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Unclean Multimodal Bill of Lading Presented Discrepancy

By
Ozgur Eker (CDCS)
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0

Banks accept only clean transport documents.

Banks do not accept any unclean transport document such as unclean bill of lading, unclean multimodal bill of lading, unclean charter party bil of lading, unclean road transport document, unclean air transport document, unclean sea waybill etc.

Letter of credit rules define clean transport document as follows: “A clean transport document is one bearing no clause or notation expressly declaring a defective condition of the goods or their packaging.”

There are two important points about the clean transport documents subject that everyone must know.

The first important point is that the word “clean” need not appear on a transport document, even if a credit has a requirement for that transport document to be “clean on board”.

The second important point is that only express clauses or notations on the transport documents would make them unclean.

If transport document is not to include a clause that expressly declare a defective condition of the goods or their packaging, then it is accepted as a clean transport document.

Sample Clauses That Make a Transport Document Unclean:

• Packaging is not sufficient for the sea journey
• Goods which improperly stored at the port of loading have been shipped on board partially wet and not in good condition.

Let us try to understand the subject with an example as below:

Letter of Credit Discrepancy Example: Unclean Multimodal Transport Document Presented Discrepancy

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: Furniture and Equipment

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

The beneficiary presented a multimodal transport bill of lading with the following clause:

Container is not properly closed and sealed, overloaded and packaging is not sufficient for the sea journey.

Multimodal Bill of Lading

Unclean multimodal bill of lading

Discrepancy: Unclean multimodal bill of lading presented.

Reason for Discrepancy: A bank will only accept a clean transport document. A clean transport document is one bearing no clause or notation expressly declaring a defective condition of the goods or their packaging.

Place of Receipt Different than the Letter of Credit Discrepancy

By
Ozgur Eker (CDCS)
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0

Multimodal bill of lading is a type of transport document, that is used when the shipment covers at least two different modes of transport.

On a typical multimodal bill of lading, there are 4 different places exist in regards to delivery of goods:

  1. Place of Receipt: is the place where the goods are received from the shipper by the carrier, or its agent
  2. Port of Loading: is the place where the goods are received for marine transport by the Carrier
  3. Port of Discharge: is the place where the goods are to be discharged from the vessel
  4. Place of Delivery: is the place where the goods are delivered by the carrier to the buyer

According to the letter of credit rules, the multimodal bill of lading must indicate that goods have been taken in charge at the place stated in the letter of credit, by either a pre-printed wording or by a notation indicating the date on which the goods have been taken in charge.

If the issuing bank finds out that the place of receipt on the multimodal bill of lading is inconsistent with the letter of credit terms, then the issuing bank will issue a discrepancy, which is known as place of receipt different than the letter of credit.

Letter of Credit Discrepancy Example: Place of Receipt Different Than the Letter of Credit on the Multimodal Bill of Lading 

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: SAO PAULO, BRAZIL

Field 44E: Port of Loading/Airport of Departure: SANTOS PORT, BRAZIL.

Field 44F: Port of Discharge/Airport of Destination: PORT OF FELIXSTOWE, UNITED KINGDOM

Field 44B: Place of Final Destination/For Transportation to …/Place of Delivery: IP1 3EE PINEWOOD, IPSWICH, UNITED KINGDOM

Field 46A: Documents Required: Full set of combined transport document issued by a shipping company marked freight collect made out to order of HSBC 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

Field 44A: Place of Taking in Charge/Dispatch from …/Place of Receipt: RIO DE JANEIRO, BRAZIL

Port of Loading: SANTOS PORT, BRAZIL

Port of Discharge: PORT OF FELIXSTOWE, UNITED KINGDOM

Place of Final Destination: IP1 3EE PINEWOOD, IPSWICH, UNITED KINGDOM

multimodal bill of lading place of receipt discrepancy

Discrepancy: Multimodal bill of lading shows a place of receipt different than the letter of credit.

Reason for Discrepancy: A multimodal bill of lading must indicate that goods have been dispatched or taken in charge at the place stated in the letter of credit.

Description of Goods on the Multimodal Bill of Lading is Inconsistent Discrepancy

By
Ozgur Eker (CDCS)
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0

According to the letter of credit rules, the commercial invoice must contain a description of goods, which corresponds to that indicated in the credit.

Other documents may or may not contain a description of goods.

If a document other than the commercial invoice, such as a bill of lading, packing list, certificate of origin, multimodal bill of lading etc., bears a description of goods, this should be in general terms but not inconsistent with that shown in the credit.

What everyone needs to know about the description of goods on a multimodal bill of lading is that the description of goods on a multimodal bill of lading can be indicated in general terms as long as it is not inconsistent with other documents and the letter of credit itself.

If the issuing bank finds out that the description of goods on the multimodal bill of lading is inconsistent with the letter of credit terms, then the issuing bank will issue a discrepancy, which is known as inconsistent description of goods.

Letter of Credit Discrepancy Example: Description of Goods is Inconsistent on the Multimodal Bill of Lading

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

Letter of Credit Conditions

Field 45-A: Description of Goods: Cocoa Powder (PCPN)

Field 46A: Documents Required: Full set of multimodal or combined transport document however named consigned to the order of Belfius Bank SA, notify applicant showing freight prepaid.

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

Multimodal Bill of Lading

Description of Goods: Second Quality Cocoa Powder

Discrepancy: Multimodal bill of lading shows a description of goods inconsistent with the letter of credit and other documents.

Letter of Credit Discrepancy Example: Description of Goods is Inconsistent on the Multimodal Bill of Lading

Reason for Discrepancy: Description of goods on the multimodal transport document may be shown in general terms not in conflict with that stated in the credit.

Notify Different Than Letter of Credit Discrepancy

By
Ozgur Eker (CDCS)
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0

Notify party is the institution, to whom the shipping company informs the arrival of the cargo.

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.

The notify party field on the multimodal bill of lading can be completed mainly in 2 different ways.

  1. In most cases, the notify party is the applicant or the importer on the multimodal bill of lading.
  2. In some rare occasions, the applicant and the issuing bank are both required to be stated as notify parties on the multimodal bills of lading.

The notify party field can be seen on the following transport documents : Bill of lading, multimodal bill of lading, charter party bill of lading, sea waybill, air transport document (air waybill), road transport document (CMR) and rail transport document etc.

If the issuing bank finds out that the notify party field of a multimodal bill of lading has not been completed as per letter of credit terms, then the issuing bank will issue a discrepancy, which is known as notify party different than the letter of credit.

Letter of Credit Discrepancy Example: Notify Party Different Than Letter of Credit on a Multimodal Bill of Lading

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

Letter of Credit Conditions

Field 50: Applicant: Al Ghazali Sons Trading Co P.O. Box No. 3268, Alkhobar 31771 Saudi Arabia. Fax: (03) 8962022 Tel: (03) 8773344

Field 46A: Documents Required: Full set of ‘clean on board’ multimodal bill of lading issued by Applicant’s Forwarder M/S. Fast Transocean Intl. Ltd., issued to the order of Banque Saudi Fransi, Alkhobar, marked ‘freight collect’ and notify applicant, evidencing shipment from any port in Spain to Dammam Port, Saudi Arabia.

The multimodal bill of lading must show the name, address and telephone number of shipping agent at the port of discharge.

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

Multimodal Bill of Lading

Consignee: To the order of Banque Saudi Fransi, Alkhobar

Notify: Al-Bingazhi Trading Co. Ltd. P.O. Box No. 3118, Riyad 31551 Saudi Arabia. Fax: (03) 8964042 Tel: (03) 8775544

multimodal bill of lading notify party discrepancy

Discrepancy: Multimodal bill of lading shows a notify company which is different than what is required in the letter of credit.

Reason for Discrepancy: If a letter of credit states the details of notify parties such as company name and address, a multimodal transport document may also indicate the details of notify party.

Consignee Different Than Letter of Credit Discrepancy

By
Ozgur Eker (CDCS)
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0

Consignee field on the multimodal bill of lading must be completed according to the instructions stated in the letter of credit.

In a contract of carriage, the consignee is the person to whom the shipment is to be delivered whether by land, sea or air.

The consignee field can be seen on the following transport documents : Bill of lading, multimodal bill of lading, charter party bill of lading, sea waybill, air transport document (air waybill), road transport document (CMR) and rail transport document etc.

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.

The consignee field on the multimodal bill of lading can be completed mainly in 5 different ways.

  1. Multimodal bill of lading consigned to the order of the issuing bank
  2. Multimodal bill of lading consigned to the issuing bank
  3. Multimodal bill of lading consigned to the order of the applicant
  4. Multimodal bill of lading consigned to the applicant
  5. Multimodal bill of lading consigned to order and blank endorsed.

If the issuing bank finds out that the consignee field of a multimodal bill of lading has not been completed as per letter of credit terms, then the issuing bank will issue a discrepancy, which is known as consignee different than letter of credit.

Letter of Credit Discrepancy Example: Consignee Different Than The Letter of Credit on a Multimodal Bill of Lading

A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:

Letter of Credit Conditions

Field 46A: Documents Required: Full set of multimodal bill of lading issued by a shipping company marked freight prepaid made out to COMMERZBANK marked notify applicant indicating that the goods have been dispatched, taken in charge or loaded on board.

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

Multimodal Bill of Lading

Consignee: To the order of Commerzbank

Notify: Applicant Company

multimodal bill of lading consignee discrepancy

Discrepancy: Multimodal bill of lading shows a consignee which is different than what is indicated in the letter of credit.

Reason for Discrepancy: If a credit requires a multimodal or combined transport document to show that the goods are consigned to a named party, such as “consigned to the issuing bank” (a straight consignment), rather than “to order” or “to order of the issuing bank”, the multimodal or combined transport document must not contain words such as “to order” or “to order of” that precede the name of that named party, whether typed or pre-printed.

Multimodal Bill of Lading Late Shipment Discrepancy

By
Ozgur Eker (CDCS)
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0

Most commercial letters of credit rely on shipment of goods to perform its role.

Under a typical commercial letter of credit, the exporter ships the goods, collects the documents including a transport document and makes the presentation to the issuing bank.

If the letter of credit requires presentation of a transport document, as most credits demand so, the shipment must be completed before the latest date of shipment indicated in the credit.

Consequently, the transport document must not be dated after the latest date of shipment.

If the exporter fails to complete the shipment before the latest date of shipment indicated in the credit, which requires presentation of a multimodal bill of lading as the transport document, then the issuing bank raises a discrepancy, which is known as late shipment discrepancy.

Sample Late Shipment Discrepancy on a Multimodal Bill of Lading Under a 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 44C: Latest Date of Shipment: 140631

Field 44E: Port of Loading/Airport of Departure: Port of Genoa, Italy

Field 44F: Port of Discharge/Airport of Destination: Port of Cape Town, South Africa

Field 44B: Place of Final Destination/For Transportation to …/Place of Delivery: 7460, Epping, Cape Town, South Africa

Field 46A: Documents Required: Full set of multimodal transport document issued by a shipping company marked freight collect made out to order of The Standard Bank of South Africa Limited 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 Genoa, Italy

Port of Discharge: Port of Cape Town, South Africa

Place of Final Destination: 7460, Epping, Cape Town, South Africa

The multimodal bill of lading is dated 31.June.2014.

In addition to issuance date of the multimodal bill of lading contains an on-board notation with the following wording: “SHIPPED ON BOARD AT PORT OF GENOA, ITALY ON VESSEL FAST IDAHO ON 02.JULY.2014“.

Discrepancy: Multimodal bill of lading shows a late shipment.

Although multimodal bill of lading date does not indicate a late shipment, the ship on board notation date shows a date which falls outside the allowed shipment period.

Reason for Discrepancy: If a letter of credit requires presentation of a transport document indicated in the UCP, the date of shipment stated on the transport document must not be showing a later date than the latest date of shipment stated in the letter of credit.

Transport Route Not As Per Letter of Credit Discrepancy

By
Ozgur Eker (CDCS)
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0

According to the letter of credit rules, each shipment needs to be verified by a corresponding transport document and must follow the route, that is stated in the letter of credit.

A transport document covering at least two different modes of transport is regarded as a multimodal transport document or combined transport document as per letter of credit rules.

Letter of credit rules accept following documents as transport documents in addition to multimodal transport document:

  • Bill of lading,
  • Non-negotiable sea waybill,
  • Charter party bill of lading,
  • Air transport document,
  • Railway transport document,
  • Road transport document,
  • Inland waterway transport document
  • Courier receipt and post receipt (only if used to transport actual good.) (not sending documents etc…)

If the issuing bank finds out that the shipment has been effected with a different route, other than what is identified in the letter of credit, then the issuing bank will issue a discrepancy, which is known as transport route is not as per letter of credit.

Discrepancy Example: Transport Route Discrepancy under a Letter of Credit

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

Letter of Credit Conditions

Field 44A: Place of Taking in Charge/Dispatch from …/Place of Receipt:
HANNOVER, GERMANY

Field 44E: Port of Loading/Airport of Departure:
HAMBURG, GERMANY

Field 44F: Port of Discharge/Airport of Destination:
ANY PORT IN CHINA

Field 46A: Documents Required: Full set of multimodal transport document issued by a shipping company marked freight (prepaid) made out to order of Agricultural Bank of China marked notify applicant indicating that the goods have been dispatched, taken in charge or loaded on board.

The beneficiary presented a multimodal transport bill of lading with the following shipment route:

Place of Receipt: WOLFSBURG, GERMANY
Port of Loading: HAMBURG PORT, GERMANY
Port of Discharge: PORT OF GUANGZHOU, CHINA

Multimodal Bill of Lading

shipment-route-multimodal-billoflading

Discrepancy: Multimodal bill of lading shows a transport route different than what is stated in the letter of credit. Place of receipt should have been Hannover, Germany but it was stated as Wolfsburg, Germany which is not as per letter of credit conditions.

Reason for Discrepancy: A multimodal transport document is to indicate the place of receipt, dispatch, taking in charge, port of loading or airport of departure stated in the credit.

Insurance Document Discrepancies

By
Ozgur Eker (CDCS)
-
0

It is a common practice in the commercial world to insure goods in transit. Briefly, the following reasons compel traders to contract transport insurance:

  • Protection against financial losses resulting from damage, pilferage, theft and non-receipt of entire or part of a consignment; and
  • Protection against financial claims that can be made against the owner of goods on board a vessel in case of a “declared general average” (the goods themselves being undamaged). (1)

According to the Incoterms rules, if the parties agreed on CIF or CIP trade terms, the exporter must provide an insurance policy or an insurance certificate to the importer at his own expense.

Consequently, if letter of credit has been chosen as a payment method with an underlining sales contract that had been established either with CIF or CIP incoterms, then the issuing bank adds an insurance document to the required documents list.

On this page you can find most common letter of credit discrepancies related to insurance documents, such as insurance policies or insurance certificates.

Insurance Policy Discrepancies

Important Definitions Regarding the Insurance Documents under Latest Letter of Credit Rules:

  • An insurance policy, insurance certificate or declaration under an open cover will be examined by banks as per UCP 600 article 28.
  • An insurance policy, an insurance certificate or a declaration under an open cover, must appear to be issued by an insurance company, an underwriter or their agents or their proxies.
  • An insurance policy, an insurance certificate or a declaration under an open cover, must appear to be signed by an insurance company, an underwriter or their agents or their proxies.
  • Presentation of cover notes will not be accepted instead of presentation of insurance policies, insurance certificates or declarations under an open cover.
  • An insurance policy is acceptable in lieu of an insurance certificate or a declaration under an open cover.
  • The date of the insurance document must be no later than the date of shipment, unless it appears from the insurance document that the cover is effective from a date not later than the date of shipment.
  • The insurance document must indicate the amount of insurance coverage and be in the same currency as the credit.
  • The insurance document must indicate that risks are covered at least between the place of taking in charge or shipment and the place of discharge or final destination as stated in the credit.

References:

  1. Shipping and Incoterms, Practice Guide, UNDP Practice Series, Page:18

Insurance Coverage is Insufficient Discrepancy

By
Ozgur Eker (CDCS)
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0

Marine insurance, contract whereby, for a consideration stipulated to be paid by one interested in a ship or cargo that is subject to the risks of marine navigation, another undertakes to indemnify him against some or all of those risks during a certain period or voyage.(1)

In a letter of credit transaction where an insurance policy or certificate is required, the amount of coverage must be determined in accordance with the letter of credit conditions and current L/C rules.

There are two possibilities exist for the insurance coverage amount under letters of credit:

  1. First possibility is that when the credit indicates a fix amount to be insured. In this case the insurance policy coverage must match the indicated amount in the credit.
  2. Second possibility is that when the credit is silent about the insurance coverage amount or percentage. In that case the insurance document is to be issued in the currency of and, as a minimum, for the amount indicated under UCP 600 sub‐article 28 (f) (ii). (The letter of credit rules define minimum insurance coverage amount as at least 110% of the CIF or CIP value of the goods.)

It is worth mentioning that there is no maximum percentage of insurance coverage identified under the letter of credit rules.

But, insufficient insurance coverage will cause problems.

If the issuing bank finds out that the insurance coverage is less than what is required under the letter of credit, then the issuing bank raises a discrepancy, which is known as insurance coverage is insufficient.

Discrepancy Example: Insurance Coverage is Insufficient:

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

Letter of Credit Conditions

Field 32 B: Currency Code, Amount
Currency: USD (US DOLLAR)
Amount: #150.000,00#

Field 39 B: Maximum Credit Amount: Not Exceeding

Field 43P: Partial Shipments: Not Allowed

Field 43T: Transhipment: Not Allowed

Field 45A: Description of Goods and or Services: 100 pcs of 200mm Concrete Drainage Pipes. Delivery Terms: CIF Port of Apapa, Lagos Incoterms 2010.

Field 46A: Documents Required:

  1. A signed invoice in duplicate indicating the details of the descriptions of goods as per the L/C.
  2. Certificate of Origin issued and certified by any Chamber of Commerce in India indicating that goods are of Indian origin.
  3. Insurance policy/certificate endorsed in blank for covering Institute Cargo Clause (A), Institute Strikes Clause (cargo), Institute War Clauses (Cargo) with claims payable in Nigeria.
  4. Full set of clean on board bill(s) of lading issued or endorsed to the order of issuing bank, notify applicant showing “freight prepaid” and showing full name and address of the shipping company agent or his representative in Nigeria.

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

Insurance Policy

insurance cover insufficient discrepancy

Discrepancy: The insurance policy indicates the amount of coverage is 150.000 USD which corresponds to 100% commercial invoice value. Letter of credit rules requires that minimum insurance cover must be at least 110% of the invoice value. Insurance cover should have been at least 165.000 USD.

Reason for Discrepancy: If there is no indication in the credit of the insurance coverage required, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods.

All Originals of Insurance Policies Have Not Been Presented Discrepancy

By
Ozgur Eker (CDCS)
-
0

Marine insurance is a type of commercial liability insurance that provides coverage (financial backing) against perils and losses associated with the transportation of goods.

Marine insurance is possibly the oldest type of commercial insurance in the world, dating as far back as the thirteenth or fourteenth century.(1)

According the current letter of credit rules, when the insurance document indicates that it has been issued in more than one original, all originals must be presented.

For example, if the insurance policy states on its face that ‘this policy has been issued in two originals to the same effect’, then both originals must be presented.

If the issuing bank finds out that all original insurance documents have not been presented, then the issuing bank will raise a discrepancy, which is known as all originals of insurance policies have not been presented.

Discrepancy Example: All Originals of Insurance Policies Have Not Been Presented:

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: 100mtons of Iron Ore. Delivery Terms: CIF Port of Rotterdam, Netherlands Incoterms 2010.

Field 46A: Documents Required:

  1. A signed invoice in duplicate indicating the details of the descriptions of goods as per the L/C
  2. Certificate of Origin issued and certified by the Chamber of Commerce in Beneficiary’s country indicating South African origin of the goods.
  3. Insurance certificate or policy in assignable form and endorsed in blank for 110% CIF commercial invoice value covering all risks showing claims payable in Netherlands in commercial invoice currency.
  4. A full set (3/3) original bills of lading issued to the order of the issuing bank marked “freight prepaid”‘ and to notify the issuing bank and the applicant.

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

Insurance Policy

marine insurance policy all originals discrepancy

Insurance Policy Discrepancy: The insurance policy indicates that it is issued in two originals. All of the original insurance policies should have been presented but only one original insurance policy presented.

Reason for Discrepancy: When a credit requires the insurance document to be issued in more than one original, or when the insurance document indicates that it has been issued in more than one original, all originals are to be presented and are to appear to have been signed.

References:

  1. Keenan, Marie. 2016. “Marine insurance.” Salem Press Encyclopedia Research Starters, EBSCO host (accessed February 24, 2018).
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