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Air Waybill

By
Ozgur Eker (CDCS)
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0

On this page I will try to explain you air waybill and its applications in letters of credit transactions.

Issuing banks mention air transport document as “Air Waybill” (AWB), or “Air Consignment Note” in letters of credit.

An air waybill is a document covering the carriage of goods by plane from one airport to another. The original for shipper, usually original No. 3 of the air waybill remains with the seller for submission to the bank. (1)

Air waybill is “the shipping document used for the transportation of air freight. It includes conditions, limitations of liability, shipping instructions, description of commodity, and applicable transportation charges.”

It is generally similar to a straight non-negotiable bill of lading and is used for similar purposes. (2)

Important Note: Air transport document is not a document of title to goods, which means that air waybill is a non-negotiable transport document.

As a result, air carriers will be able to deliver goods to the consignee without obtaining one original copy of air waybill.

For this reason, exporters and banks (issuing bank and confirming bank) have to be very careful when working with a letter of credit demanding an air waybill as a transport document, because neither exporters nor banks could secure goods as a collateral.

What are the Functions of an Air Waybill?

An air waybill serves the following functions:

  • to document the contract of carriage
  • to prove receipt of goods for shipment
  • certificate of insurance (if goods insured under carrier policy)
  • it serves as a customs declaration
  • it is a waybill (i.e. it guides carrier personnel in the handling and delivery of the
    goods) (3)

How to Use Air Waybill in Letters of Credit Transactions:

An air transport document, however named, must appear to:

  1. indicate the name of the carrier and be signed by:
    – the carrier, or
    – a named agent for or on behalf of the carrier.
  2. indicate that the goods have been accepted for carriage.
  3. indicate the date of issuance. This date will be deemed to be the date of shipment unless the air transport document contains a specific notation of the actual date of shipment, in which case the date stated in the notation will be deemed to be the date of shipment. Any other information appearing on the air transport document relative to the flight number and date will not be considered in determining the date of shipment.
  4. indicate the airport of departure and the airport of destination stated in the credit.
  5. be the original for consignor or shipper, even if the credit stipulates a full set of originals.
  6. contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage. Contents of terms and conditions of carriage will not be examined.

For the purpose of this article, transhipment means unloading from one aircraft and reloading to another aircraft during the carriage from the airport of departure to the airport of destination stated in the credit.

An air transport document may indicate that the goods will or may be transshipped, provided that the entire carriage is covered by one and the same air transport document.

An air transport document indicating that transshipment will or may take place is acceptable, even if the credit prohibits transshipment. (4)

Special Hints Regarding the Air Waybill From ISBP (International Standard Banking Practice):

  1. If a credit requires presentation of an air transport document covering an airport-to-airport shipment, UCP 600 article 23 is applicable.
  2. If a credit requires presentation of an “air waybill”, “air consignment note” or similar, UCP 600 article 23 applies. To comply with UCP 600 article 23, an air transport document must appear to cover an airport-to-airport shipment but need not be titled “air waybill”, “air consignment note” or similar..
  3. The air transport document must appear to be the original for consignor or shipper. A requirement for a full set of originals is satisfied by the presentation of a document indicating that it is the original for consignor or shipper.

Air Waybill Sample:

Air waybill sample

References:

  1. http://definitions.uslegal.com/a/air-waybill/
  2. Documentary Credits, Collections and Bank Guarantees, Swedbank, Page: 32
  3. Transportation Best Practices Manual, PF Collins International Trade Services, Page:30
  4. UCP 600

Charter Party Bill of Lading

By
Ozgur Eker (CDCS)
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0

On this page I will try to explain you “Charter Party Bill of Lading” and its applications in letters of credit transactions.

Charter Party Bill of Lading is one of the transport documents that is specifically governed by the letter of credit rules.

The international shipping industry is responsible for the carriage of around 90% of world trade.

Shipping is the life blood of the global economy. Without shipping, intercontinental trade, the bulk transport of raw materials, and the import/export of affordable food and manufactured goods would simply not be possible.(1)

International sea transportation can be divided into 3 main cargo groups:

  • containers,
  • liquid bulk cargo (or “wet” trades such as crude oil, petroleum products and gas) and
  • solid bulk cargo (or “dry” trades such as coal, iron ore and grain).(2)

sea transportation sub-groupes

Maritime container transportation is carried out by container ship operators, who produce negotiable bill of loading or non-negotiable sea waybill as transport documents.

Unlike container transportation, bulk cargo shipment requires special types of vessels and is not suitable for liner services.

As a result, bulk cargo transportation is carried out via hired vessels. In maritime glossary, hiring a vessel is called “Charter Party”.

Definition of Charter Party and Charter Party Bill of Lading

Charter Party Bill of Lading is the transport document of the shipments, which made via vessels subject to charter party contracts.

How to Use Charter Party Bill of Lading in Letters of Credit Transactions:

Charter party bill of lading is covered under article 22 of UCP 600.

A bill of lading, however named, containing an indication that it is subject to a charter party (charter party bill of lading), must appear to:

  1. be signed by:
    – the master or a named agent for or on behalf of the master, or
    – the owner or a named agent for or on behalf of the owner, or
    – the charterer or a named agent for or on behalf of the charterer.

Any signature by the master, owner, charterer or agent must be identified as that of the master, owner, charterer or agent.

Any signature by an agent must indicate whether the agent has signed for or on behalf of the master, owner or charterer.

An agent signing for or on behalf of the owner or charterer must indicate the name of the owner or charterer.

2. indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit

3. indicate shipment from the port of loading to the port of discharge stated in the credit. The port of discharge may also be shown as a range of ports or a geographical area, as stated in the credit.

4. be the sole original charter party bill of lading or, if issued in more than one original, be the full set as indicated on the charter party bill of lading.

A bank will not examine charter party contracts, even if they are required to be presented by the terms of the credit. (source : UCP 600)

Special Hints Regarding the Charter Party Bill of Lading From ISBP (International Standard Banking Practice):

  1. If a credit requires presentation of a charter party bill of lading or if a credit allows presentation of a charter party bill of lading and a charter party bill of lading is presented UCP 600 article 22 is applicable.
  2. A transport document containing any indication that it is subject to a charter party is a charter party bill of lading under UCP 600 article 22.
  3. If a credit does not state a notify party, the respective field on the charter party bill of lading may be left blank or completed in any manner.

References:

  1. International Chamber of Shipping, http://www.ics-shipping.org/shipping-facts/shipping-and-world-trade (Retrived: 06.April.2018)
  2. Dry bulk cargo shipping — An overlooked threat to the marine environment? Matthias Grotea, Nicole Mazureka, Carolin Gräbscha, Jana Zeilingerb, Stéphane Le Flochc, Dierk-Steffen Wahrendorfd, Thomas Höfera, https://www.sciencedirect.com/science/article/pii/S0025326X16303861 (Retrived: 06.April.2018)

Sea Waybill (Non-Negotiable Bill of Lading)

By
Ozgur Eker (CDCS)
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0

Transport documents can be classified under two main groups: Negotiable transport documents and non-negotiable transport documents.

Bill of lading has always been a negotiable transport document for centuries.

Road transport document, air transport document and rail transport document are relatively new transport document types and all of them are non-negotiable by their nature.

Non-negotiable transport documents generally called as waybills; such as air waybill, road waybill and rail waybill etc.

Non-negotiable transport documents share two out of three basic functions of a negotiable bill of lading:

  • Non-negotiable transport documents are receipts for the goods as negotiable bills of lading;
  • Non-negotiable transport documents evidence the terms of the contract of carriage (by way of clauses usually printed on one side of the document) as negotiable bills of lading;
  • But non-negotiable transport documents are not said to be “negotiable documents of title” unlike negotiable bills of lading.

What Are The Main Differences Between a Negotiable Bill of Lading and Non-Negotiable Transport Documents?

The main difference between a negotiable bill of lading and non-negotiable transport documents is how the goods are delivered to the consignee.

Under negotiable bill of lading, the goods can only be handed over to the consignee, if and only if, at least one negotiable bill of lading copy is surrendered to the carrier’s agent at the port of discharge.

Under non-negotiable transport documents, however, the carrier delivers the goods to the consignee without demanding any original copies of the transport documents, by having authentication of the consignee’s company information.

negotiable bill of lading and non-negotiable transport documents

Sea waybill is a non-negotiable bill of lading, invented by the transportation industry very recently, to respond the market, that demands a more flexible marine transport document than a conventional bill of lading.

What Are The Advantages and Disadvantages of a Sea Waybill?

The main advantages of a sea waybill over a traditional negotiable bill of lading is its flexibility and ease of use.

Advantages of a Sea Waybill

Importers can clear the goods from the customs without needing to present at least one original copy of the bill of lading, when sea waybill is selected as a transport document.

This will reduce procedures and increase efficiency, and may help to eliminate or at least limit demurrage and detention charges at the port of discharge.

advantages and disadvantages of a sea waybill

International trade has been increased in volume for the last couple of decades significantly; furthermore vessels are becoming faster and ports are getting quicker.

For example, one container vessel can travel around all major European Ports within a week.

It would not be possible for exporters to dispatch export documents, especially the bills of lading, within a such short period of time.

Consequently, importers may face to pay high amounts of demurrage and detention charges.

Actually, sea waybill has been invented to prevent such inefficient processes.

Disadvantages of a Sea Waybill

Main disadvantage of a sea waybill against a negotiable bill of lading is that it reduces exporter’s control over the goods, because of the fact that importer can clear the goods from customs without surrendering an original bill of lading.

This makes sea waybill not suitable for cash against documents and letter of credit payments and increases fraud risk.

How to Use Sea Waybill in Letters of Credit Transactions:

Non-negotiable Sea Waybill is covered under article 21 of UCP 600.

A non-negotiable sea waybill, however named, must appear to:

  1. 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.
  2. indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit.
  3. indicate shipment from the port of loading to the port of discharge stated in the credit.
  4. be the sole original non-negotiable sea waybill or, if issued in more than one original, be the full set as indicated on the non-negotiable sea waybill.
  5. contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back non-negotiable sea waybill).
  6. contain no indication that it is subject to a charter party. (source : UCP 600)

Special Hints Regarding the Sea Waybill From ISBP (International Standard Banking Practice):

  1. To comply with UCP 600 article 21, a non-negotiable sea waybill must appear to cover a port-to-port shipment but need not be titled “Non-negotiable Sea Waybill” or similar.
  2. If a credit requires presentation of a non-negotiable sea waybill (“Sea Waybill”, Non-negotiable Port-to-Port transport Document” or similar) covering sea shipment only, UCP 600 article 21 is applicable.

Sea Waybill Example:

You can find a sample sea waybill below in blank format.

Please keep in mind that this sea waybill format is not suitable for letter of credit, because it does not contain any reference to contract of carriage.sea waybill example

Bill of Lading

By
Ozgur Eker (CDCS)
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0

The transport document covering the carriage of goods by sea is called a bill of lading. B/L is the most frequently used abbreviation of the bill of lading.

Actually, the bill of lading is the generic name of the transport document, which is used in sea shipments.

There are several types of bills of lading in circulation such as multimodal bill of lading, charter party bill of lading and non-negotiable bill of lading etc. Each type of bill of lading has unique characteristics.

On this page you can find information regarding the bill of lading that is mostly used containerized, port to port shipments.

Although most banks define this type of bill of lading as marine bill of lading or ocean bill of lading, we better to use the exact definition from the letter of credit rules and call this transport document simply as bill of lading.

What are the Functions of a Bill of Lading?

The bill of lading is the authentic receipt delivered by a carrier, confirming that the goods therein specified (markings, types of goods, number of packages, etc.) have been loaded or taken in charge for loading on a designated vessel for carriage to a specified port. (1)

A bill of lading is an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight be delivered to the order or assigns of a specified person at a specified place. (2)

functions of a bill of lading

The bill of lading fulfills three basic functions :

  • bills of lading are receipts for the goods;
  • bills of lading evidence the terms of the contract of carriage (by way of clauses usually printed on one side of the document);
  • they are said to be “negotiable documents of title” (except for the nominative or “straight” bill of lading) (3)

Important Note: Letter of credit rules, UCP 600, define the bill of lading as a transport document used only port-to-port sea shipments. Which means that you can not use the bill of lading with air or land shipments. Also if transportation take place more than one mode of transport, then letter of credit should call for a multimodal bill of lading or combined bill of lading.

How to Use Bill of Lading in Letters of Credit Transactions:

The rules related to the multimodal bill of lading can be found under article 20 of UCP 600.

A bill of lading, however named, must appear to:

  1. 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.
  2. indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit by:
    • pre-printed wording, or
    • an on board notation indicating the date on which the goods have been shipped on board.
  3. indicate shipment from the port of loading to the port of discharge stated in the credit.
  4. be the sole original bill of lading or, if issued in more than one original, be the full set as indicated on the bill of lading.
  5. contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back bill of lading).
  6. contain no indication that it is subject to a charter party. (4)

Special Hints Regarding the Bill of Lading From ISBP (International Standard Banking Practice):

  1. To comply with UCP 600 article 20, a bill of lading must appear to cover a port-to-port shipment but need not be titled “marine bill of lading”, “ocean bill of lading”, “port-to-port bill of lading” or similar.
  2. If a credit requires presentation of a bill of lading (“marine”, “ocean” or “port-to-port” or similar) covering sea shipment only, UCP 600 article 20 is applicable.
  3. If a credit states “Freight Forwarder’s Bill of Lading is acceptable” or uses a similar phrase, then the bill of lading may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or agent for the named carrier. In this event, it is not necessary to show the name of the carrier.

Bill of Lading Example?

You can find a bill of lading example below, that is evidencing a frozen meat shipment from Poland to Saudi Arabia.

bill of lading example

Multimodal Bill of Lading

By
Ozgur Eker (CDCS)
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0

Multimodal transportation is the movement of one unit load from origin to destination by several methods or transportation under one document without breaking up the unit load.

A very good example of a multimodal transportation is that containers loaded in continental Europe travel by train to Rotterdam, then ship on a vessel to Dar Es Salaam, then are delivered inland in Tanzania by truck. (Source: UNDP Shipping and Incoterms Practice Guide, Page: 6)

Multimodal bill of lading is a transport document that is evidencing more than one mode of transport, one of which is typically by sea shipment, although it is not required.

Bill of lading for combined transport is another name of the multimodal bill of lading.

MMBL (Multimodal Bill of Lading) or MMTD (Multimodal Transport Document) are the most frequently used abbreviations.

Types of Multimodal Transport Documents:

Multimodal bills of lading can be classified under two main types: multimodal transport bill of lading and through bill of lading.

types of multimodal bill of lading

Multimodal Transport Bills of Lading: These types of multimodal bills of lading are issued by a multimodal transport operator and mostly printed on FIATA (International Federation of Freight Forwarders Associations) standard pre-printed form.

Multimodal transport operator (MTO) means any person who concludes a multimodal transport contract and assumes responsibility for the performance thereof as a carrier for the whole journey.

Through Bills of Lading: Through Bills of Lading are virtually identical to the Multimodal Transport Bills of lading but with one major difference.

The Multimodal Transport Bill of Lading is issued by the Multimodal Transport Operator (MTO) (shipping lines, freight forwarders, NVOCC Operators) who takes responsibility of the goods (e.g. shortages, losses, damages) during the entire period of transport, thus not only for the sea passage but also for the other transport modes as well.

The Through Bill of Lading is issued by the sea carrier but the carrier states on the contract of carriage that he is only responsible of the goods for that part of the carriage he takes care of, such as the sea passage only. (Source : www.maritimeknowhow.com )

How to Use Multimodal Bill of Lading in Letters of Credit Transactions:

The rules related to the multimodal bill of lading can be found under article 19 of UCP 600.

A transport document covering at least two different modes of transport (multimodal or combined transport document), however named, must appear to:

  1. 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.
  2. indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit.
  3. indicate the place of dispatch, taking in charge or shipment and the place of final destination stated in the credit,
  4. be the sole original transport document or, if issued in more than one original, be the full set as indicated on the transport document.
  5. contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back transport document).
  6. contain no indication that it is subject to a charter party. (Source : UCP 600)

Special Hints Regarding the Multimodal Bill of Lading From ISBP (International Standard Banking Practice):

  • In all places where the term “multimodal transport document” is used within this document, it also includes the term combined transport document.
  • A document need not be titled “Multimodal transport document” or “Combined transport document” to be acceptable under UCP 600 article 19, even if such expressions are used in the credit.
  • If a credit requires presentation of a transport document covering transportation utilizing at least two modes of transport … the transport document must not indicate that shipment or dispatch has been effected by only one mode of transport.

Multimodal Bill of Lading Example:

You can find a multimodal bill of lading example below, that is evidencing a soybean shipment from USA to Japan.

multimodal bill of lading example

Above multimodal bill of lading evidencing both road and sea transportation. It is most probably issued by a freight forwarder, because of the fact that the transport document has been signed “As CARRIER”.

Letter of Credit Documents

By
Ozgur Eker (CDCS)
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0

After reading this post, you should understand why documentation is very important under letters of credit.

Additionally, most frequently used document links have been supplied on later parts of this article.

There are many important points in a typical letter of credit transaction that need to be taken care of professionally.

However, documentation is much more important than any other aspects of the letters of credit transactions, because the documentation forms the backbone of the letters of credit structure.

In order to understand the importance of the documentation, please assume that you are an exporter, whom has just shipped an order.

How can you prove to the issuing bank that you have make the shipment according to the letter of credit terms?

Which means that;

  • you have shipped the goods on time, not late
  • you have shipped the right goods, not wrong ones
  • you have shipped the goods in good condition, no apparent defect on the packing
  • you have delivered the goods to the carrier for transportation from port of loading to the port of discharge indicated in the credit etc.

In order to prove above points to the issuing bank, you have to supply a relevant transport document.

Furthermore, let us also consider that the delivery term was CIF Incoterms 2010, which obligates the exporter, which is you, to arrange and pay the insurance for the shipment.

Once again, you have to supply an insurance policy to fulfill your insurance responsibility.

The examples can be extended, but perhaps the main idea is very clear. Letters of credit transactions are related to the documents only, not actions.

importance of letter of credit documentation

The importance of the documentation is stated in UCP 600 article 5 as follows:

Banks deal with documents and not with goods, services or performance to which the documents may relate.

In addition, every condition stated in the letter of credit must be connected to a document. This point is also clearly indicated in UCP 600 article 14 as below.

If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.

Documents Most Frequently Used Under Letters of Credit Transactions:

Transport Documents:

Insurance Documents:

Financial Documents:

Commercial Documents:

Official Documents:

Inspection Certificate Discrepancies

By
Ozgur Eker (CDCS)
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0

On this page you can find most common discrepancies related to the inspection certificate, which is issued under a typical letter of credit transaction.

Discrepancy can be defined as an error or defect, according to the issuing bank, in the presented documents compared with the documentary credit, the UCP 600 rules or other documents that have been presented under the same letter of credit.

Inspection in international trade can be defined as a process of checking the quality of goods against the contractual requirements.

Inspection certificate is the document that is usually issued by the inspection company after completion of the inspection.

Inspection certificate provides data on the result of the inspection.

Inspection Certificate Discrepancies

  • Inspection Certificate Not Issued and Signed by the Party Required by the Letter of Credit
  • Total Quantity Indicated on the Certificate of Inspection is not in Accordance with the Bill of Lading and Certificate of Origin
  • Inspection Certificate Is not Dated within the Timeline Required by the Documentary Credit
  • Inspection Certificate Identifies Different Goods Inspected Inconsistent with Those Described by Commercial Invoices
  • Inspection Certificate Indicates That Goods Do not Comply with the specifications
  • Inspection Certificate Indicates That Packing is not as per L/C.
  • Pre-shipment Inspection Certificate Shows Date of Inspection a Later Date Than Date of Shipment

Important Points Regarding the Inspection Certificates under Letter of Credit Rules:

  • When a credit requires the presentation of an inspection certificate, this will be satisfied by the presentation of a signed document titled as inspection certificate, or bearing a similar title or even untitled, which fulfills its function by certifying the result of the indicated action, for example, the results of the inspection.
  • When a credit requires the presentation of a pre-shipment inspection certificate, which relates to an action required to take place on or prior to the date of shipment, the certificate must indicate:

a. an issuance date of the certificate is no later than the date of shipment; or
b. stating that the inspection of goods took place prior to, or on the date of shipment,
c. the exact title of the required certificate, such as, “Pre‐shipment Inspection Certificate”.

  • An inspection certificate should be issued by the institution stated in the credit.
  • When a letter of credit does not state the title of an issuer, any institution including the beneficiary could issue the inspection certificate.
  • When a letter of credit indicates specific requirements with respect to inspection, the data regarding the inspection mentioned on the inspection certificate should comply with those requirements.

Inspection Certificate Not issued and Signed by the Party Required by the Letter of Credit Discrepancy

By
Ozgur Eker (CDCS)
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0

Inspection in international trade can be defined as a process of checking the quality of goods against the contractual requirements.

Because, the importer and exporter are located in different countries, and they are usually living very away from each other, as a result it would not be feasible for the importer to send someone to check the quality of goods for each shipment.

If the importer (the applicant) is not able to send a person he trusts to the place of shipment, he can ask an internationally recognized inspection company, such as the Geneva-based Société Générale Surveillance (SGS) to perform the inspection required.

The applicant will instruct the inspection company as to the manner in which it is to check the goods and what they must look for. (1)

Third party inspection services in international trade can be grouped under two main categories.

  1. Previous Shipment Inspections, which are performed before the goods are shipped from the exporter’s factory and
  2. Post Shipment Inspections, which are performed after the goods are shipped from the exporter’s factory.

types of inspection

Inspections, which are performed before the goods are shipped from the exporter’s factory are as follows:

  1. Pre-Production Inspection (PPI)
  2. During Production Inspection (DUPRO)
  3. Pre-Shipment Inspection (PSI)
  4. Container Loading Supervision (CLS) or Container Loading Inspection (CLI)

Inspections, which are performed after the goods are shipped from the exporter’s factory are as follows:

  1. Post-Shipment Inspection (2)

Inspection certificate is the document that is issued by the inspection company after completion of the inspection. Inspection certificate provides data on the result of the inspection.

The inspection certificate should be issued by the party stated in the letter of credit.

According to the letter of credit rules and standard banking practices an inspection certificate, however named, must appear to be issued and signed by the entity stated in the letter of credit.

For example, if the letter of credit requires that pre-shipment inspection certificate should be issued by SGS, Intertek or CCIC Inspection Company, the inspection certificate that has been presented by the beneficiary must be issued and signed by one of these independent inspection companies.

If issuing bank finds out that an inspection certificate has not been issued and signed by the entity as required by the letter of credit, then the issuing bank will raise a discrepancy, which is known as inspection certificate not issued and signed by the party required by the letter of credit.

Letter of Credit Discrepancy Example: Inspection Certificate Not Issued and Signed by the Party Required by the Letter of Credit

A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:

Letter of Credit Conditions

Field 45A: Description of Goods and or Services: 20 mtons of %100 organic Italian Extra Virgin olive Oil. Delivery Terms: CIF Port of Newark, USA Incoterms 2010.

Field 46A: Documents Required:

  1. Beneficiary’s dated and manually signed commercial invoice in duplicates bearing full description of goods and its quantity, net and gross weight, unit and total price.
  2. Insurance policy covering all risks showing claims payable in USA.
  3. 3/3 full set original clean bills of lading made out to order of issuing bank, notify applicant company indicating freight prepaid stating the name, telephone and fax numbers of carrier’s agent in port of discharge. Bill of lading should evidence shipments made in refrigerated 40′ closed containers.
  4. The original inspection certificate issued not prior to marine bill of lading date by S.G.S or its authorized agent on S.G.S letter head certifying that the goods shipped/inspected are in conformity with the quality, quantity, and packing of the goods loaded are strictly complying with specifications of the goods indicated in the relative Purchasing Instruction, the terms of the l/c and all subsequent amendments as presented to S.G.S by the importer. The inspection certificate shall verify that the goods are in conformity with USDA organic food standards.

The beneficiary presented an insurance policy as shown on the below picture.

Inspection Certificate

Discrepancy Example: Inspection Certificate Not issued and Signed by the Party Required by the Letter of CreditDiscrepancy: Inspection certificate should have been issued by S.G.S or its authorized agent on behalf of S.G.S inspection company. On the other hand, the inspection certificate has been issued by another inspection company.

Reason for Discrepancy: According to letter of credit rules and standard banking practices an inspection certificate, however named, must appear to be issued and signed by the entity stated in the letter of credit.

References:

  1. Documentary Credits in Practice, Second edition 2009, Nordea, Page:174, Reached: 07.March.2018
  2. What is a Pre-Production Inspection (PPI)?, www.advancedontrade.com, Reached: 07.March.2018

Multimodal Bill of Lading Discrepancies

By
Ozgur Eker (CDCS)
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0

Multimodal transportation is the movement of one unit load from origin to destination by several methods or transportation under one document without breaking up the unit load.

The development of container traffic has made this possible, as containers can travel from end to end without being opened/unloaded/reloaded during the course of the journey.

The advantage for those who make use of multimodal transportation is that they have one document only for the whole operation and that the operator is legally responsible for a satisfactory overall performance by his own staff and by the agents or branches that he is employing.(1)

Multimodal bill of lading is the transport document that covers at least two different modes of transport.

On this page you can find most common discrepancies related to the multimodal bills of lading under the letters of credit transaction.

Multimodal Bill of Lading Discrepancies

Important Definitions Regarding the Multimodal Bill of Lading under Latest Letter of Credit Rules:

  • According to latest UCP 600 letter of credit rules a multimodal bill of lading should not bear any indication that it is subject to charter party.
  • All original multimodal bills of lading printed by the carrier must be presented to the bank by the beneficiaries.
  • It is hard to prevent a transshipment in a multimodal transportation as a result even letter of credit prohibits transshipment multimodal bill of lading can state ‘Transshipment may/will take place.”
  • Multimodal bill of lading should be regarded as a negotiable transport document like a bill of lading if the last mode of shipment in the entire journey is completed by sea transportation.
  • More than one notify parties could be stated in a multimodal bill of lading.
  • ‘To Order’ or ‘To the order of shipper’ means that multimodal bill of lading should be endorsed by the shipper as per letter of credit instructions.

References:

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

Multimodal Bill of Lading Does Not Cover At Least Two Different Modes of Transport Discrepancy

By
Ozgur Eker (CDCS)
-
0

A transport document covering at least two different modes of transport is regarded as a multimodal bill of lading according to the letter of credit rules.

If the letter of credit asks for a multimodal bill of lading or a combined bill of lading, however named, the transport document which will be presented by the beneficiary must be covering at least two different modes of transport.

It is worth mentioning that the title of the transport document is irrelevant according to the letter of credit rules.

The transport document presented needs not to be titled “Multimodal bill of lading” or “Combined bill of lading” or words of similar effect even when the credit so names the required document.

The important point is the content of the transport document not the title.

Single Modes of Transport Examples:

Sample 1 : Shipment Effected From Melbourne Port, Australia to Port of Guangzhou, China

single mode of transport example 1

  • Transport Document Title: Multimodal Bill of Lading
  • Port of Loading: Port Melbourne, Australia
  • Port of Discharge: Port of Guangzhou, China

Only sea shipment has been effected.

This is a port to port marine bill of lading not a multimodal bill of lading.

 

Sample 2 : Shipment Effected From Changi Airport, Singapore to Narita Airport, Tokyo

Changi Airport, Singapore to Narita Airport, Tokyo

  • Transport Document Title : Combined Bill of Lading
  • Airport of Departure: Changi Airport, Singapore
  • Airport of Destination: Narita Airport, Tokyo

Only air shipment has been effected.

This transport document can be treated as an air waybill not a combined bill of lading.

 

Multimodal Transport Examples:

Sample 1 : Multimodal Shipment Effected via Land and Sea Shipments 

Multimodal Shipment Effected via Land and Sea Shipments Transport Document Title: Multimodal Bill of Lading
Place of Receipt: Zurich, Switzerland
Port of Loading: Port of Genoa, Italy
Port of Discharge: Jeddah Islamic Port, KSA

Land and sea shipment has been effected together.

This is a multimodal bill of lading.

If the issuing bank finds out that single mode of transport effected on the multimodal bill of lading, then the issuing bank will issue a discrepancy, which is known as multimodal bill of lading does not cover at least two different modes of transport.

Letter of Credit Discrepancy Example: Multimodal Bill of Lading Does Not Cover At Least Two Different Modes of Transport

A letter of credit has been issued in SWIFT format, subject to UCP latest version, with the following details:

Letter of Credit Conditions

Field 44A: Place of Taking in Charge/Dispatch from …/Place of Receipt: Durban, South Africa

Field 44B: Place of Final Destination/For Transportation to …/Place of Delivery: Utrecht, Holland

Field 46A: Documents Required: Full set of multimodal transport document marked freight collect made out to order of Amsterdam Trade Bank marked notify applicant indicating that the goods have been dispatched, taken in charge or loaded on board.

The beneficiary presented a combined bill of lading with the following data:

Multimodal Bill of Lading

Port of Loading: Port Of Durban, South Africa

Port of Discharge: Rotterdam Port, Holland

Discrepancy: Multimodal bill of lading does not show at least two different modes of transport. Only sea transportation has been effected.

Reason for Discrepancy: A multimodal transport document must be covering at least two different modes of transport.

The essence of multimodal transport document is that it is evidencing at least two different modes of transport.

As an example, the multimodal bill of lading can show dispatch from an inland point, such as a road transportation from an inland point to the port of loading located in the country of export, and then consequent shipment by sea from port of loading to the port of discharge.

or any other combinations of different delivery places, so that at least two different modes of transport is utilized.

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