ICC Digital Library Forum

we have received a b/l covering a shipment of plywood under an l/c which states in the pre-printed 'shipped' section the following clause:

'The term ''apparent good order and condition'' when used in this b/l with reference to iron, steel or metal products or wood products does not mean that the goods, when received, were fee of visible rust or moisture staining, chaffing and/or breakage. If the shipper so requests, a subsitute b/l will be issued omitting the above definition and setting forth any notations as to rust or moisture staining, chaffing and/or breakage which may appear on the Mate's, or Tally Clerk's Receipts'

Although it doesn't specifically violate Art 32a I have rejected this document as it casts doubt as whether b/l is clean. The last sentence troubles me the most.

Anyone seen this clause before and accepted the b/l?

Phil

Philip,

For easy reference of members, the pre-printed clause that brings you troubles is quoted hereunder:

QUOTE

'The term ''apparent good order and condition'' when used in this b/l with reference to iron, steel or metal products or wood products does not mean that the goods, when received, were fee of visible rust or moisture staining, chaffing and/or breakage. If the shipper so requests, a subsitute b/l will be issued omitting the above definition and setting forth any notations as to rust or moisture staining, chaffing and/or breakage which may appear on the Mate's, or Tally Clerk's Receipts'

UNQUOTE

We assume that in your query by the word “fee” you should mean “free”. Also “subsitute” is a typo of “substitute”.

The pre-printed clause quoted above reflects the transport practice observed by the medium and small carriers. Big carriers with good reputation would not be ready to issue (or re-issue a fresh) BL with the unfavourable endorsements in the mate’s receipt (or BL) removed against a LOI (Letter of Indemnity).

FIRST PART OF CARRIER’S DECLARATION

QUOTE

'The term ''apparent good order and condition'' when used in this b/l with reference to iron, steel or metal products or wood products does not mean that the goods, when received, were fee of visible rust or moisture staining, chaffing and/or breakage.

UNQUOTE

This issue is not expressly stated in the UCP 500 or the recently approved ISBP. However, the carrier declares on the BL that by using the term “in apparent good order and condition”, it does not mean that the goods (iron, steel, metal or wood products) are without any visible rust or moisture staining, chaffing and/or breakage upon receipt. This declaration only reflects the trade practice in maritime transport because such products would more or less have rust, denting and stains as an “inherent vice”, which is not covered by cargo insurance in order to reduce the insurance premium. So it is perfectly normal to have such a pre-printed statement in the BL as a means to protect the carrier against unreasonable claims on arrival at the port of discharge. So we cannot deem this declaration of indemnity nature as a valid discrepancy.

SECOND PART OF CARRIER’S DECLARATION

QUOTE

If the shipper so requests, a subsitute b/l will be issued omitting the above definition and setting forth any notations as to rust or moisture staining, chaffing and/or breakage which may appear on the Mate's, or Tally Clerk's Receipts'

UNQUOTE

Having said that, but stating so OPENLY on the BL - The carrier may issue or re-issue a BL with the unfavourable remarks in the mate’s receipt or BL issued on the condition of the goods or packaging removed against a LOI - is an action not to be encouraged. We may do something silently but we should not say it openly. This is a golden rule in politics.

However, as you have also realised, such a declaration may or may not make the BL discrepant, as the goods may be without any defects. Can a doubt of the document checker be a valid reason to establish a valid discrepancy? This is not stated in the UCP 500 or the ISBP. As such it should be decided by a court of law.

However, some legislations regard such practice as a form of fraud. We have seen precedent cases in the UK maritime courts.

COMMON SENSE APPROACH

To use common sense, we think that the BL should appear OK. Why?

If the shipper/beneficiary actually presented a “cleaned” BL against a LOI, he should not be so stupid to let the declaration clause, particularly for the second part, to stay on the BL. The carrier should have also removed the second part of the declaration when the BL was issued or re-issued against a LOI.

A Chinese word of wisdom goes:

“The one who has just consumed some food stolen from the kitchen would not clean his mouth in the public”.

Another story about stupidity. A rich man in ancient China worried about theft and burglary. So he wrote a declaration on the door of his big house:

"This house does not have 300 pieces of silver".

Would the shipper/beneficiary in your case be another rich man from ancient China?

www.tolee.com

[edited 11/7/02 8:28:34 PM]

Phil,

I can’t say we have seen this clause before.

Having said that, I’m afraid I cannot see it transgresses sub-Art 32a and therefore I would not have rejected the b/l.

See you either on 28 Nov (with Al) and/or 13 Dec (the seminar)?

Jeremy

Philip,

TO SAY IN A PRESENTED DOCUMENT THAT THE ISSUER MAY OR MAY NOT DO CERTAIN THINGS IS OK

Further to our lengthy input, we would like to point out that for any message/endorsement in the BL (or a presented document) that the carrier (or issuer) sates that it MAY OR MAY NOT do certain things, the UCP 500 would not regard this sort of “reminder or warning” message as a source of discrepancy.

Example?

Sub Article 23 (a) (iii) (b) regarding intended port of loading/discharge.

Sub Article 23 (d) (ii) regarding transhipment possibility.

Sub Article 31 (ii) regarding on deck shipment possibility.

Sub Article 33 (d) regarding additional freight possibility.

From the above quoted sub Articles, it is now clear that the UCP 500 allows a presented document to make a declaration, warning, reminder or reservation message that the issuer MAY OR MAY NOT do certain thing. This is to show ICC’s respect towards the trade practices of other trades, such as transport, insurance and others.

KYM IN ADDITION TO KYC

In other trades, the service provider has to incorporate in its terms and conditions of services certain reservation clause to make its price competitive and practical. This is to strike a happy medium between service quality and cost. Another reason is to tune up its terms of services, price included, to combat strong competition in the marketplace.

Document examiners must understand this. Otherwise they may kill the underlying transactions by merely determining discrepancies "on the face". A good banker has to know the market practices (shall we call this KYM (know your market)) in addition to KYC (know your customers).

TO STATE SOMETHING DONE TO THE DISADVANTAGE OF THE APPLICANT IN THE PRESENTED DOCUMENT IS NOT OK

So unless the presented document clearly indicates that the issuer has DONE certain things, to the disadvantage of the Applicant, the UCP 500 would not regard it as a source of valid discrepancy.

Therefore in your case, the reminder message in the BL cannot be deemed to be a valid discrepancy.

WE MAY INFER THE ANSWER FROM OTHER ARTICLES OF UCP AND ISBP

When we have doubts over an issue that is not expressly stipulated in the UCP 500 or ISBP, we may look at the other Articles in the UCP 500 or the ISBP to find out the answer by inferring to the overall intention or principle of the ICC Banking Commission, as we did in this posting.

In Buddhism we often use such approach to find out something not said the past teachings of Buddha. Hence studying Buddhism may help to resolve problems in UCP and ISBP.

www.tolee.com

[edited 11/7/02 8:46:13 PM]

T.O.

Thanks for your input. I still remain unconvinced that it is completely safe to accept the b/l. The clause is effectively stating that the b/l may not be entirely accurate as to the condition of the goods and if the truth is required the shipping company will issue another document which could then possibly violate Art 32.

As you say, rights to tranship etc are standard clauses and covered by UCP. However, the above clause is not standard (and it could be detrimental to the applicant) so, in my opinion, a different approach to checking is required especially when the documents are for a substantial value (in my case usd1.5 mio plus). Since I cannot rely on UCP for an answer my experience tells me that such a clause should be questioned and I applied the old doc credits maxim 'when it doubt chuck it out!'

If push came to shove I would feel more comfortable justifying rejection than defending acceptance.

There is an ICC D/C seminar next month and I shall raise this query with the panel of experts (one of whom is our own Jeremy Smith)

Phil

I'd better give it some further thought then!

I can see why this clause troubles you.

However, as has been said by all involved in the discussion, it doesn't violate Article 32a - the B/L does not EXPRESSLY declare a defective condition of the goods...

This situation seems to give very little protection to an "unsuspecting" beneficiary.

Jeremy,

May we ask you, a banker who knows laws, a question:

Can suspicion be reasons for rejection of documents?

From legal perspective, also common sense perspective, we must have evidence in order to accuse somebody.

A Chinese word of wisdom again:

"If one wishes to catch the man who steals one’s wife, one must catch him red handed from a bed"

One just can't propose a divorce merely relying on suspicion. This applies to DC operations as well, whether you like it or not!

Otherwise all presentations could be discrepant!

www.tolee.com

[edited 11/8/02 4:34:19 PM]

the man could say to the husband 'here's a photo of half of your bed showing your wife alone in it. However, if you so request I will show you a photo of the whole bed which may or may not show me also in it'.

I'd think i'd be suspicious!

Philip,

CERTAIN RELATED THOUGHTS INSPIRED BY YOUR INPUT - JUST TO CREATE SOME FUN HERE

In this particular situation, presentation of evidence (document if you will) must be made by the husband, or if presentation is made by the wife stealer [shall we call him the “beneficiary” for certain service(s) or performance(s) if not goods?], it must be countersigned for authenticity by the husband, the “applicant” (for divorce?) to avoid fake document presentation.

By the way, the UCP 500 does not allow presentation of part of a document, either the whole document or nothing. We have never seen presentation of half a page of a commercial invoice or half a draft. That is nevertheless ISBP although there is no such Article there stating this expressly!

Solely for the purpose of creating some humour here, who should present a NOC [Notice of Completeness for certain performance(s) or service(s), if not "obligations", in single or plural number all depending on how many times they meet]? And who to present a NOD/R (Notice of Dishonour/Refusal) where NOC, NOD/R may not necessarily take the same interpretations as in the eUCP, UCP 500 or ISBP?

And last but not least, what is the "reasonable time" [for such unauthorized if not "unclean" service(s) or performance(s)]?

Hope this input would amuse members and make the Discussion Forum livelier.

www.tolee.com

[edited 11/9/02 4:02:35 PM]