ICC Digital Library Forum

One of the latest ‘Official Opinions- Unpublished’ is ‘Questions concerning bills of lading signed by forwarders From UCP500 Sub-Article 23(a), 23(a)(i) and 26(a)(i); Articles 26 and 30’ (document 470/TA572rev I assume).

The query concerned two ‘issues’, and it is the first issue with which I am concerned. That is whether, where:
1. A documentary credit called for clean on board bills of lading and stipulated separately, "Transport document issued by Freight Forwarder not acceptable" (the ‘Stipulation’), and:
2. The transport document subsequently presented was titled "FBL BIFA Negotiable FIATA Multimodal Transport Bill of Lading" and signed by the issuer, "as carrier",
a bank was correct to refuse the document for the reason that the express condition of the credit "Transport Document issued by freight forwarder not acceptable" overrode UCP Article 30.

The opinion states that the Stipulation is ‘an ambiguous term’ which ‘does not clearly define the type of document that would be acceptable’. This being so, one would expect that the view would be taken that the Stipulation was an ‘unclear instruction’ per Article 12 that therefore required the Advising Bank to ‘request [the Issuing Bank] to provide the necessary information’. Therefore, that no definitive interpretation of the term could be given. However, instead the opinion simply goes on to state, without providing any explanation whatsoever, that ‘the bank would be obliged to accept a bill of lading that was signed "as carrier" irrespective of any knowledge they may have as to the capacity of the issuer’.

Setting aside the lack of an explanation for this position, it fails to address the question of ‘appearance’, i.e. what if the carrier APPEARS to be a ‘forwarding agent’ from the document presented? A bank may well not have any knowledge ‘as to the capacity of the issuer’, but nonetheless it appear from the document presented that the ‘issuer’ acts as a ‘freight forwarder’. What then? If the ‘Banking Commission’ is actually suggesting that such a document is compliant, it is logically saying that the Stipulation is completely meaningless and of no effect whatsoever. This, to me, is simply untenable. Therefore, I do not perceive that the position is any clearer, and in fact possibly less clear, than it was before the Banking Commission responded.

Anyone else any thoughts on the matter?

Merry Christmas to everyone.


[edited 12/17/2004 10:32:53 AM]

Jeremy ,
We sometimes receive export L/C (s) stipulating that " transport docs issued by Freight Forwarder is not acceptable"
My view , this term does not really define the doc which would not be acceptable.As we consider that It has no meaning,we disregard that term.A bank which requires the transport doc.issued by a freight forwarder not to be presented, should have a
condition in Credit saying that "Transport docs issued by a Freight Forwarder is not acceptable even if it has been signed in accordance with UCP Article 30."
If I receive an L/C having such a clause, I would have another problem because I do not have knowledge the transport docs which have " An apperant capasity of freight forwarder" even if it has been signed as carrier or as agent to carrier. I mean such the transport docs as FBL BIFA
Negotiable FIATA Mult. B/L (s) or anothers. Avoiding any further confusion,banks requiring this term should say that FBL BIFA Neg.B/L.............. is not acceptable.
Meanwhile ,I should say that I'm too not able to understand what if the CARRIER or It's AGENT appears to be a forwarding agent , or why it is not acceptable to banks or importers provided that the doc has been signed in acc.with UCP Art 30.

Yahya ,

Dear Jeremy,

Tough question so close to Christmas

My own personal view’s without responsibility.

I’ll give you my view’s – but I have to start somewhere else, and I am not sure that you’ll totally agree with me … I ask you to bear with me though; at the end I think that my conclusion will be almost the same as yours.

If there is one thing that I have never understood, then it surely is the way that trade finance bankers perceive the freight forwarder. I admit that I have a handicap here. Everyone have their own secret, and mine is, that I used to work as a freight forwarder, before joining a bank’s trade finance department. So I bear the heavy burden of knowledge:-)

We did everything within transport - and in the periphery thereof (that one could make a bit of money on). Let me mention some: Goods Storage – Carrier – Intermediary - Packing goods - NVOCC - Transport and goods Insurance - Travel agent - Container Consolidator - Customs clearing agent.

As a freight forwarder in Denmark, our set of rules were NSAB 1). They are interesting to look at in this context because they apply to freight forwarding companies (a company doing freight forwarding business). These rules defines the “function” (capacity) of the forwarder. It makes a distinction between the forwarder acting as CARRIER or as INTERMEDIARY (with different liability). The forwarder can choose/agree the “function” on a case by case basis. One way of choosing (according to NSAB) is to issue a bill of lading on its own stationary: then the forwarder is by definition “carrier”.

As mentioned this is the Nordic rules – I would be very interested in hearing how this is in other countries.

So far so good!

I think this is where the current ruling from the ICC gets messed up – but somehow this is also where this new opinion tries to clear things up: In the past rulings from the ICC, the forwarder as a company and the “function” of the forwarder has been mixed up. This opinion tries to separate the two, saying that if the documentary credit states that “B/L issued by Freight Forwarder is not acceptable”, then it should just be issued “as carrier” (the function). (I do not say that I agree with this, only that this distinction is vital, and it is a clear progress that it is mentioned).

However; people who read these things (trade finance bankers) would probably understand this, but a phrase like: “… may be signed by the forwarder in the capacity as forwarder …” is to me – nonsense; for the reasons mentioned above. Being a forwarder is NOT equal to any capacity or function. The capacity or function vary from case to case.

You mention article 12. The problem with article 12 (as I have experienced it), is that it is being played when documents are presented or refused (as in this case). The intention however is to use it, at time of advising the credit. So I ask you, what is the consequence of an “unclear instruction” which has not been dealt with when advising the credit: can you disregard the term (as Yahya suggests)? Should you use “logic” (dangerous patch). In this case, I would to some extent accept the view from the banking commission that it is in fact an “unclear condition”. BUT looking through the ICC rul-ing on this area, I would not blame a bank to accept this as clear, one way or the other. I mean the: terms “Freight forwarder bill of lading acceptable” has been used a number of times. E.g.:

* ICC Opinion R.221
* ICC Opinion R.225
* ISBP paragraph 77 + 124 + 148
* The Opinion in question (TA.572)

So why should it be an “unclear instruction” to state that “Forwarders B/L NOT accept-able”??

So where is all of this coming to:
1) is this in fact an unclear condition”?
If you look at the current ruling on this (mentioned above), then I personally would agree with the opinion, that the term is unclear, and I think that it should not be used. The issuing bank should state exactly what it is, that is not acceptable. I would hope that this issue as a whole would be dealt with together with the UCP revision (either as a part of – or as a separate “decision”) to clear all those opinions and paragraphs up once and for all.
On the other hand, rising a bit from the documentary credit ruling, then the stipulation is (to me) perfectly clear: The document must not “appear” to be issued by a freight forwarder!

2) is the ruling right?
Going back to my introduction: Being a freight forwarder is a job – a business. If this is not allowed in the credit, then my logic tells me that this stipulation has nothing to do with the capacity/function. It must mean that it should not “appear” to be a B/L issued by a freight forwarder.

3) a conclusion?
My conclusion is that in theory I do NOT agree with the opinion.
In practice however, looking at all the misunderstandings surrounding the “Freight Forwarder”, I would accept the argument that the term is unclear, and should therefore be disregarded – which would lead to the conclusion mentioned in the opinion.


I would also like to wish everyone a Merry Christmas, and thank you Jeremy and the rest of you for the postings in DC-Pro, it has really helped my understanding of the wired character: the documentary credit. I do not expect ever to be able to tame it, but to understand (some of) it, is not a bad thing

Best regards
Kim


Ps. On purpose I have not mentioned article 30, as I hope that if we all do not mention it – then it will go away


1) The General Conditions of the Nordic Association of Freight Forwarders – NSAB 2000. It can be found in various languages on the internet at the following address: http://dasp.dk/docs/jura/nsab_2000/index.asp

Yahya and Kim,

Thanks for taking the time to express your views. If anyone else has any thoughts I’d be pleased to ‘hear’ them.

It may be of interest to know that:
1. A ‘Middle Eastern’ bank very helpfully simply stated in its credit ‘Bills of lading issued by Freight Forwarder is not acceptable even if signed as a carrier or as an agent of the carrier’. I do not see how it could be argued that bills of lading that APPEARED to be signed by a freight forwarder, whether as carrier or agent of a carrier could be considered compliant, whatever the apparent logic -or lack of- in such a requirement.
2. A ‘Near Eastern’ bank included in its credit the term ‘A transport doc. issued by a freight forwarder isn’t acceptable.’ It has since confirmed to us that it meant a transport document signed by a freight forwarder in accordance with Article 30 & 23ai is not acceptable. Just goes to show that one could be caught up in dispute with the issuing bank if one disregarded such a term.
3. A ‘Far Eastern’ bank included in its credit the term ‘Freight forwarder b/l is not acceptable’. It has since confirmed to us ‘The B/L must be issued and signed per Article 23a’. This seems most odd as sub-Article 23a does not require any ‘reinforcement’ in the credit to be effective. So as to make sure there is not any misunderstanding we have reverted to enquire if bills of lading signed per Article 30 are acceptable.

A plea to all issuing banks world-wide: please:
A. do not include in credits you issue terms that just say ‘FREIGHT FORWARDER TRANSPORT DOCUMENT NOT ACCEPTABLE’, ‘TRANSPORT DOCUMENT ISSUED BY FREIGHT FORWARDER NOT ACCEPTABLE’ etc.
B. be clear if you are excluding Article 30(i) or both Article 30(i) AND (ii).
May I suggest ‘TRANSPORT DOCUMENT ISSUED BY FREIGHT FORWARDER PER ARTICLE 30’ or ‘PER ARTICLE 30(I)’ (as appropriate)?
C. do not mention freight forwarders in any way if you are prepared to accept a document per Article 30.
All this will avoid the possibility of your credit being held up, unadvised, while clarification is sought of the unclear instruction per Article 12 or documents being taken up that you consider non-compliant or refused that you consider compliant.

[edited 12/20/2004 5:08:42 PM]
[edited 12/20/2004 5:09:24 PM]

Dear Jeremy,

I fully support your plea to issuing banks worldwide. Your examples clearly shows the problems that lies here. I just wonder why, these clauses are added to the credit at all? Can anybody explain that. I would be eager to hear.

I have one comment however:

Now; do not say that I did not warn you! You mentioned article 30 no less that 7 (seven) times, in your last posting.

There is actually one other thing that I do not understand: and that is article 30. First of all, there is the problem of appearance. You have to be able to see from the document that the issuer is in fact a forwarder. I assume that this means a “forwarding company”.

If you are then able to see from the document, that it is in fact issued by a forwarder, then the rule is that the document must be examined according to the relevant transport article – as well as article 30 (e.g. ICC opinion R.225). Since this requirement for "carrier" is also included in any of the transport articles (article 23-28), one can concluded that if all provisions of the relevant transport article (i.e. 23) are complied with - the requirement regarding "carrier" in article 30 is also complied with, and subsequently article 30 is complied with. I would even go so far as to state that one need not read article 30!

You then raise the scenario where article 30 is excluded from the specific credit. Well that is a good question! My very personal view, is that if the credit calling for a port to port B/L ONLY states that “article 30 is excluded”, then I fail to see that the document is not complying … if the document is issued by a freight forwarder.
On the other hand, if the credit requirement is more specific (like you mention), then you would have to check carefully if it appears to be issued by a forwarder. And then one could start to discuss how that “appears”. Is a “house bill of lading” not allowed? What about a “Fiata FBL”?

So the only thing I dare to conclude – conclusive – is that a good clean up is needed here!

I think that will do for now; and see what you made me do: mention article 30 nine (9) times. Not a good way to start the day

Best regards
Kim

If I remember rightly, ICC's Opinion regarding this case was very different and it has been changed after Moscow Meeting, Their previous conclusion based on " issuance " of the transport document and the presented FBL BIFA Negotiable TD was considered to be as discrepant.Then as Jeremy said that they stated that this stipulation is regarded " an ambiguous term"which does not define the doc would be acceptable.
I 'm just asking to ensure ;
If the credit includes a stipulation or similar " Transport docs issued by freight forwarders are not acceptable "
Whether the following presented transport docs are not acceptable ;
- House AWB , House B/L , or any FIATA doc such as FIATA FBL
- Any type of transport doc which includes a reference to " a master awb,b/l number "
(Suppose that the docs signed as carrier or their agents )

Yahya,

[edited 12/21/2004 11:10:06 AM]

Kim,

I sympathise with your concerns. However, whatever the (de-)merits of Article 30, it exists and banks therefore have to deal with its consequences whether they like it or not. Logical or not, Article 30 does seem to consider a document that has been signed as carrier, or on behalf of a carrier, by a ‘freight forwarder’ as having been ‘issued’ by such an entity. However, Article 30 does not attempt to define the term ‘freight forwarder’ (just as the UCP does not define ‘carrier’, ‘insurance company’, ‘underwriter’, ‘broker’ etc).

Based on this, where Article 30 IS overridden in a credit and a bank examines documents ‘with REASONABLE care, to ascertain whether … they APPEAR … to be in compliance’, to me it must refuse any transport document that -from an examination to the required standard, i.e. that of reasonable care, and no greater- appears to be ‘issued’ as envisaged by Article 30) by a ‘freight forwarder’.

Then, as you identify, we come to the -potentially tricky- question of how one establishes if a transport document APPEARS to be ‘issued’ by a freight forwarder. I do not pretend I can lay out comprehensive, all encompassing criteria. However, I consider it self-evident that if a document, from an examination (by a BANKER) with reasonable care:
A. clearly suggests the ‘issuer’ (i.e. the signing party, per Article 30) is a member of the ‘International Federation of Freight Forwarders Associations’, ‘FIATA’, ‘British International Freight Association’ or -in the UK- ‘BIFA’, or:
B. that the name of the ‘issuer’ includes in its name ‘freight forwarder’ or ‘forwarding’;
that document appears, on its face, to have been ‘issued by a freight forwarder’ and thus is not in compliance with the terms and conditions of the credit concerned.

As for a document headed ‘house bill of lading’ I am less certain and shall ‘keep my peace’ until such time as I have no choice but to comment.

All the above is purely personal and without any liability or responsibility on my part.

Regards, Jeremy

P.S. Yahya, I think the above addresses -to some extent- the points you raise in your latest posting.

Dear Jeremy,

“REASONABLE care” .. hmm that hurt

Anyway, I do thank you for your – always – very valid, and well thought arguments. You may be right – but then again you may also be wrong. This issue has been in my mind for quite some time (years), and I have not been able to find evidence supporting your view or the opposite. I’ll give you, that the conclusion that you reach is the “political correct” one, and no doubt the safe path to follow. I would however still suggest that, the clause in the credit is 100% clear, and if not so the advising bank returns to the issuing bank based on article 12 and asks for a clarification.

For the sake of discussion (and the UCP revision), I think that this string is important, and at the end of the day, it will be a matter of choice; I can see arguments both ways.

I have one comment however: I think that you add too much “weight” on article 30.
(In the following there may be some who’s memory are better than mine; and if so please feel free to correct, support, add or comment).
I think the “life” of the forwarder in documentary credit transactions has (more or less) reflected real life. Going back to ICC Brochure 290 Bill’s of lading issued by forwarders were simply not acceptable (article 19,a). I guess that was logic at the time, since the major part of a forwarders work were still the “classic forwarder role”: namely acting as intermediary: some kind of agent-like role for e.g. the shippers. When UCP 400 were introduced the times were changing, and the NVOCC became the rule rather than the exception. Because of the “ghost” of article 19 only FIATA Bill’s were permitted (article 25,d).
During the making of UCP 500, the NVOCC role were now a common practice, and the drafters wanted to support this practice, whatever “organisation” the forwarder belonged to. The intention were to remove article 25,d. but the FREIGHT FORWARDERS were worried (based on the “ghost” of brochure 290 I suppose), that the consequence of that would be, that transport documents issued by forwarders were no longer acceptable. Consequently article 30 were drafted, to underline that they were indeed, provided the relevant transport article were complied with.

I am not sure, if there is a conclusion to all of this, other than article 30 is – and has always been useless from a practical point of view, but has served the role of making clear that a bill of lading issued by a forwarder should not be refused on that ground alone. This is why I hope that your conclusion will not be the prevailing one – after the UCP revision.

I think that the term “Forwarders bill of lading not acceptable” is a reminiscence of ICC brochure 290, and I urge the banks that issues credits with such a clause to think careful about why they do so.

And Yehya; you are absolutely correct, that the first draft of this opinion were “completely different”!

Regarding "House B/L": From a “documentary credit point of view” I would also be very reluctant to make a firm statement. However rising from the documentary credit scene, I would clearly place a “House Bill of Lading” in the same category as “FBL”, “Fiata FBL” etc.

Above purely personal and without any liability or responsibility on my part.

Best regards
Kim

[edited 12/22/2004 9:33:16 AM]

Dear Jeremy and Kim,
I have to say that I 'm really confused about this stipulation. Before our discussion we were disregarding this stipulation,so we thought that this wording was meaningless.
At first ICC said that If L/C includes that wording , It would override the content of Article 30 of UCP but would not prohibit the freight forwarder signing as agent of the carrier on a B/L that was issued on the carrier's stationery,and orherwise subject to the provisions of Art 23 and FBL BIFA Negotiable B/L was considered to be discrepant, Then
The opinion has been changed as " A B/L that was signed as the carrier should be accepted irrespective of any knowledge it includes as to the capasity of the issuer.
If a bank puts this wording in L/C opening, it should have a meaning to them, so what is the meaning ?
I hope that The Drafting Group for UCP revision would take into consideration this discussion.

Regards,
Yahya

Dear Yahya,

… but hopefully you are confused on a higher level

No really; I am confused as well.

Everything depends on what the credit says. You are right that the conclusion in the opinion is, that the FIATA B/L is acceptable, but it is not clear to me WHY this is so. Is because the BIFA FIATA B/L is acceptable regardless of the stipulation in the credit, or is it because the stipulation in the credit is unclear? (My guess would be that it is the latter … but a guess it is)

So the questions are: what is the intention of the stipulation (FBL not acceptable)? Based on that answer: how should it be phrased in order to be clear?
(and is it possible to remove article 30 from every single copy of UCP 500 worldwide, and from the memories of each and every L/C specialist, expert, officer etc

Best regards
Kim