Transport and banks – a slow cocktail

[KimChristensen]

As promised:

It seems to me that one of the areas that need the most attention is the transport articles in the UCP 500.

From my chair it looks as if transport practice have slowly been moving away from the wording in the UCP.

There is a great dilemma here, as the banker’s claims not to know anything about transport (!!), and the transporters do not really seem to care about letters of credit (!!).

Or is it just me?

Anyway here are some observations, showing where UCP and transport practice mismatch – as I see it:

Article 26/ISBP para 120
According to UCP/ISBP the document must not show that ONLY ONE mode of transport has been used.
The UNCTAD/ICC Rules for Multimodal Transport Documents says that the rules apply even if one mode of transport is used. I see many examples where the MMTD is used for road transport only.

Article 24
The NN Sea waybill requires that shipment is to be made from one port to another port.
The CIM Uniform rules for sea waybills states that the document covers a transport wholly or partly by sea. In other words: it may be used as a multimodal document, one leg must however be made by sea

Article 23/ article 26
There is no doubt that the document being called for in documentary credits most often is the ocean B/L (Article 23). It seems to me however that what many LC users require is a document that:

- Is a document of title
- Shows that the goods has been shipped on board (to match e.g. FOB or CFR Incoterms)
- Is “open” for the last leg of the transport – as to how goods are shipped from port of discharge to final destination (as this is often now known when goods are shipped).

It goes without saying that the above can be handled via L/C clauses. If however I am right, in saying that many LC users really needs such a document, then why not adjust the rules to match this.


The above are my personal observations, but I would really like to know if you have made similar observations. And if there are any “transporters” “out there” – please speak now.

Thanks
Kim

[JudithAutié]

I agree with the first two points that you made, but would just point out that as far as the Ocean B/L is concerned, in many countries (of which France)it is not considered a document giving title to the goods, so I don't see how this point could be covered by the UCP.

I agree it is often preferable to have the "last portion" of the transport (i.e. from the port of discharge to the buyer's facilities) open since very often the buyer is in a much better position to arrange transport in his own country after having fulfilled the customs formalities. So the B/L as it stands, does allow this.

What I would really love to see is some standardization in the B/L formats -- which altho presented at the last ICC banking commission meeting, is still very much a "dream on". Maybe one day, when the B/Ls become electronic, the problem will at last be solved )

Regards
Judith

[KimChristensen]

Dear Judith

Thanks a lot for your comments. They are highly appreciated.

First of all, I must make one clarification. I was not trying to say, that the UCP should determine whether or not it is a document of title. I was only trying to point out, that most exporters seek a document of title – e.g. a negotiable bill of lading – and therefore often prefers a document according to article 23 when a documentary credit is involved. So it was merely a comment on industry practice – and not on UCP drafting

I of course agree with your comments on standardisation, and accept that this – or rather the lack of it – does create problems for banks, drafting groups etc.

On the other hand I can not help noticing, that I see:

1) some clear mismatch’s between the UCP and the rules for the transport documents
2) some inconsistencies between the UCP and the current industry practice.

So my point with this string is to identify if those observations are 1) very local – or 2) if other bankers have done similar observations.

If the answer is 1) then I rest my case – but if the answer is 2) then I really think we have a responsibility to dig deeper into this – for the sake of our common customers and the future of this fine product.

Best regards
Kim