ICC Digital Library Forum

As a Freight Forwarder (and ex banker) I have a question regarding transhipments and how it should be shown on the bill of landing.

Lets say I have a shipment from Melbourne that is going to Xingang in China. It will be transhipped via Hong Kong.

In most cases, the Bill of Lading will be made out as:
EG 1:
Port of Load: Melbourne
Port of Discharge: Hong Kong
Final destination: Xingang

I was told some time ago by the banks that if the shipment is under a L/C it MUST be made out as per below to comply with the LC & the UCP and I have been doing it as per EG2 for some years now.
EG 2:
Port of Load: Melbourne
Port of Discharge: Xingang via Hong Kong
Final destination: Xingang.

But some times the banks ring me and advise me that I have made the B/L out wrong and it should be made out as per EG1. Then a few months later they ring and advise it must be made out as EG2. I have been trying some information on this. Is there a ruling on this? Where is the UCP does it say this?

Mark
Melbourne Australia

Dear Mark

Does the UCP have something to say about this? Well you bet

Looking at it from a general point of view, it is quite simple; more specific however – it gets a bit more complex. In fact both examples may be acceptable (or the opposite)! Let me try to explain.

First of all, I think it would be helpful to try to think like a trade finance banker (is that possible?). The starting point for the trade finance banker would be: What is the requirement in the credit? The reason they will ask this, is that this will point to very specific (sub-) articles in the UCP and paragraphs in the ISBP that will answer the questions that you ask.

There may be a number of articles possible for the example that you mention. The two most frequent are:

Article 23; To be used if the credit calls for a marine/ocean bill of lading.
If this is the case, then it must appear that the goods have been shipped by vessel between the PORTS mentioned in the credit.

Article 26; To be used if the credit calls for a Multimodal Transport Document (covering at least two different modes of transport).
If this is the case, then it must appear that the goods have been transported between the PLACES mentioned in the credit.

Before looking further at your examples, I would advise that you do not focus too hard on the “fields” mentioned on the transport document. The reason for this can i.e. be found in ISBP paragraph 81.

However assuming that this is handled exclusively in the fields mentioned in your examples, then I would evaluate it as follows:

If the requirement in the credit is a “Marine B/L” (= UCP article 23 / ISPB Paragraph 73-99); then example 1 would NOT be acceptable (sub-article 23,a,iii). This is because it does not appear from the document that the goods are being shipped from Hong Kong to Xingang by vessel (I am not sure if Chinese speaking people would agree, since Xingang means “The New PORT” . Anyway, two ways to “fix” this would be to issue the document as follows:

1:
Port of Loading: Melbourne
Port of Transhipment: Hong Kong
Port of Discharge: Xingang

2:
To do it as mentioned; but to add in the body of the document that the leg from Hong Kong to Xingang will be affected by vessel. (ISBP Paragraph 81)

Example 2 would be ok, since Xingang is mentioned as a port.

If the requirement in the credit is a Multimodal Transport Document (= UCP article 26 / ISPB Paragraph 120-143), then Example 1 would be acceptable. (See ISBP paragraph 120).

Example 2 would not be acceptable since it appears that the full transport has been affected by vessel (port to port) (Again see ISBP Paragraph 120).

So in fact the bankers may be right both to refuse and accept … it all depends!

I hope this helps you.. It is my personal views without responsibility / liability.

Best regards
Kim

The whole issue of which article of UCP applies has been an issue since UCP 500 came out. This is especially true for inland applicants who do not want to allow transhipment, want an ocean bill of lading and Article 23 to apply but want the goods covered to an inland point (e.g. Chicago). On the other side for exporters, the same issue applies for shipments in reverse and they feel Article 26 should apply as the letter of credit is indicating an inland point as the port of discharge which should imply a multimodal bill is automatically called for. The difference here is you have two ports and not a case where the final place of destination is an inland point. In anyevent, Article 23 would seem to apply and provided transhipment was allowed or shipment was being shipped in a container, we would consider the bill of lading acceptable if it showed the port of loading in the credit, a transhipment port in the port of discharge and port of discharge shown in the credit as the "For Transhipment To" box. We would not accept it with the "For Final Destination" unless the bill of lading clearly indicated that it covered the shipment to the final place of destination.

Dear Larry

I thank you for your comments.
I am not that sure, that I agree with your comments regarding UCP 500. To me it is (somewhat) clear: The wording in the credit will determine which article should apply, and that’s it.
The examples that you mention would also easily be dealt with through the wording of the credit.

So the morale on such a long Friday should be that the credit should be worded clearly!

For this example, I do not agree that article 23 would seem to apply … having seen no direct wording from the credit that is. It is perfectly possible, that a Multimodal Transport Document would be required (i.e. showing that goods have been shipped on board Melbourne). The reason may be, that at the time of shipment, the shipping line / consignee would not know how (mode of transport) to forward the goods from Hong Kong to Xingang – and therefore opens the POSSIBILITY that it be transported via rail or truck. To be determined at time of arrival Hong Kong, when they know what is realistic / economic / fast (Whatever is important for the specific shipment).

Best regards
Kim