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How to Determine Maturity Date if Letter of Credit States That Tenor of the L/C is 60 Days After Bill of Lading Issue Date?

By
Ozgur Eker (CDCS)
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0

Maturity date is a term related to a time draft.

A time draft is a form of payment that is guaranteed by an issuing bank, but is not payable in full until a specified amount of time after it is received and accepted. (1)

The maturity date is a date on which a bill of exchange or deferred payment undertaking under a documentary credit is to be paid by the party assuming the undertaking. (2)

Determining the maturity date is an important concept especially when the letter of credit is available with a time draft.

Example: A letter of credit has been issued by an international bank’s branch in France states that the documentary credit is available by drafts payable at 60 days after bill of lading issue date.

The beneficiary has presented the bill of lading showing:

  • date of issue : 04.August.2014 and
  • shipped on board date :  01.August.2014.

How to determine maturity date if letter of credit states that tenor of the L/C is 60 days after bill of lading issue date?

How to determine the maturity date of the draft based on above information?

First of all we need to understand that whether there are any differences exist between the “bill of lading date” and the “bill of lading issue date”.

When we look at the ISBP 745 we understand that ICC Banking commission used these terms with the same meaning. As a result both “bill of lading date” and “bill of lading issue date” have the same meaning in terms of letter of credit rules.

Secondly we need to answer which date we should be using when determining the maturity date of the draft.

Should we use bill of lading issuance date or shipped on board date?

Once again we need to look at the ISBP 745 for the correct answer. ISBP 745 states that shipped on board date is deemed to be bill of lading date or bill of lading issue date with the following statement:

“When the tenor refers to, for example, 60 days after the bill of lading date, the on board date is deemed to be the bill of lading date even when the on board date is prior to or later than the date of issuance of the bill of lading.”

As a result we need to use shipped on board date when determining the maturity date of the draft even if the letter of credit states that tenor of the L/C is 60 days after bill of lading issue date.

On the above example shipped on board date is 01.August.2014 and tenor is 60 days after bill of lading issuance date.

We should accept shipped on board date as bill of lading issue date and should use it on calculation of the maturity date.

The maturity date is 30.September.2014.

Important Note: You should add 60 days to 01.August.2014. Remember you should exclude 01.August.2014 when counting 60 days.

Sources:

  1. https://www.investopedia.com/terms/t/time-draft.asp
  2. Documentary credits in practice, Reinhard Längerich, Second edition – 2009, Page: 304, Published by: Nordea

How to Determine Date of Shipment on an Air Transport Document?

By
Ozgur Eker (CDCS)
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0

An air waybill is a document covering the carriage of goods by plane from one airport to another.

Date of shipment is one of the key definitions in a letter of credit transaction. It is used to determine

  • whether shipment made on time or not (in other words a late shipment has been effected or not),
  • whether documents presented within the presentation period or not (in other words a late presentation has been effected or not),
  • maturity date of the time draft,
  • maturity date of a deferred payment letter of credit.

Date of shipment can be determined in two ways on an air waybill.

Option 1 => There is no actual date of shipment notation on the air waybill:

  • The date of issuance of the air waybill will be deemed to be the date of shipment.

Option 2=> Air waybill indicates, by notation, the actual date of shipment: Notation date will be deemed to be the date of shipment as specified below:

  • Date of the actual date of shipment notation/stamp => this date will be deemed to be the date of shipment.
How to determine date of shipment on an Air Transport Document?
An air waybill with a separate actual date of shipment notation. The date of shipment on this air waybill is 15.05.2014 as indicated on the notation.

How to Add a Confirmation to a Letter of Credit?

By
Ozgur Eker (CDCS)
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0

Confirmation gives additional payment assurance to the exporters.

When an irrevocable letter of credit is issued, the risk of payment rests with the issuing bank. This type of letter of credit is defined as an unconfirmed letter of credit.

However, in certain circumstances, the exporter may find the issuing bank not fully trustworthy and/or the country where it is located has high political or economic uncertainty.

In this situation, the exporter should consider requesting a confirmed letter of credit.

Confirmation is a security tool for the exporters. Confirmation eliminates country risks and insolvency risk of the issuing bank.

Step by Step Explanation of Letter of Credit Confirmation Process

Figure 1 : Step by step explanation of letter of credit confirmation process

  • Step 1 – Sale Contract: The exporter and importer sign a sale contract. They choose letter of credit as a payment method.
  • Step 2 – Confirmation Request on Sale Contract: On the sales contract, the exporter demands a confirmed letter of credit. The exporter may wish the credit to be confirmed by a bank which is acceptable for the exporter. In order to make sure that the credit is not be confirmed by another bank, which is not suitable for the exporter, the exporter should indicate this on the sales contract with a wording similar stated bellows:

“The documentary letter of credit should be issued in a way so that it can be confirmed by a bank acceptable to the exporter”.

  • Step 3 – Letter of Credit Application: The importer applies to his bank to open the letter of credit.
  • Step 4 – Letter of Credit Issuance: The issuing bank issues the letter of credit. The letter of credit must include “May Add” or “Confirm” codes in field “Field 49: Confirmation Instructions”.
  • Step 5 – Confirmation: Advising bank or another bank that the beneficiary wants to have the letter of credit confirmed discuss the terms and conditions of the confirmation. If both parties agreed on the confirmation conditions, then the letter of credit will be confirmed. Confirming bank should inform to the beneficiary that it has included its confirmation to the letter of credit.

Dates

By
Ozgur Eker (CDCS)
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0

Whatever your position in an international letter of credit transaction, whether you are an export specialist in a small manufacturing company, an import responsible in a medium size international trade firm or a trade finance expert in one of the first class banks, you should always be very careful with the dates of the documents.

The dates of the documents are one of the major sources of discrepancies. This is not only my claim, but also supported by evidences.

Significant amount of ICC Opinions are issued related to this subject for the last 25 years.

How to Deal with Dates of the Documents When Working with a Letter of Credit?

Make Sure That Each Document is Properly Dated: As a general rule each letter of credit document should be dated. The documents are expected to be dated after the issuance date of the credit, but not later than the presentation date.

Important Note: The letter of credit rules allow presentation of undated documents.

Additionally, documents dated prior to the issuance date of the credit is also acceptable under the letters of credit rules.

However, the issuing banks prevent presentation of such documents via additional conditions such as:

  • All documents including transport documents must be dated but not dated prior to the issuance date of this credit.
  • All required documents date should be later than issue date of this later of credit
  • All documents must be dated and made out in English language

Follow the Instructions Indicated in the Letter of Credit: Some of the letters of credit may contain special conditions regarding the dates of the documents such as:

  • Shipment dated before 16/11/2018 not acceptable (blocking regulatory condition).
  • First shipment is to be effected on or before 50 days from L/C issuance date.

If the letter of credit contains a clause as indicated above, the beneficiaries must act accordingly.

Make Sure That You are Using L/C Terminology Correctly: Some word have special meanings under the letter of credit rules such as:

  • The term “within” when used in connection with a date excludes that date in the calculation of the period.
  • “within 2 days after” indicates a period from the date of the event until 2 days after the event.
  • “not later than 2 days after” does not indicate a period, only a latest date. If an advice must not be dated prior to a specific date, the credit must so state.
  • “at least 2 days before” indicates that something must take place not later than 2 days before an event. There is no limit as to how early it may take place.
    “within 2 days of” indicates a period 2 days prior to the event until 2 days after the event.

Special Suggestions From the International Standard Banking Practice – ISBP 2007

  • Drafts, transport documents and insurance documents must be dated even if a credit does not expressly so require.
  • Documents must not indicate that they were issued after the date they are presented.
  • Any document, including a certificate of analysis, inspection certificate and pre-shipment inspection certificate, may be dated after the date of shipment. However, if a credit requires a document evidencing a pre-shipment event (e.g., pre-shipment inspection certificate), the document must, either by its title or content, indicate that the event (e.g., inspection) took place prior to or on the date of shipment.
  • A document indicating a date of preparation and a later date of signing is deemed to be issued on the date of signing.
  • Dates may be expressed in different formats, e.g., the 12th of November 2007 could be expressed as 12 Nov 07, 12Nov07, 12.11.2007, 12.11.07, 2007.11.12, 11.12.07, 121107, etc. Provided that the date intended can be determined from the document or from other documents included in the presentation, any of these formats are acceptable.
  • To avoid confusion it is recommended that the name of the month should be used instead of the number.

DOCDEX

By
Ozgur Eker (CDCS)
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0

DOCDEX – ICC’s Documentary Credit Dispute Resolution Expertise

Docdex is one of the options available to solve letter of credit disputes. Its full name is “ICC’s Documentary Credit Dispute Resolution Expertise”.

What Does DOCDEX Mean?

Docdex decisions are private, expert-based and non-binding which means that Docdex decisions do not have any legal effects on to the disputing parties unless they have agreed in written that they will be solving any potential problems occurred under the documentary collections, letters of credit or demand guarantees by the means of Docdex decisions.

Sample Docdex Clause for a letter of credit transaction: This clause should be inserted in to the credit under field 47-A Additional Conditions in order to make the Docdex decision binding for all parties.

All disputes arising out of or in connection with this letter of credit shall be finally settled under the DOCDEX Decision in accordance with the ICC DOCDEX Rules, ICC Publication No. 811 by one or more experts appointed in accordance with the said Rules by the ICC International Centre for Expertise.

Scope of the Docdex Decisions:

DOCDEX decisions can be issued for the disputes which have been originated in connection with any of the following situations:

How to Apply for a Docdex Decision:

In order to settle a letter of credit dispute by using DOCDEX, the parties should follow two simple steps:

  • Initiator: Submit a request for a DOCDEX decision, along with the standard fee of US$5000 and all relevant documents, to the ICC International Centre for Expertise.
  • Respondent: If you are the opposing party, respond to the request by submitting your answer with all supporting documents.

Note: All the parties are given the opportunity to participate in the DOCDEX proceedings. However, the DOCDEX panel issues an opinion regardless of whether or not the Respondent agrees to participate.

How Much Time is Required to Reach a Docdex Decision?

Experts appointed by the Dispute Resolution Expertise Center will be reaching a Docdex decision within 2-3 months.

It would be worth mentioning that Docdex is a very fast alternative to a traditional court decision which could last around 6-18 months.

The Experts have to issue an opinion to the Dispute Resolution Expertise Centre within 30 days following receipt of all the relevant documents.

The Experts’ decision is examined by the Technical Adviser of the ICC Banking Commission, who ascertains that their decision is in line with the applicable ICC Rules and their interpretation by the Banking Commission.

How Much Does a Docdex Decision Cost?

Applying for a Docdex decision should normally cost to the initiator USD 5.000,00 – 10.000,00.

As of 1 May 2015, the following filing fees apply:

  • Where the amount in dispute does not exceed USD 1.000.000,00 the Standard Fee is USD 5.000,00
  • For all amounts in dispute exceeding USD 1.000.000,00 the Standard Fee is USD 10.000,00.

This is the standard fee of the Docdex decision procedure.

The Standard Fee includes the Centre’s administrative expenses and the Appointed Experts’ fees.

An Additional Fee may be fixed by the Centre—at its discretion—taking into account the facts and documents underlying the dispute (“Additional Fee”).

The Additional Fee does not exceed 50% of the Standard Fee.

What Sort of Documents Required for Applying a Docdex Decision?

Initiator must apply to the ICC International Centre for Expertise for a Docdex decision along with all the documents indicated below:

  • full name and address of the Initiator, clearly stating such Initiator’s function(s) in connection with the documentary credit, the collection, or the demand guarantee; and
  • full name and address of any other party to the dispute (Respondent), clearly stating such Respondent’s function(s) in connection with the documentary credit, the collection, or the demand guarantee, where the Request is not submitted jointly by all parties to the dispute; and
  • a statement of the Initiator formally requesting a DOCDEX Decision in accordance with the ICC DOCDEX, ICC Publication No. 811; and
  • a summary of the dispute and of the Initiator’s claims, clearly identifying all issues related to the documentary credit, the collection, or the demand guarantee and the applicable ICC Rules to be determined; and
  • copies of the documentary credit in dispute, the collection instruction, or the demand guarantee in dispute, all amendments thereto, and all documents deemed necessary to establish the relevant circumstances; and
  • a statement by the Initiator that a copy of such Request, including all documents annexed thereto, has been sent to each Respondent named in the Request.

Important Note: The Request must be submitted in four copies.

Important Note 2: The Request must be accompanied by the payment of the Standard Fee amounting to USD 5.000,00 – 10.000,00. What’s more, even in exceptional cases, the International Centre for ADR (“Centre”) will only charge an additional fee of US$2,500 or US$5,000.

You can find full details of the Docdex application from this link.

Electronic Letters of Credit

By
Ozgur Eker (CDCS)
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0

What is an Electronic Letter of Credit?

An electronic letter of credit can be defined as a letter of credit transaction, which is carried out entirely on electronic means of communication and issued according to the rules, such as an eUCP, which are allowing electronic presentations.

Introduction: The information technology revolution and advancements in the international maritime business have changed the way of doing business in cross border trade.

We have been enjoying a new type of international business thanks to the advancements in both logistics and communication sectors.

Importers can easily subscribe to www.alibaba.com in order to find a reliable supplier who will offer good quality goods with competitive prices.

By signing a sales contract or preparing a simple proforma invoice the importer and exporter can determine the delivery term and the payment method.

After arranging the transportation and taking care of the insurance and custom clearance, the operational side of the deal is completed.

You can order any kind of goods internationally by online means without knowing who your supplier is or another party that has been participating in that particular export import business.

Everything could be handled by electronic means of communication fast and secure.

Preliminary Works: In order to make international letters of credit more compatible to this challenging electronic business environment, the ICC Banking Commission started to work on electronic letters of credit rules in year 2000.

The aim of the ICC Banking Commission Working Group, which consisting of experts in the UCP, electronic trade, legal issues and related industries, such as transport was to carry out the documentary credits rules into electronic environments where electronic presentations are possible without the need of any paper based documents.

Rules: (eUCP): In year 2002, the Banking Commission created supplementary rules to UCP 500 which, enabled the presentation of electronic records alone or in combination with paper documents.

The supplementary rules are known as the “Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation” or simply “eUCP“.

eUCP came into effect on 01.April.2002.

  • Revision of the eUCP: UCP 500 revised in year 2007 and UCP 600 replaced the previous version of the letters of credit rules.

Along with UCP 500 revision ICC banking commission made necessary amendments on the eUCP rules.

As a result in year 2007 eUCP V1.1 Supplement to UCP 600 replaced the older version of eUCP which was known as eUCP V1 Supplement to UCP 500.

Let us have a look at the electronic letter of credit rules in detail.

eUCP V1.1 Supplement to UCP 600: UCP 600 contains within its text the 12 Articles of the eUCP, ICC’s supplement to the UCP governing presentation of documents in electronic or part-electronic form.

When you are buying UCP 600 from the ICC bookstore, you will also be buying supplementary eUCP rules as well.

eUCP Table of Contents

How Electronic Letters of Credit Work?

Under electronic letters of credit all letters of credit parties such as the beneficiary, applicant, issuing bank, advising bank and confirming bank must be connected to the same secure online platform which enables electronic presentations and electronic document examinations.

GlobalTrade Corporation and The Bolero Ecosystem are top two companies throughout the world offering secure multi-bank platforms.

Figure 1 : Electronic Letter of Credit Transaction Process

Step By Step Electronic Letter of Credit Transaction Process

  1. Electronic letter of credit transaction starts with the signature of the sales contract between the exporter and the importer through secure online platform.
  2. The applicant (importer) applies to the issuing bank for opening an electronic letter of credit which should be subject to latest version of eUCP rules.
  3. The issuing bank issues its electronic letter of credit and send the credit to the advising bank through multi-bank platform.
  4. The beneficiary (exporter) of the electronic letter of credit receives the authenticated copy of the e-credit through the secure online multi-bank platform.
  5. At the same time the applicant (importer) applies to the transport company, to make sure that an electronic bill of lading will be issued instead of a regular paper based bill of lading.
  6. The beneficiary make the electronic presentation to the advising bank. Electronic presentation contains electronic documents including digitally signed e-bill of lading.
  7. Advising bank checks the documents. If documents require no correction then advising bank make the electronic presentation to the issuing bank.
  8. Issuing bank checks the documents. If documents are found to be complying then issuing banks issuing bank honors its letter of credit.
  9. Issuing bank sends e-documents to the applicant.

Benefits of the Electronic Letters of Credit:

Cost Reduction Through Operational Efficiency: Traditional paper documents have much higher operational costs comparing to the electronic documentation. You can benefit from costs indicated below by leaving paper documents behind and converting into electronic letter of credit presentations,

  • International courier costs: In each set of documents you submit to your bank under a paper based letter of credit, you should be paying between 75 USD-100 USD. You could save this amount with electronic L/Cs.
  • Domestic Document Gathering Costs: Most of the export and import documents are created quite far away from the manufacturing companies, as production plants are located away from the city centers, where the land prices are low. Some documents are created at the custom offices which are located just inside the port of discharge. Collecting different paper based documents from different locations may cost considerable amount of money, especially when the exporters are racing for a timely presentation under the letters of credit.

Financial Advantages: Financial gains as a result of using electronic letters of credit could be sum up under below points.

  • Reaching to the Payments Faster via Online Presentations: Under paper based presentations, the beneficiaries could collect all required letters of credit documents within 4-5 days after the date of shipment. Documents could reach to the issuing banks or confirming banks via expedited courier services between 3-7 days under normal conditions. (You should always think about strikes and holiday periods also extreme conditions where air traffic is severely affected such as eruptions of Eyjafjallajökull volcano in Iceland resulting at least 20 countries closed their airspace to commercial jet traffic for a period of week between 14–20 April.2010.). In conclusion, it is fair to expect under an at sight letter of credit, which allows paper based presentations, the beneficiary could reach to the payment within 12-20 days after the date of shipment. On the other hand, the beneficiary may be able to reach to the payment under an electronic letter of credit, which available by at sight within 3-4 days after the date of shipment.

Benefits of Reduced Risk Levels: Electronic letters of credit could eliminate or at least reduce various risks of the exporters, importers as defined below.

  • Electronic Documents can be corrected easily which makes them less risky in terms of refusals by the issuing banks: Corrections on electronic documents is easier and faster than paper based documents. As a result exporters’ presentation refusal risks reduced significantly. According to ICC data %70 of presentations have been refused by issuing banks on 1st presentation. Electronic presentation could reduce these rejection figures considerably.
  • Documents reach to Issuing Bank Earlier: In some occasions the distance between exporter’s country and importer’s country is quite short that paper documents could reach to the issuing bank long after vessel arrives to the port of destination. Such a situation could create couple of problems that may be causing extra risks and costs to both exporters and importers as highlighted below.
    • Demurrage charges
    • Risk and costs associated with issuance of a Letter of Indemnity

Case Study:

First end-to-end fully electronic letter of credit presentation

Bolero has announced the first fully electronic presentation into mainland China of documents under a Letter of Credit, using the Bolero platform. This is the latest in a series of major milestone achieved by the participants in this transaction.

The electronic presentation related to a shipment of manganese ore from Australia to China. As a fully end-to-end electronic presentation including the Bolero eBL (electronic bill of lading), all parties were connected to the Bolero platform.

BHP Billiton was the exporter and beneficiary of the Letter of Credit; the customer and applicant was Sichuan Emei Ferroalloy I/E Co., Ltd. and ANZ bank acted as the advising bank, with China CITIC Bank acting as the first ever Chinese ePresentation receiving bank. The shipping company was “K” Line Pte Ltd.

The Letter of Credit was issued under eUCP and all documents required under this Letter of Credit, including the bill of lading, were presented electronically using the Bolero platform, supported by the unique Bolero legal rule-book.

A number of electronic presentations using Bolero have been undertaken elsewhere in Asia, but it is particularly significant to be able to prove acceptance in mainland China, a key export market for the resource industry.

Being the first end-to-end electronic presentation into China, this also achieved a number of significant milestones: the first eBL into China with resultant cargo release and customs clearance, the first local Chinese Bank receiving a fully electronic presentation and the first Chinese corporate customer receiving an electronic presentation and surrender of an eBL.

In this transaction, the customer, Sichuan Emei Ferroalloy I/E Co., Ltd., applied to China CITIC Bank for a Letter of Credit (L/C) to be issued under eUCP with BHP Billiton as the beneficiary.

The L/C was advised to BHP Billiton using the Bolero export L/C management solution. The Bill of Lading was created on Bolero and made available to BHP Billiton to include in their electronic presentation.

BHP Billiton did a fully electronic presentation of all documents required under the L/C to ANZ bank. Following confirmation of compliance by ANZ bank, the electronic presentation was then forwarded over Bolero to the issuing bank, China CITIC Bank, and subsequently forwarded over Bolero to the customer, Sichuan Emei who surrendered the eBL to “K” Line.

This program proved the ability to drive the presentation end-to-end through to being promptly honoured and paid by the issuing bank.

Special Thanks: 

  • Special thanks to Tom Rahder from www.bolero.net for his great contribution to this article.

Freight Forwarder’s Bill of Lading Not Acceptable

By
Ozgur Eker (CDCS)
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0

Some issuing banks add an additional condition to the letters of credit they have issued, indicating that freight forwarder’s bill of lading is not acceptable.

  • Why issuing banks disallow freight forwarder’s bill of lading?
  • What happens if issuing bank forbids presentation of a freight forwarder’s bill of lading under a letter of credit?

If an issuing bank wants to prohibit presentation of a freight forwarder’s bill of lading, can achieve this aim simply by adding a condition under field 47-A Additional Conditions.

Below you can find some example texts, disallowing presentation of freight forwarder’s bill of lading.

Sample Texts from Selected Letters of Credit

  • Forwarder’s bill of lading not acceptable.
  • Transport documents issued by freight forwarder are not acceptable.
  • Goods must be shipped through the nominated liner which will be advised by the applicant in a certified format with applicant’s seal, a copy of the same must be presented for negotiation and the bill of lading, (freight forwarder’s bill of lading is not acceptable) must evidence that the goods have been shipped on the liner specified therein.

Why issuing banks disallow freight forwarder’s bill of lading?

Issuing banks want to secure themselves as much as possible by requesting not a freight forwarder’s bill of lading, but a carrier’s bill of lading.

A carrier’s bill of lading, which is known as master bill of lading, give more security to the issuing banks comparing to freight forwarder’s bill of lading, which is known as house bill of lading.

differences between a freight forwarder's bill of lading and a carrier's bill of lading

What Does the Letter of Credit Rules Tell About Disallowing Freight Forwarder’s Bill of Lading?

UCP 600:

UCP 600 sub-article 14(l) states that

“A transport document may be issued by any party other than a carrier, owner, master or charterer provided that the transport document meets the requirements of articles 19, 20, 21, 22, 23 or 24 of these rules.”

UCP 600 sub-article 20(a) states that

a.A bill of lading, however named, must appear to:
i. indicate the name of the carrier and be signed by:
– the carrier or a named agent for or on behalf of the carrier, or
– the master or a named agent for or on behalf of the master.

ISBP 745:

ISBP 745 states that

“A stipulation in a credit that “Freight Forwarder’s Bills of Lading are not acceptable” or “House Bills of Lading are not acceptable” or words of similar effect has no meaning in the context of the title, format, content or signing of a bill of lading unless the credit provides specific requirements detailing how the bill of lading is to be issued and signed. In the absence of these requirements, such a stipulation is to be disregarded, and the bill of lading presented is to be examined according to the requirements of UCP 600 article 20″.

  • According to latest version of international standard banking practices, “Freight Forwarder’s Bills of Lading are not acceptable” or “House Bills of Lading are not acceptable” stipulations in a letter of credit has no meaning unless banks defines how the bill of lading is to be issued and signed.
  • If no specific requirements have been mentioned in the letter of credit in regards to issuance and signature of the bill of lading, then banks, nominated bank, confirming bank and issuing bank, have to disregard such a stipulation.
Official Opinion R643 / TA669rev – 2005-2008:

If a transport document states “freight forwarder bills of lading are not acceptable” or “house bills of lading not acceptable”, can the freight forwarder or agent sign the bill of lading according to the requirements expressed in sub-article 20 (a) (i)?

Query

ICC Opinion TA 572 – Issue No. 1 (October 2004) describes the situation in which the documentary credit states that “Transport document issued by Freight Forwarder not acceptable”. The conclusion of the Opinion was that ” … the bank would be obliged to accept a bill of lading that was signed ‘as carrier’ irrespective of any knowledge it may have as to the capacity of the issuer” – i.e., even when the transport document was entitled “FBL BIFA Negotiable FIATA Multimodal Transport Bill of Lading”.

a-The above Opinion was given subject to UCP 500, and we ask you kindly to inform us if the same position would apply under UCP 600.

b-Also kindly advise if the conclusion above would be the same had the documentary credit stated that “House bill of lading not acceptable” or similar.

Analysis

One of the reasons behind conditions such as “freight forwarder bills of lading are not acceptable” or “house bills of lading not acceptable” is to require the issuance of a bill of lading by the carrier, albeit that the freight forwarder or agent could sign the bill of lading according to the requirements expressed in sub-article 20 (a) (i). If a freight forwarder or agent signs as carrier, the bill of lading becomes a carrier document.

Conclusion

The same position applies under UCP 600.
If the credit states “house bill of lading not acceptable” or similar, the same position will apply.

What is a Freight Forwarder’s Bill of Lading?

By
Ozgur Eker (CDCS)
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0

A freight forwarder’s bill of lading is a transport document which is issued by a freight forwarder.

It is also known as a house bill of lading.

What Does Freight Forwarder’s Bill of Lading Mean in Export and Import Businesses?

A freight forwarder’s bill of lading (FBL) is a transport document, which is used in sea shipments and multimodal 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 Freight Forwarder’s Bill of Lading (FBL)?

  • A freight forwarder’s bill of lading generally issued on a freight forwarder’s bill of lading format. It is also known as house bill of lading (HBL).
  • A freight forwarder’s bill of lading issued and signed by a forwarder without indicating any signing authority either a carrier or as agent of the carrier. In some occasions forwarder companies sign FBLs “as carrier”, especially when their clients require a letter of credit compliant bill of lading.
  • A freight forwarder’s bill of lading (FBL) 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.
  • A freight forwarder’s bill of lading is signed by the forwarder and states the terms and conditions of carriage for the forwarder company’s perspective. FBL does not contain actual carrier’s carriage contract, as a result shipper and consignee stated on the house bill of lading is not a direct participant of the carriage contract indicated on the master bill of lading.

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.

Forwarder’s bill of lading is also known as house bill of lading.

Is Freight Forwarder’s Bill of Lading Acceptable Under Letters of Credit?

According to the letter of credit rules, unless otherwise indicated in a specific letter of credit, it is possible to present a freight forwarders bill of lading.

But the bill of lading must be issued in accordance with the UCP 600 rules.

As a result if a letter of credit requests a marine bill of lading, it is possible to present a carrier’s bill of lading, forwarder’s bill of lading (house bill of lading in other words) or multi modal bill of lading without any problem, as long as the presented document conforms the respected letter of credit rules.

Important Note: It is not possible to present a charter party bill of lading if a letter of credit requests a marine bill of lading.

Letter of Credit Example with Freight Forwarder’s Bill of Lading Presentation:

Letter of Credit Sample: Field: 46A: Documents Required

  1. Full set of original clean on board ocean bills of lading made out to the order of issuing bank marked freight to be collected and notify applicant indicating this documentary credit number and name, address, telephone no of the carrying vessels agent at the port of discharge.

Option 1: Freight Forwarder’s bill of lading presented which is signed as carrier

Forwarder's bill of lading presented which is signed as carrier

The exporter presented a freight forwarder’s bill of lading, which is signed “as carrier” by the freight forwarder company.

This kind of signature, identifying freight forwarder company as a carrier and signed by the same company as carrier, is acceptable in terms of letter of credit rules.

If you need further information in regards to letter of credit rules on bill of lading issuance, please visit my bill of lading page.

Option 2: Freight Forwarder’s bill of lading presented which is signed as agent for the carrier

Option 2 : Forwarder's bill of lading presented which is signed as agent for the carrier.The exporter presented a freight forwarder’s bill of lading, which is signed “as agent for carrier” by the freight forwarder company.

This kind of signature, identifying freight forwarder company as agent for the carrier and signed by the same company as agent on behalf of the carrier, is acceptable in terms of letter of credit rules.

If you need further information in regards to letter of credit rules on bill of lading issuance, please visit my bill of lading page.

Important Note: If Freight Forwarder’s Bill of lading is not signed one of the methods explained above, then banks may raise a discrepancy called “Carrier Not Identified or Bill of Lading not Signed as per UCP“.

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

By
Ozgur Eker (CDCS)
-
0

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?

By
Ozgur Eker (CDCS)
-
0

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.
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