Logistics

What are the Differences Between MBL (Master Bill of Lading) and HBL (House Bill of Lading)?

Ozgur Eker (CDCS) Bill of Lading, Letter of Credit Documents, Logistics , , ,
Differences Between MBL (Master Bill of Lading) and HBL (House Bill of Lading)

Understanding the differences between a master bill of lading and a house bill of lading in export and import transactions.

What Does a Master Bill of Lading Mean in Export and Import Businesses?

A master bill of lading (MBL) is a transport document, which is used in sea shipments, issued and signed by a sea cargo carrier or its agent, generally on a pre-printed carrier’s bill of lading format, evidences the terms and conditions of the carriage of goods between port of loading to port of discharge.

What Are the Main Features of a Master Bill of Lading (MBL)?

  • A master bill of lading generally issued on a pre-printed bill of lading form of an issuer carrier.
  • A master bill of lading issued and signed by a carrier or an agent on behalf of the carrier.
  • A master bill of lading (MBL) is issued subject to Hague Rules, The Hague-Visby Rules and US COGSA (US Carriage of Goods by Sea Act 1936. ) etc.
  • A master bill of lading is signed by the actual carrier and states the terms and conditions of the carriage, as a result consignee may have a better protection in case the goods are damaged or lost in transit.

Figure 1: Master Bill of Lading Sample (Carrier: Maersk Line) Figure 1 : Master Bill of Lading Sample (Carrier : Maersk Line)

What Does a House Bill of Lading Mean in Export and Import Businesses?

A house bill of lading (HBL) is a transport document, which is used in sea shipments, issued and signed by a freight forwarder, generally on a freight forwarder’s bill of lading format, evidences the terms and conditions of the carriage of goods as specified by the freight forwarder.

What Are the Main Features of a House Bill of Lading (HBL)?

  • A house bill of lading generally issued on a freight forwarder’s bill of lading format.
  • A house bill of lading issued and signed by a forwarder without indicating any signing authority either carrier or as agent of the carrier. In some occasions forwarder companies sign HBLs “as carrier”, especially when their clients require a bill of lading compliant to the letter of credit conditions.
  • A house bill of lading (HBL) may or may not be subject to Hague Rules, The Hague-Visby Rules and US COGSA (US Carriage of Goods by Sea Act 1936. ) etc.
  • House bill of lading is signed by the forwarder, and it states the terms and conditions of carriage for the forwarder company’s perspective. A house bill of lading does not contain actual carrier’s carriage contract, as a result the shipper stated on the house bill of lading is not identified in the actual carrier’s contract.

Figure 2: House Bill of Lading Sample

Figure 2 : House Bill of Lading Sample

What are the Differences Between MBL (Master Bill of Lading) and HBL (House Bill of Lading)?

Master Bill of LadingHouse Bill of Lading
Master Bill of Lading:
Issued by the actual carrier, such as MSC, Maersk, Yang Ming Lines, etc.		House Bill of Lading:
Issued by the forwarder company, such as XYZ Forwarding Ltd, etc.
Master Bill of Lading:
Signed either by the carrier or an agent of the carrier.		House Bill of Lading:
Signed by the forwarding company without any agency indication of the carrier.
Master Bill of Lading:
Issued on a pre-printed form of an actual carrier's bill of lading.		House Bill of Lading:
Issued on a pre-printed form of a forwarder company's bill of lading.
Master Bill of Lading:
Always subject to Hague Rules, The Hague-Visby Rules and US COGSA (US Carriage of Goods by Sea Act 1936. ) etc.		House Bill of Lading:
May or may not be subject to Hague Rules, The Hague-Visby Rules and US COGSA (US Carriage of Goods by Sea Act 1936. ) etc.
Master Bill of Lading:
States the terms and conditions of the carriage, as a result consignee may have protection in case the goods are damaged or lost in transit.		House Bill of Lading:
States the terms and conditions of the forwarding company, as a result consignee will not be having a legal protection in case the goods are damaged or lost in transit.
Master Bill of Lading:
States actual carrier's bill of lading number.		House Bill of Lading:
States forwarder company's bill of lading number.

What are the Differences Between Air Waybill and Bill of Lading?

Ozgur Eker (CDCS) Air Waybill, Bill of Lading, Letter of Credit Documents, Logistics ,
Differences Between Air Waybill and Bill of Lading

What Does Bill of Lading Mean in Export and Import Businesses?

Bill of lading (B/L) is a transport document, which is used in port-to-port sea shipments, issued and signed by a carrier or its agent, generally on a pre-printed carrier’s bill of lading format, evidences the terms and conditions of the carriage of goods between port of loading and port of discharge.

What are the Main Features of a Bill of Lading (B/L)?

  • A negotiable bill of lading represents the title of the goods and normally has to be surrendered at the port of discharge to the carrier’s agent to obtain delivery of the goods.
  • A bill of lading is regarded as a negotiable document if issued “to order and black endorsed” or “to order of a (named party)”.
  • A bill of lading issued and signed by a carrier or an agent on behalf of the carrier is called a master bill of lading.
  • A bill of lading issued and signed by a freight forwarder is called a house bill of lading.
  • There are certain differences exist between a master bill of lading and house bill of lading.
  • A bill of lading generally issued subject to Hague Rules, The Hague-Visby Rules and US COGSA (US Carriage of Goods by Sea Act 1936. ) etc.
  • Because a bill of lading is used in port-to-port sea shipments, it can be used in conjunction with all the trade terms defined in Incoterms 2010 rules.

Figure 1 : Bill of Lading Sample

Figure 1 : Bill of Lading Sample

What Does Air Waybill Mean in Export and Import Businesses?

An air waybill (AWB) is a transport document, which is used in air shipments, issued and signed by an airline cargo carrier or its agent, generally on a pre-printed air waybill format, evidences the terms and conditions of the carriage of goods over routes of the airline carrier(s).

What are the Main Features of an Air Waybill (AWB)?

  • An air waybill, contrary to bill of lading, is not a document of title, as a result it is not a negotiable document. The carrier’s agent delivers goods by approving the identity of the consignee without requesting surrender of the original air waybill.
  • An air Waybill is not a negotiable document as a result it cannot be issued “to order and black endorsed” or “to order of an issuing bank”. An air waybill can only be consigned to a “named company”.
  • An air waybill can be issued and signed by a carrier or an agent on behalf of the carrier.
  • Alternatively it can be issued and signed by a freight forwarder. But carrier air waybill and forwarder air waybill have some differences. For more information please read my article “What is the difference between MAWB (Master Air Waybill) and HAWB (House Air Waybill)?“
  • An air waybill generally issued subject to Warsaw Convention, Hague amendment, Montreal Convention, etc.
  • An air waybill should be used in airport-to-airport shipments, as a result it cannot be used in conjunction with the incoterms available only sea shipments such as FAS, FOB, CFR and CIF. For further information please look at “What happens if a letter of credit calls for a wrong Incoterms?“.

Figure 2 : Air Waybill Sample

Figure 1 : Master Air Waybill Sample

What are the Differences Between Air Waybill and Bill of Lading?

Air WaybillBill of Lading
Air Waybill:
Air waybill should be used in air shipments.		Bill of Lading:
Bill of lading should be used in port-to-port sea shipments.
Air Waybill:
Air waybill is not a document of title.		Bill of Lading:
Negotiable bill of lading is a document of title. At least one original bill of lading must be surrender to collect the goods from the carrier.
Air Waybill:
Air Waybill cannot be issued "to order and black endorsed" or "to order of an issuing bank".		Bill of Lading:
Bill of lading can be issued "to order and black endorsed" or "to order of an issuing bank".
Air Waybill:
Air waybill generally issued subject to Warsaw Convention, Hague amendment, Montreal Convention, etc.		Bill of Lading:
Bill of lading generally issued subject to Hague Rules, The Hague-Visby Rules and US COGSA (US Carriage of Goods by Sea Act 1936. ) etc.
Air Waybill:
Air waybill cannot be used in conjunction with the incoterms available only sea shipments such as FAS, FOB, CFR and CIF.		Bill of Lading:
Bill of lading can be used in conjunction with all of the incoterms available.

What is the Difference Between MAWB (Master Air Waybill) and HAWB (House Air Waybill)?

Ozgur Eker (CDCS) Air Waybill, Logistics , ,
What is the Difference Between MAWB (Master Air Waybill) and HAWB (House Air Waybill)?

What Does Master Air Waybill Mean in Export and Import Businesses?

Master air waybill (MAWB) is a transport document, which is used in air shipments, issued and signed by the air cargo carrier or its agent, generally on a pre-printed carrier’s air waybill format, evidences the terms and conditions of the carriage of goods over routes of the carrier(s).

Master waybills can also be identified as an airline air waybills, with pre-printed issuing carrier identification.

What Are the Main Features of a Master Air Waybill (MAWB)?

  • Master air waybill generally issued on a pre-printed air waybill form of an issuer carrier.
  • Master air waybill issued and signed by the carrier or an agent on behalf of the carrier.
  • A master air waybill (MAWB) is subject to IATA Rules and one of the the international air conventions (Warsaw Convention, Hague amendment, Montreal Convention, etc.)
  • Master air waybill is signed by the actual carrier and states the terms and conditions of the carriage, as a result consignee may have protection in case the goods are damaged or lost in transit.

Figure 1 : Master Air Waybill Sample

Figure 1 : Master Air Waybill Sample

What Does House Air Waybill Mean in Export and Import Businesses?

House air waybill (HAWB) is a transport document, which is used in air shipments, issued and signed by a freight forwarder, generally on a natural air waybill format, evidences the terms and conditions of the carriage of goods as specified by the freight forwarder.

Neutral air waybills, without pre-printed identification of the issuing carrier can be used to issuance of house air waybills.

What Are the Main Features of a House Air Waybill (HAWB)?

  • House air waybill generally issued on a natural air waybill format.
  • House air waybill issued and signed by a forwarder without indicating any signing authority either carrier or as agent of the carrier.
  • A house air waybill (HAWB) may or may not be subject to IATA Rules and one of the the international air conventions (Warsaw Convention, Hague amendment, Montreal Convention, etc.)
  • House air waybill is signed by the forwarder and states the terms and conditions of carriage for the forwarder company’s perspective. House air waybill does not contain actual carrier’s carriage contract, as a result shipper stated on the house air waybill is not the direct participant of the carriage contract indicated on the master air waybill.

Figure 2 : House Air Waybill Sample

Figure 2 : House Air Waybill Sample

Differences Between Master Air Waybill and House Air Waybill

Master Air WaybillHouse Air Waybill
Master Air Waybill:
Issued by the actual carrier, such as Korean Airlines, Emirates Airlines etc.		House Air Waybill:
Issued by the forwarder company, such as XYZ Forwarding Ltd, etc.
Master Air Waybill:
Signed either by the carrier or an agent of the carrier.		House Air Waybill:
Signed by the forwarding company without any agency indication of the carrier.
Master Air Waybill:
Issued on a pre-printed form of an actual carrier's air waybill.		House Air Waybill:
Issued on a naturel form of an air waybill.
Master Air Waybill:
Always subject to IATA Rules and one of the the international air conventions (Warsaw Convention, Hague amendment, Montreal Convention, etc.)		House Air Waybill:
May or may not be subject to IATA Rules and one of the the international air conventions (Warsaw Convention, Hague amendment, Montreal Convention, etc.)
Master Air Waybill:
States the terms and conditions of the carriage, as a result consignee may have protection in case the goods are damaged or lost in transit.		House Air Waybill:
States the terms and conditions of the forwarding company, as a result consignee will not be having a legal protection in case the goods are damaged or lost in transit.
Master Air Waybill:
States only MAWB number.		House Air Waybill:
States both MAWB and HAWB number.

Which is the Best Cargo Insurance Type That Should be Selected Against Non-Delivery Risks?

Ozgur Eker (CDCS) How to Work With a Letter of Credit, Incoterms, Inspection Certificate, Insurance Policy, Letter of Credit Basics, Letter of Credit Documents, Logistics , , ,
Which is the best insurance type that should be selected against non-delivery risks?

Institute Cargo Clause A (All risks), Institute Cargo Clause B and Institute Cargo Clause C are the main types of cargo insurance types used in international trade

But which cargo clause is the most suitable one for letter of credit transactions?

How to eliminate non-delivery risks, war and strike risks in international trade?

Question Comes from Lus Miguel, Porto, Portugal:

Dear sirs,

First of all, congratulations for your website, it has been a great help. I’d like to ask you some questions regarding insurance versus letters of credit.

Knowing that if the credit is under the UCP 600 the insurance terms is agreed between exporter and importer (INCOTERMS) the banks sometimes ask for a Clause A plus extra coverage.

I think (and this is my doubt) that the banks at the bottom line can ask a minimum clause insurance (110%) if they trust their client financial capability to support a cargo loss/accident.

It is always a commercial decision.

Am I right at my conclusion?

The reason for my question is that nowadays we usually approve with clause A but if the commercials ask we lower the type of coverage to B or C.

I was looking for case studies, but I believe the risk when the cargo does not arrive to destiny is always on the side of importers/exporters (INCOTERMS chosen) and the bank is always defended since if the documents are good we have to pay them to the exporter.

Do you have knowledge of other situations that banks got “burned” regarding insurance problems when docs were okay?

Sincerely,

Here is the Answer:

Thanks for your question.

Analyses:

Insurance Coverage Under the Incoterms: According to the Incoterms 2010, seller has to make the insurance agreement with an insurance company and has to supply an insurance policy or certificate by paying the insurance premium under two trade terms:

Both CIF and CIP incoterms outlines a minimum insurance coverage, which is Institute Marine Cargo Clauses, C.

Exporters and importers are free to determine a more detailed insurance coverage such as Institute Marine Cargo Clauses, A (all risks).

Furthermore they can choose to include additional clauses to an all risk policy such as

  • WSRCC (War, strikes, riots and civil commotion) Clause,
  • Theft, Pilferage and Non-Delivery clause etc.

All of these extra insurance coverage must be paid by the buyer, unless otherwise determined on the sales contract.

Delivery Place Under CIF incoterms: Most of the international trader think that under CIF incoterms, the seller delivers the goods to the buyer at the port of discharge but this is not correct.

The seller delivers the goods to the buyer at the port of loading once the goods are shipped on board a named vessel under the CIF incoterms.

As a result, non delivery risks of the goods is not different between FOB and CIF incoterms from the point of the issuing bank under a letter of credit transaction.

The exporter delivers the good under both incoterms at the port of loading, and if the issuing bank receives a complying presentation, then it has to honor whether or not the goods arrive to the port of discharge. (Fraudulent shipments are the exemptions)

Insurance Coverage Under the Letter of Credit rules: The letter of credit rules, UCP 600, does not give directions either banks or their customers that what type of insurance cover must be selected.

Just on the contrary, the letter of credit rules tell that a credit should state the type of insurance required and, if any, the additional risks to be covered.

Conclusion:

Non-delivery Risk of Goods: As an issuing bank, the non-delivery risks remains unchanged under certain incoterms such as FOB and CIF.

The issuing bank has to honor complying presentations whether or not goods arrive port of discharge.

In practice, in most of the cases, the issuing banks have to decide accepting or rejecting the presentations while goods are still in transit, long before they have completed their journey.

Establishing Internal Standards: Each bank should establish an internal standards against non-delivery of goods risks.

This can be done by requesting all risks insurance policy covering additional clauses such as war, strikes, riots and civil commotion and theft, pilferage and non-delivery under CIF and CIP incoterms.

For the remaining incoterms you may indicate on the letter of credit application form that your bank will be arranging an insurance policy on behalf of your customer in order to secure delivery of goods.

Alternatively you can indemnify yourself against such risks by holding your customer fully responsible against non-delivery of goods under complying presentations.

Implementation: In order to establish a well-structured internal guidelines, an issuing bank could get in touch with local ICC Banking committee.

In our case it is ICC Portugal.

ICC Portugal
Rua das Portas de Santo Antão, 89
1169-022 Lisboa
T: +351 21 346 3304
E-mail: [email protected] Web: www.icc-portugal.com

Incoterms

Ozgur Eker (CDCS) Incoterms, Rules ,
incoterms

What Does Incoterms Mean? 

INCOTERMS (International Commercial Terms) have been created by the International Chamber of Commerce in order to reach an uniform set of international rules for the interpretation of trade terms in a global scale.

Pre-Incoterms Era: From Local Practices to Worldwide Trade Rules

Trade, -not only domestic, but also international -, has always been played a key role in development of the civilizations.

Traders follow the local practices, which have been created through hundreds of years.

But these practices have limited sphere of influence, so vital trade customs vary from one place to another.

As international trade emerged it was observed that different practices have been creating ambiguity for the traders.

Frequently, parties to a trade transaction are unaware of the different trading practices in their respective countries.

This can give rise to misunderstandings, disputes and litigation, with all the waste of time and money that this entails.

Buyers and sellers should know exactly what their obligations and rights are in a foreign trade transaction without leaving a possible source of uncertainty.

For example, the place of the delivery, the party who is responsible for making the contract of carriage and insurance, arranging the export and import procedures and paying the loading and unloading costs etc must have been precisely determined.

Additionally, the points indicated above are the core elements of a sales contract, which means that every sales contract must cover these point.

As a result they have to be re-written for every foreign trade transaction.

In order to prevent unnecessary repetitions, trade terms, which contain almost all of the vital parts regarding the obligations of the parties on a sales contract, have been created by various organizations.

But these initial trade terms had different interpretations in different countries, so they could not create an uniformity in practice.

Incoterms Era: Publication of First Incoterms and Revised Versions

INCOTERMS (International Commercial Terms) have been created by the International Chamber of Commerce in order to reach an uniform set of international rules for the interpretation of trade terms in a global scale.

First version of INCOTERMS published in 1936. These first rules were known as “Incoterms 1936”.

International trade terms have been revised regularly by ICC as follows:

  • Incoterms 1953,
  • Incoterms 1967,
  • Incoterms 1976,
  • Incoterms 1980,
  • Incoterms 1990,
  • Incoterms 2000,
  • Incoterms 2010.

Incoterms 2010 is the latest publication.

Incoterms 2010 published in September 2010 and came into effect on 1 January 2011.

Incoterms 2000

Incoterms 2000 have been released in September 1999 under ICC publication number 560 and have entered into force on 1 January 2000.

Incoterms 2000 defines 13 rules.

Group E

  • EXW EX WORKS (… named place)

Group F

  • FCA FREE CARRIER (… named place)
  • FAS FREE ALONGSIDE SHIP (… named port of shipment)
  • FOB FREE ON BOARD (… named port of shipment)

Group C

  • CFR COST AND FREIGHT (… named port of destination)
  • CIF COST, INSURANCE AND FREIGHT (… named port of destination)
  • CPT CARRIAGE PAID TO (… named place of destination)
  • CIP CARRIAGE AND INSURANCE PAID TO (… named place of destination)

Group D

  • DAF DELIVERED AT FRONTIER (… named place)
  • DES DELIVERED EX SHIP (… named port of destination)
  • DEQ DELIVERED EX QUAY (… named port of destination)
  • DDU DELIVERED DUTY UNPAID (… named place of destination)
  • DDP DELIVERED DUTY PAID (… named place of destination)

Incoterms 2010

Incoterms 2010 is the latest publication.

Incoterms 2010 published in September 2010 and came into effect on 1 January 2011.

There are 11 rules defined in Incoterms 2010 and they are all trademarked of ICC.

It is possible to purchase both hard copy and online version of Incoterms 2010 rules from ICC’s website.

Explanations of Incoterms 2010 Trade Terms: 

The trade terms under Incoterms 2010 have been classified based on modes of transport.

Under Incoterms 2010, 7 trade terms can be used for any mode or modes of transport. These are:

  • ex works, exw
  • free carrier, fca
  • carriage paid to, cpt
  • carriage and insurance paid to, cip
  • delivered at terminal, dat
  • delivered at place, dap
  • delivered duty paid, ddp

Whereas 4 trade terms under Incoterms 2010 can be used only for sea and inland waterway transport. These are:

  • free alongside ship, fas
  • free on board, fob
  • cost and freight, cfr
  • cost insurance and freight, cif

On this section I will be explaining the trade terms, which have been defined in Incoterms 2010 rules.

RULES FOR ANY MODE OR MODES OF TRANSPORT

EXW – Ex Works: “Ex Works” means that the exporter delivers the goods to the importer when exporter places the goods at the disposal of the importer at the exporter’s premises or at another named place such as exporter’s warehouse etc.

  • The exporter does not need to load the goods on any collecting vehicle.
  • The exporter does not need to clear the goods for export, where such clearance is applicable.

FCA – Free Carrier: “Free Carrier” means that the exporter delivers the goods to the carrier or another person nominated by the importer at the exporter’s premises or another named place.

If the named place is the exporter’s premises, delivery is completed when the goods have been loaded on the means of transport provided by the buyer.

In any other case, delivery is completed when the goods are placed at the disposal of the carrier or another person nominated by the buyer on the seller’s means of transport ready for unloading.

FCA requires the exporter to clear the goods for export, where applicable.

CPT – Carriage Paid to: “Carriage Paid To” means that the exporter delivers the goods to the carrier or another person nominated by the exporter at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

When CPT is used, the exporter fulfills its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination.

CPT requires the seller to clear the goods for export, where applicable.

CIP – Carriage and Insurance Paid to: “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between the parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

When CIP is used, the seller fulfills its obligation to deliver when it hands the goods over to the carrier and not when the goods reach the place of destination.

DAT – Delivered at Terminal: “Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination.

“Terminal” includes any place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal.

DAT requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

DAP – Delivered at Place: “Delivered at Place” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination.

The seller bears all risks involved in bringing the goods to the named place.

DAP requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

DDP – Delivered Duty Paid: “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination.

DDP requires the seller to clear the goods for export, where applicable.

Seller has to clear the goods for import, pay any import duty or carry out any import customs formalities.

RULES FOR SEA AND INLAND WATERWAY TRANSPORT

FAS – Free Alongside Ship: “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a quay or a barge) nominated by the buyer at the named port of shipment.

FAS requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

FOB – Free on Board: “Free on Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.

FOB requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

CFR – Cost and Freight: “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel.

CFR requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

CIF – Cost, Insurance and Freight: “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered.

The risk of loss of or damage to the goods passes when the goods are on board the vessel.

The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

CIF requires the seller to clear the goods for export, where applicable.

Seller has no obligation to clear the goods for import, pay any import duty or carry out any import customs formalities.

What are the Main Differences Between Incoterms 2010 and Incoterms 2000?

There are 4 main differences exist in Incoterms 2010 comparing to Incoterms 2000. These amendments are:

Addition of New Incoterms Rules: Two new incoterms rules have been put into use with the Incoterms 2010 rules. These new rules are DAT and DAP.

Deleted Incoterms Rules: Four incoterms rules have been removed from the usage with the publication of Incoterms 2010. These no longer valid incoterms are DAF, DES, DEQ and DDU.

Changing the Classification of Rules: Incoterms 2010 divides incoterms into two main categories: Rules for any mode or modes of transport (ex works, free carrier, carriage paid to, carriage and insurance paid to, delivered at terminal, delivered at place, delivered duty paid) and rules for sea and inland waterway transport (free alongside ship, free on board, cost and freight, cost insurance and freight)

Definition of New Delivery Place for Incoterms FOB, CFR and CIF: According to Incoterms 2010, the goods will be delivered by exporter to importer only when they will be shipped on board a named vessel at the port of loading. In the previous version of the rules, Incoterms 2000, the goods have been considered as delivered once they have passed the ship’s rail.

How to Use Incoterms 2010 in Letters of Credit?

Incoterms are incorporated into sales contracts or proforma invoices, which are related to the sale of tangible goods.

In letters of credit, issuing banks generally use trade terms under field 45A – Description of Goods and Services.

If an issuing bank adds incoterms into the field 45-A Description of Goods and Services, then the beneficiary must include this exact incoterms phrase in to the commercial invoice.

Otherwise the issuing raises a discrepancy, which is known as incoterms discrepancy.

Example: Usage of Incoterms 2010 in a letter of credit

Field 45A: Description of Goods and Services
HYDROLIC PET BOTTLE BALING AND EQUIPMENT. CONFORM TO PROFORMA INVOICE NUMBER ADG-001 DTD 08.11.2012 CFR ALGIERS PORT-ALGERIA,INCOTERMS 2010 THIS MENTION SHOULD APPEAR ON COMMERCIAL INVOICE.

Commercial Invoice: Includes description of goods including the corresponding incoterms as stated in the letter of credit. (CFR ALGIERS PORT-ALGERIA, INCOTERMS 2010)

Sources:

  1. Incoterms® 2010 English Edition By the International Chamber of Commerce (ICC)
    ICC Publication No. 715E, 2010 Edition
  2. Incoterms 2010 Complete Guide, www.advancedontrade.com

Means of Conveyance and Mode of Transport

Ozgur Eker (CDCS) How to Work With a Letter of Credit, Letter of Credit Basics, Logistics , , , ,
Means-of-Conveyance-and-Mode-of-Transport

Modes of Transport is a term used to distinguish substantially different ways to perform transport.

The most frequently used modes of transport in international trade are air transportation, land transportation, rail transportation, sea transportation and multimodal transportation.

Means of Conveyance is a term describing something that serves as a means of transportation, such as a vessel, truck, aircraft etc.

On this page, I will try to explain two important logistics terms: modes of transport and means of conveyance and their applications under the letter of credit rules.

Modes of Transport in Letters of Credit:

Modes of transport term used in connection with the determination of the multimodal transport documents under the letter of credit transactions.

Multimodal transportation is the movement of one unit load from origin to destination by several modes of transportation under one document without breaking up the unit load. (1)

According to the letter of credit rules, if a transport document covers at least two different modes of transport, then it is regarded as a multimodal bill of lading.

The title of the transport document is not important.

UCP 600 Article 19 – Transport Document Covering at Least Two Different Modes of Transport
a. A transport document covering at least two different modes of transport (multimodal or combined transport
document), however named,…

Example: A letter of credit asks for a full set of shipped on board multimodal ocean bills of lading marked freight payable at destination made out to the order of issuing bank marked notify applicant.

Transport Document: The bill of lading shows port to port sea shipment between a German port to Djibouti Port and a land or rail transport between Djibouti Port to Modjo Dry Port. The presented document is a multimodal bill of lading according to the letter of credit rules, regardless of the title of the transport document.

Means of Conveyance in Letters of Credit:

Means of conveyance term used in connection with the determination of the transshipment and partial shipments under the letter of credit transactions.

Transshipment:

According to the letter of credit rules transhipment means unloading from one means of conveyance and reloading to another means of conveyance (whether or not in different modes of transport) during the carriage that takes place between the route indicated in the credit.

For example, under sea shipments transhipment means unloading from one vessel and reloading to another vessel during the carriage from the port of loading to the port of discharge stated in the credit.

According to the letter of credit rules transhipment can be occurred only if,

  • happened during the carriage that takes place between the route indicated in the credit.
  • cargo is unloading from one means of conveyance and reloading to another means of conveyance (whether or not in different modes of transport).

Partial Shipments:

According to the letter of credit rules, a presentation consisting of one or more sets of transport documents evidencing shipment on more than one means of conveyance within the same mode of transport will be regarded as covering a partial shipment, even if
the means of conveyance leave on the same day for the same destination.

References:

  1. Shipping and Incoterms, Practice Guide, UNDP Practice Series, Page: 6