The following clause was seen on the front of a B/L used in a presentation against a LC under CFR terms :
"any fines or penalties levied against the carrier are for account of the merchants."
Is this discrepant ? If so, on what grounds ?
If not, do we need to alter the UCP to cover it ?
Laurence
A new genus of B/L clauses ?
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larryBacon
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A new genus of B/L clauses ?
No & no.
A new genus of B/L clauses ?
There is no discrepancy
I think that there is a new concept among the carriers in this year :
- Moving the carriage clauses from the back side to the front side to protect themselves.
- Confusing banks .)
yahya
I think that there is a new concept among the carriers in this year :
- Moving the carriage clauses from the back side to the front side to protect themselves.
- Confusing banks .)
yahya
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
A new genus of B/L clauses ?
Yahya,
at first glance, I thought the same as you, that this is a case of moving a clause from the back to the front of the B/L, but this is not so. You will find similar clauses on the backs of Bs/L relating to the goods shipped and I have no problem with those, regardless whether they are on the front or back.
This one is different because it is not confined to or pertaining to the goods in question, or any goods. If one accepts such a clause, the merchants are liable to reimburse the carrier for fines relating to toxic discharges, illegal trafficking of goods or people, collision caused by the crew etc. It is a blank cheque written by the merchants in favour of the carrier.
Since the definition of
"merchants" in Bs/L usually refer to consignor and consignee, and since most Bs/L used in LC's are consigned to order of the issuing bank, this puts the issuing bank at risk also.
Laurence
at first glance, I thought the same as you, that this is a case of moving a clause from the back to the front of the B/L, but this is not so. You will find similar clauses on the backs of Bs/L relating to the goods shipped and I have no problem with those, regardless whether they are on the front or back.
This one is different because it is not confined to or pertaining to the goods in question, or any goods. If one accepts such a clause, the merchants are liable to reimburse the carrier for fines relating to toxic discharges, illegal trafficking of goods or people, collision caused by the crew etc. It is a blank cheque written by the merchants in favour of the carrier.
Since the definition of
"merchants" in Bs/L usually refer to consignor and consignee, and since most Bs/L used in LC's are consigned to order of the issuing bank, this puts the issuing bank at risk also.
Laurence
A new genus of B/L clauses ?
Laurence ,
I appreciate your comments and information about this clause.
But as we always say that the checkers are not intended to be an expert at any field except checking docs underUCP or other standard bank.pract.
So, most of us are not able to discern legal effects/ penalties/ fines from the clauses on B/L (s).
Would there be an end of this type of clauses on B/L(s)?
How can we prevent the carriers to put this clauses on B/L ?
Is it fair to make the banks be responsible for illegal trafficking of goods or people or collision caused by crew or such as...
I still have no ground for refusal
Yahya,
[edited 10/8/2004 3:08:42 PM]
I appreciate your comments and information about this clause.
But as we always say that the checkers are not intended to be an expert at any field except checking docs underUCP or other standard bank.pract.
So, most of us are not able to discern legal effects/ penalties/ fines from the clauses on B/L (s).
Would there be an end of this type of clauses on B/L(s)?
How can we prevent the carriers to put this clauses on B/L ?
Is it fair to make the banks be responsible for illegal trafficking of goods or people or collision caused by crew or such as...
I still have no ground for refusal
Yahya,
[edited 10/8/2004 3:08:42 PM]
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
A new genus of B/L clauses ?
Yahya,
you say that you have no grounds for refusal. Bear in mind that this is a CFR shipment. On this basis, goods should be free from any charges upto the point of delivery (ship's rail at the port of destination). Therefore, would you agree that the clause cited on this B/L is at odds with the CFR requirement ?
Laurence
[edited 10/9/2004 6:06:33 PM]
you say that you have no grounds for refusal. Bear in mind that this is a CFR shipment. On this basis, goods should be free from any charges upto the point of delivery (ship's rail at the port of destination). Therefore, would you agree that the clause cited on this B/L is at odds with the CFR requirement ?
Laurence
[edited 10/9/2004 6:06:33 PM]
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
A new genus of B/L clauses ?
Dear Yahya and Laurance
Looking at it strictly from a document examiners view there are two issues here:
1) If the credit calls for CFR, then ISBP para 65 will apply. This means i.e. that if the trade term (CFR place Incoterms 2000) is part of the goods description, then this should be reflected in the invoice. I do not think that the document examiner should investigate if in fact all cost and freight has been paid according to the trade term.
2) A CFR term will usually result in a requirement to the transport document, proving that the FREIGHT has been paid. This must be reflected in the transport document according to article 33 B. This only covers freight, and as such not “any charges”.
I can see the problem, but I am in line with Yahya here. If the two points above are full filled I would accept the document.
This does however not change the fact, that Laurence has a point here, and this clause is theoretically problematic to L/C banks. Based on the never ending story of the clauses in the transport documents, I think that all these examples should be presented to the banking commission, in order to discuss with the transport commission. They should know, that this does not make life easier for banks – or more important for the documentary credit AND transport customers.
Best regards
Kim
Looking at it strictly from a document examiners view there are two issues here:
1) If the credit calls for CFR, then ISBP para 65 will apply. This means i.e. that if the trade term (CFR place Incoterms 2000) is part of the goods description, then this should be reflected in the invoice. I do not think that the document examiner should investigate if in fact all cost and freight has been paid according to the trade term.
2) A CFR term will usually result in a requirement to the transport document, proving that the FREIGHT has been paid. This must be reflected in the transport document according to article 33 B. This only covers freight, and as such not “any charges”.
I can see the problem, but I am in line with Yahya here. If the two points above are full filled I would accept the document.
This does however not change the fact, that Laurence has a point here, and this clause is theoretically problematic to L/C banks. Based on the never ending story of the clauses in the transport documents, I think that all these examples should be presented to the banking commission, in order to discuss with the transport commission. They should know, that this does not make life easier for banks – or more important for the documentary credit AND transport customers.
Best regards
Kim
A new genus of B/L clauses ?
I mean that there is no provision of UCP that wholly covers the situation.
It is a fact that discrepancies can only be cited in relation to the UCP.
There would be no connection between CFR and this clause.
I think that it doesn't matter to 'Shipping Company' what the shipping term is.
I am quite sure that Shipping Company issue same kind of B/L (s) for FOB,CFR shipments
as you said that 'The Merchant ' refers to consignee/consignor.
The SC's intention to state this clause is to avoid some unexpected results.(may be- expected results-)
It is very simple way to avoid some results ! say that I 'm not responsible If my vessel contains some refugees!
or collision caused by (my) crew! or scattering '' toxic'' from my vessel.
Laurence ,it is just a joke , I agree with you that this clause puts the issuing bank at risk.
But I still have no basement for refusal.
I actually wonder that which art of your rejection would be based? or What would be your wording for refusal ?
Yahya,
It is a fact that discrepancies can only be cited in relation to the UCP.
There would be no connection between CFR and this clause.
I think that it doesn't matter to 'Shipping Company' what the shipping term is.
I am quite sure that Shipping Company issue same kind of B/L (s) for FOB,CFR shipments
as you said that 'The Merchant ' refers to consignee/consignor.
The SC's intention to state this clause is to avoid some unexpected results.(may be- expected results-)
It is very simple way to avoid some results ! say that I 'm not responsible If my vessel contains some refugees!
or collision caused by (my) crew! or scattering '' toxic'' from my vessel.
Laurence ,it is just a joke , I agree with you that this clause puts the issuing bank at risk.
But I still have no basement for refusal.
I actually wonder that which art of your rejection would be based? or What would be your wording for refusal ?
Yahya,
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larryBacon
- Posts: 689
- Joined: Fri Apr 05, 2019 5:26 pm
A new genus of B/L clauses ?
Dear Kim and Yahya,
you are right to quote par 65 of ISBP, but look at the last sentence of this par. "Any charges and costs shown beyond this value are not allowed."
Since you agree that CFR must be found in the invoice, I trust that you also agree that there must be consistency between documents. I do not propose investigating if all charges have been paid, but merely to observe whether all of the documents reflect terms which are not inconsistent with CFR. In my view, the clause cited earlier is inconsistent with CFR. The inconsistency is there regardless of which document shows it, but the fact that it is quoted on the B/L makes it more serious for practical purposes.
Bear in mind the second sentence of the definition of CFR in Incoterms 2000 :
"The seller must pay the costs and freight necessary to bring the goods to the named port of destination ....".
The clause in question tells us that the carrier is at liberty to add more (unlimited) charges to both consignor and consignee. There is also no time limit on when the carrier may levy the additional charges. Therefore not all costs have been paid.
Reasons for rejection :
1. B/L is inconsistent with invoice because invoice shows CFR, but B/L shows that other costs may be levied.
2. B/L is inconsistent with LC requirement for CFR for similar reasons as above.
Laurence
[edited 10/12/2004 8:42:53 PM]
you are right to quote par 65 of ISBP, but look at the last sentence of this par. "Any charges and costs shown beyond this value are not allowed."
Since you agree that CFR must be found in the invoice, I trust that you also agree that there must be consistency between documents. I do not propose investigating if all charges have been paid, but merely to observe whether all of the documents reflect terms which are not inconsistent with CFR. In my view, the clause cited earlier is inconsistent with CFR. The inconsistency is there regardless of which document shows it, but the fact that it is quoted on the B/L makes it more serious for practical purposes.
Bear in mind the second sentence of the definition of CFR in Incoterms 2000 :
"The seller must pay the costs and freight necessary to bring the goods to the named port of destination ....".
The clause in question tells us that the carrier is at liberty to add more (unlimited) charges to both consignor and consignee. There is also no time limit on when the carrier may levy the additional charges. Therefore not all costs have been paid.
Reasons for rejection :
1. B/L is inconsistent with invoice because invoice shows CFR, but B/L shows that other costs may be levied.
2. B/L is inconsistent with LC requirement for CFR for similar reasons as above.
Laurence
[edited 10/12/2004 8:42:53 PM]
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KimChristensen
- Posts: 404
- Joined: Fri Apr 05, 2019 5:21 pm
A new genus of B/L clauses ?
Dear Laurence
Again – I can follow your thinking from a ”real life point of view”, but this is documentary credits
..... Just kidding.
I think that one vital difference here, is that the charges referred to in paragraph 65 are actual charges that IS payable. In the example that you mention the charges MAY occur.
I see this in parallel with the conditions regarding i.e. “on deck”: UCP 500, article 31. The B/L must not show that goods ARE shipped on deck, but it is ok if it shows that it MAY be shipped on deck.
In addition to that, I think that UCP 500 article 33D will apply here – which will make the B/L compliant anyway, thus making your two reasons for rejection invalid.
How is this – by the way – stated on the bill of lading? Is it an added text, or is it part of the pre printed terms i.e. in the right bottom just above the signature field?
Best regards
Kim
Again – I can follow your thinking from a ”real life point of view”, but this is documentary credits
..... Just kidding.I think that one vital difference here, is that the charges referred to in paragraph 65 are actual charges that IS payable. In the example that you mention the charges MAY occur.
I see this in parallel with the conditions regarding i.e. “on deck”: UCP 500, article 31. The B/L must not show that goods ARE shipped on deck, but it is ok if it shows that it MAY be shipped on deck.
In addition to that, I think that UCP 500 article 33D will apply here – which will make the B/L compliant anyway, thus making your two reasons for rejection invalid.
How is this – by the way – stated on the bill of lading? Is it an added text, or is it part of the pre printed terms i.e. in the right bottom just above the signature field?
Best regards
Kim