ICC Digital Library Forum

Dear Sirs,
We'd like to apply to you as your valuable opinion concerning the matter outlined below would be very interested for us.
Examining the application for opening an import Letter of Credit an issuing bank faced the conditions which envisaged the presentation of ocean Bill of Lading. The shipment was to be effected from any port in Italy/Germany for transportation to UM-QASER port, then to CIP Baghdad. Final destination -CIP Baghdad.
In this connection we wonder whether your esteemed bank will issue the Letter of Credit under an application with the above mentioned terms and conditions, or It would be better to recommend the Client to replace the ocean Bill of Lading with the multimodal transport document in spite of the fact that the contract for the delivery of the goods has been already concluded between the Applicant and Beneficiary.
Your early reply would be highly appreciated.
Yours faithfully,

From Incoterms 2000 point of view, Both CIP and CIF can be used for transport covered by a bill of lading.

CIF OR MARINE BILL OF LADING SCENARIO

For use of CIF or the transport document used is a marine bill of lading, the carriage is then subject to the maritime legislations such as the COGSA in UK or USA or maritime conventions, such as the Hague, the Hague/Visby or the Hamburg Rules.

A GOOD LESSON FOR THE PARTIES

Most maritime carriers would exclude liability once the goods are landed for further carriage, as seen in the disclaimers in many marine bills of lading. We have handled one DC fraud case a couple of years ago where the carrier, a very famous one (sorry we cannot mention its name here), stated in its bills of lading that the carrier would not be held responsible for the carriage from Riga to Moscow by truck haulage over land. The container stowed with colour TV (made in China) was claimed by a fraudster who held fake copies of shipping documents. Unfortunately the open cover policy made by the head office excluded risks for inland carriage in Russia. So the claims to both the carrier and the insurer was not successful. The seller sustained great loss.

This is a good lesson for the parties to learn that the insurance terms must match the carriage and, if necessary, additional premium has to be paid to close this loophole. There should be close liaison between the head office and the shipping department to ensure there is no communication gap that may lead to no claims in case of loss of or damage to the goods. From our experience, the bigger the company, the bigger the communication problems. After the "accident", different departments would play politics and put all the blames on others.
In other words, if anything goes wrong during the transport from Um Quasar to Baghdad, it would be subject to inland transport or non-maritime legislations or conventions, depending on the mode(s) of transport used, whether by trains, trucks, inland waterways, air or other means of further transport. Then the disputes would not be easily resolved as the governing legislations, conventions are unclear, and particularly the contract of carriage (the marine bill of lading) is covering the maritime part only.

CIP OR MULTIMODAL TRANSPORT DOCUMENT SCENARIO

For use of CIP or a multimodal transport document is used, the whole transport from place of receipt to place of final destination is covered by multimodal legislations or conventions. There is no problem or dispute.

But parties must be able to identify which is a true multimodal transport bill of lading and which is a pseudo one, for example a through transport bill of lading. Those who would like to know more on this may get such information from our DC website.

CARGO INSURANCE MUST MATCH TRANSPORT MODES AND CARRIER'S DISCLAIMERS

From cargo insurance point of view, parties must check that the cargo insurance terms must match the transport modes/terms used to ensure that this would not affect the claims, in case of necessity.

This subject is quite complicated for further discussions in the Discussion Forum. We can only point out the risks here. Certain intelligent exporting houses do invite the experts to review their internal operation procedures and documentation annually to ensure that they are effective.

There is a popular saying in Hong Kong: "To save a candy, one may lose a factory". (áÇ¥ª²É¿}¡A­ø¨£¶¡¼t)

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[edited 6/7/02 5:11:10 PM]