Notations and Multimodal Transport Documents

In the autumn 2009 issue of DCInsight, Haluk Erdemol tackled on board notations as they apply to a B/L and multimodal transport documents (multimodal bills of lading). This is perhaps the most controversial issue that has emerged in UCP 600 so far, and his article was an excellent contribution to the ongoing debate, which hopefully will be resolved some time soon. Here I would like to add some personal comments. Bill of lading First, it is unfortunate that this confusion took place, as it was, in my view, clearly avoidable.

It is a well-known fact that UCP  500 article 23 provided clear guidance in saying: “If the bill of lading indicates a place of receipt or taking in charge different from the port of loading, the on board notation must also include the port of loading stipulated in the Credit and the name of the vessel on which goods have been loaded, even if they have been loaded on the vessel named in the bill of lading.”

Sub-article 23 (a) (iii) (a) of UCP 500 also clearly allowed a bill of lading to show a place of taking in charge different from the port of loading, and/or a place of final destination different from the port of discharge. ISBP 645 paragraph 82 further explained that if the Container Yard (CY) or Container Freight Station (CFS) is stated as the place of receipt, and that place is the same as the stated port of loading, these places (place of receipt and the port of loading) would not be considered as different, and consequently the inclusion of the named vessel and port of loading in the on board notation would not be necessary.

This clarification does not appear in the updated ISBP 681. The intention behind these apparent changes (or omissions) in the UCP 600 and ISBP 681 has not been explained in a timely fashion to the banking community. Naturally, this led to confusion with some believing there was an intention to treat the matter differently under the new UCP (why otherwise was there a change?); and others claiming that it was only a change in the drafting style and not in the underlying rules for examination.

In its Commentary to UCP 600, the UCP Drafting Group explains that the reason for changes in the wording was “not to encourage” the use of the “place of receipt” and “place of final destination” on bills of lading covering ocean transport. But the requirement that the document checker must be able to determine that the bill of lading appears to indicate that the shipped on board statement (by pre-printed wording or by a separate notation) relates to loading on board the named vessel at the port of loading stated in the credit, and not to any pre-carriage of the goods between a place of receipt and the port of loading, remains the same as it has been under UCP 500.

The Drafting Group’s desire “not to encourage the use of the place of receipt on bill of lading” is understandable. It seems pretty strange when the credit requires only ocean transport from a port of loading to a port of discharge, that the bill of lading should show the place of receipt at all. If the place of receipt is the same as port of loading, and the only difference is that the place of receipt is a CY or CFS, then it seems reasonable. In most cases, containers are received by carriers at these places.

The bill of lading is released to the shipper only when the goods are on board the named vessel. But if the place of receipt is very far from the port of loading, say at adistant inland place, then it is likely that the document is actually a multimodal transport document. Usually, the document itself makes this quite clear.

For instance, if a document is entitled “Bill of Lading for Combined (Multimodal) Transport Shipment or Port to Port Shipment” and indicates that the “Place of Receipt” and/or “Place of Delivery” fields are to be filled in only in case the document is used as a combined (multimodal) transport document, should we accept a multimodal transport document in cases when the credit requires a bill of lading covering only a port-to-port transport?

It would be nice to receive “true ocean transport bills of lading only” when a credit requires a bill of lading covering port-to-port transport. However, in practice, especially in the case of landlocked exporters, shippers arrange the transport with one major carrier, which organizes both the land transport from the inland place to the port of loading and then transport from the port of loading to the port of discharge or even the final place of destination.

Practice It would be simple if the transport from the inland place of receipt to the port of loading were covered by one transport document, say a road transport document, and the port-to-port transport (as requested by the credit) by an ocean bill of lading. In such a case, the bill of lading would not show the place of receipt as the inland place at all (why should it?). However, in practice the carrier issues only one transport document: a multimodal transport document, since that is what he is responsible for.

He does not often understand why the shipper wants him to add a separate dated on board notation with the named vessel and the port of loading and, in some cases, he does not actually want to comply with this specific request since, by doing so, he actually “converts” the multimodal transport document into a bill of lading. Certainly we accept documents as compliant when the credit requests a bill of lading covering ocean transport only.

We do not concern ourselves too much with the pre-carriage (from the place of receipt to the port of loading), provided it isevident that the goods were shipped on the named vessel at the port of loading. If the place of receipt differs from the port of loading (see above) and the bill of lading shows also a pre-carriage means of conveyance (for instance a truck), an on board notation (shipment date, vessel name, port of loading) is necessary. It would be necessary even if the pre-printed wording indicates “shipped on board.”

If the transport document expressly indicates that the “shipped on board” statement relates to any truck, wagon or any other means of conveyance on which goods are shipped from the place of receipt on the way to the port of loading, than the extended on board notation (showing shipment date, vessel name, port of loading) would be also requested. Do we, as bankers, accept a bill of lading showing a place of final destination different (not just CY or CFS) from the port of discharge? Under UCP 500 we clearly did; under UCP 600 we do as well, even without clear guidance in UCP 600 or ISBP 681. It may seem strange that we accept a transport document which shows that the goods will go to Prague when what we wanted was for the goods to be delivered only to the port of discharge, say, Hamburg. But we do.

Multimodal transport Neither article 26 of UCP 500 nor article 19 of UCP 600 clearly state that a multimodal transport document must show that the goods were “shipped on board” the named vessel in the port of loading if the transport begins by ocean transport from the port of loading stipulated in the credit (as the starting point of the shipment).

This issue was very problematic under UCP 500, which is why many of us constantly raised the issue during the UCP revision process. Sub-article 19 (a) (ii) of UCP 600 requires a multimodal transport document to: “indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit”. It is argued that if the multimodal transport starts with ocean transport (from the port of loading as requested in the credit), then it should show that the goods were shipped on board a named vessel at the port of loading stated in the credit.

However, since UCP 600 does not clearly say so, one might argue that the multimodal transport document might just show that the goods were dispatched or taken in charge in the port of loading.

In the case of multimodal transport, delivery terms such as FCA, CPT or CIP should preferably be used, as these are a perfect match for the “goods being dispatched or taken in charge”. Many recent Banking Commission opinions made it clear that if the multimodal transport starts at the port of loading stated in the credit, the multimodal transport document must show that the goods have been shipped on board a named vessel at the port of loading stated therein.

This may not be ideal, but provided this interpretation is clear and well communicated, it is acceptable. If the applicant wants a multimodal transport document to show that the transport starts at the port of loading with goods being taken in charge only (as opposed to being shipped on a named vessel), he or she can do so by inserting a clear request in the credit. If the credit shows a port, e.g.,

Hamburg port, as the place of receipt, then in my view the multimodal transport document might well show that the goods have only been taken in charge in the Hamburg port. It should be made perfectly clear that if the multimodal transport starts by ocean transport at the port of loading as stated in the credit, the requirements for the multimodal transport document in relation to “shipped on board at the place stated in the credit” must be exactly the same as those for the bill of lading as set out in article 20.

In other words, if the multimodal transport document shows a place of receipt different from the port of loading (see above) and also shows the pre-carriage means of conveyance, an on board notation is required (indicating the shipment date, name of the vessel and port of loading).

If the multimodal transport document shows a qualification to the vessel as “intended”, a separate dated on board notation with the name of the actual vessel is required. If the multimodal transport document shows a qualification of the port of loading as “intended”, a separate dated on board notation with the name of the actual vessel and port of loading is required.

ICC rules are rules of practice. Their goal must be to provide practitioners with clear guidelines to do their jobs. In this case, the clarity called for has, up to this point, been lacking. Article originally published in DCInsight Vol. 16 No.1 January – March 2010 by Pavel Andrle.

Pavel Andrle is an international trade finance consultant and trainer for eBSI Export Academy and Secretary of the Banking Commission of ICC Czech Republic. His e-mail is pa@ebsi.ie.