘to the order of a bank’, as opposed to goods simply being consigned to a bank as in Judith’s example.
2. I can see how one might argue that allowing goods to be consigned to a bank might not reflect Article 4, but it is not a view I would agree with. To me Article 4 is just one of those articles making clear that the bank’s obligations are governed by the documents and not the goods, and no more.
3. I can accept that consigning goods to a bank may cause customs problems (this is not an area in which I have any expertise). However, I would simply observe that it is a widespread practice, particularly on inward documentary collections (i.e. imports into the U.K.), sellers in the Indian sub-continent are particularly guilty of this practice, and export documentary credits (exports from the U.K.). It is also something we allow on import documentary credits should the applicant request, but it’s not that common for them to do so.
4. Presumably Incoterms are not relevant where the applicant has validly rejected the goods and documents, and -in the absence of agreement to the contrary with the carrier- the consignor or goods is/are liable for storage costs.
Jeremy
Judith,
Pleased to hear you had a good time. I’m giving a talk on an ICC UK ISBP seminar in June. Therefore, I may be in touch by e-mail for some views, if that’s alright. (Others may also find me pestering them as well.)
Jeremy
[edited 3/26/03 9:21:22 PM]
-
larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
Responsibility towards goods when documents are refused
Jeremy,
I acknowledge that, as Judith says, the authorities in some countries give the banks no option but to adopt this practice. The similarity to which I alluded earlier in consigning AWBs to order, is that although this practice continues, I regard it as "bad practice" as in my DCI article.
For me, a bank which arranges for goods to be consigned to that bank (not merely to order of the bank), has a conflict of interest, in that it has "an interest" in the goods, while simultaneously claiming under Article 4 to "deal with documents and not with goods".
Incoterms are usually crucial to determining the party to whom storage charges in such a situation are payable. A simple example might be DDP where the exporter is liable for these charges whether or not goods/documents are rejected. At the opposite end of the scale, a carrier would seek payment from the importer for these charges if the terms were EXW, again regardless of rejection of goods/documents.
Laurence
I acknowledge that, as Judith says, the authorities in some countries give the banks no option but to adopt this practice. The similarity to which I alluded earlier in consigning AWBs to order, is that although this practice continues, I regard it as "bad practice" as in my DCI article.
For me, a bank which arranges for goods to be consigned to that bank (not merely to order of the bank), has a conflict of interest, in that it has "an interest" in the goods, while simultaneously claiming under Article 4 to "deal with documents and not with goods".
Incoterms are usually crucial to determining the party to whom storage charges in such a situation are payable. A simple example might be DDP where the exporter is liable for these charges whether or not goods/documents are rejected. At the opposite end of the scale, a carrier would seek payment from the importer for these charges if the terms were EXW, again regardless of rejection of goods/documents.
Laurence