Uniform Customs and Practice for Documentary Credits - UCP 600

Sailing has been a major contributor to the development of civilization. The first boat was built during the Stone age which resembled a Canoe. Canoe was used for transportation of goods and material as well as for fishing. Maritime history IE study of human activity at sea is treated as an academic subject in itself. Maritime history is intriguing and requires tons of articles, however the scope of this article is limited to understanding the Bill of Lading along with its governing guidelines. In this article ICC guidelines governing the Bill of Lading (B/L) have been divided into 40 rules which have been further explained with examples.

Sea Shipments constitute more than 80% of World Trade and as per the review of Maritime transport conducted by UNCTAD (United Nations Conference on Trade and development, the volumes are increasing every year. Commodities such as grains and oil because of the size, quantity and the distances to be covered are exclusively shipped via sea.

Bill of Lading (B/L) is a transport document that exclusively covers the shipment of goods via sea route. Bill of Lading may be called House B/L, Master B/L, Ocean B/L, Order B/L, Straight B/L, Claused B/L, Multimodal B/L, Clean B/L etc. In some cases it is just a naming convention whereas in some cases the B/L has some distinct features. We will discuss the nomenclature of each type in our forthcoming article, in this article we will discuss the fundamentals of an ordinary or commonly used Bill of Lading.

Bill of Lading is a document of title issued in 3 original copies where it serves as a receipt to the consignor and also functions as evidence of contract between the consignor and the carrier. It is a sensitive document as it provides the right or access to the underlying goods.

B/L is negotiable and the title to the goods can be transferred by endorsement.

Trans-shipment is unloading and reloading of goods from one vessel to another during the carriage of those goods from the port of loading to the port of discharge stated on the credit.

Partial Shipment is shipment of goods on more than one vessel even if each vessel leaves on the same day for destination.

Demurrage is defined as a charge or a fee levied by the port authorities on a vessel of the goods for some infringement of regulations. Example – delay in berthing or not removing the goods in time.

Basics

1) Issuing bank generally requires a Bill of lading to be issued as to the Bank’s order or to the order of shipper and to be endorsed in blank, so that the buyer cannot get hold of the goods unless the issuing bank endorses the B/L in the favor of the consignee.

2) A bill of lading can be issued by any party other than carrier or master provided it meets all the conditions stipulated in Article 20 of UCP.

3) The carrier is entitled to effect the delivery of goods to the holder of one original Bill of Lading and is not concerned with the whereabouts of the other 2 Bill of Ladings of the full set.

4) B/L is always issued in 3 originals and it should indicate the number of originals that have been issued. This is necessary to ensure that a full set has been presented. Any one original is good enough to release the shipment.

5) First/Second/Third original = Original/Duplicate/Triplicate

6) A Bill of Lading need not be named as ‘Marine bill of lading’, ‘Ocean bill of lading’ or similar even if credit refers to this particular document with any of these names.

7) Terms and conditions of the carriage must be stated or should make reference to another source containing the terms and conditions of the carriage

8) If the credit stipulates that ‘Freight Forwarders Bill of Lading’ or ‘House Bill of Lading’ is not acceptable then the credit should also state context such as title, format, content or signing to which this condition relates. If the context is not elaborated in the credit, this condition will be ignored and the Bill of Lading presented will be examined against Article 20 of UCP 600.

9) Credit usually calls for a ‘CLEAN’ B/L or requires the word ‘CLEAN to appear on the B/L, the B/L need not indicate the word ‘Clean’ or similar to ‘Clean’ but must not explicitly evidence that the condition of goods or package is defective. Even the word ‘Clean’ seems to have been deleted on the B/L does not make it discrepant.

10) B/L is a negotiable document and entitles the bearer to the underlying goods, hence all the corrections on the B/L must be authenticated. In case of an authentication made by an agent, authenticating agent can be different than the agent who has signed the B/L provided they belong to the same Carrier or the Master. Corrections on Non-negotiable copies of the B/L need not be authenticated.

11) The inco-terms on the B/L should coincide with the inco-terms on the credit,

12) Goods description indicated on the B/L must not conflict with the credit

Again clauses similar to ‘packaging MAY not be sufficient’ do not make the B/L discrepant but clauses such as ‘8 out 26 boxes are damaged and the seal is broken’ indicates that the goods are damaged and the B/L is now discrepant.

Parties

13) Bill of Lading should not state that it is subject to a Charter party. We will be covering Charter Party B/L as a separate topic.

14) If credit requires the goods to be consigned to a named party then the B/L indicating words similar to ‘to the order of’ the named party will be discrepant. And vice versa.

15) Notify party details stated in the B/L must match with the credit.

16) If the goods are to be consigned to the applicant or the issuing bank, B/L need not state their address and contact details.

17) If the notify party is the applicant and contact details and address of an applicant is stated on the B/L under notify party, then it should not conflict with that on the credit.

Partial Shipment and Trans-Shipment

18) If the credit disallows partial shipment then more than one set of B/L is acceptable provided they indicate that the goods have been shipped on the same vessel, same journey and are destined for the same port of discharge. In this case, latest of all date of shipment will be used to calculate the presentation period and the maturity date as may be required.

19) When partial shipment is allowed by the credit and more than one set of B/L is presented, the earliest date of shipment will be used to calculate the presentation period.

20) Credit dis-allows trans-shipment, bill of lading indicating that ‘transshipment will take place’ is accepted provided – the cargo is shipped in trailer, container, Lash barge and the entire carriage is covered by one shipment.

21) An indication that goods will or may be transshipped is acceptable provided that the entire carriage is covered by one and the same air transport document

Signatures, Date & Stamps

22) If the Master/Captain is signs the Bill of Lading, the Master/Captain should be identified but his name need be stated.

23) When an Agent is signs the B/L on behalf of the Master/Captain, Agent should be named and identified as an Agent for the Master (Captain).

24) When an Agent signs the B/L on behalf of the carrier, the agent needs to be named, indicate as it is signing as an ‘Agent’ for the named Carrier.

25) If the Carrier is identified as ‘Carrier’ somewhere else on the B/L, then Agent may sign as per the above rule but without identifying the Carrier.

26) Carrier should always be identified, if the Bill of Lading is signed by a named branch of the carrier, the signature will be considered to be that of the carrier.

27) In case of Pre-printed Shipped on board stamp, Date of issuance = Date of shipment

28) On Board notation or stamp, Date of such notation/stamp = Date of shipment

29) In case of ‘Intended vessel’, On Board notation with actual vessel is required

30) If LC calls for any transport document without stating that ‘Freight Forwarder’s transport document is acceptable then the Freight Forwarder’s transport document is acceptable provided it is signed as ‘Carrier’ or ‘Agent’ on behalf of the Carrier.

31) If LC says Freight Forwarder’s or ‘House Bill of Lading’ is acceptable then the document is acceptable if the ‘Carrier’, ‘Agent’ is not identified and if the Freight Forwarder signs in his own capacity.

32) Shipped in apparent good order = Laden on Board = Clean on Board = Shipped on Board

Ports

33) Port of discharge on the credit and the B/L must match

34) If the port of discharge required by the LC is stated as the ‘Place of Final destination’ on the B/L, then it should also bear a notation that the port of discharge is stated as the ‘Place of Final destination’.

If the credit requires shipment to be effected to Louisiana, but Louisiana is shown as the place of destination instead of the port of discharge, this should be evidenced by a notation like ‘port of discharge Louisiana’

35) In case of ‘Intended port of loading, On Board notation + date of shipment + port of loading as stated in the LC is required.

36) The above rule also applies for ‘port of discharge’ as per credit is appearing as the ‘place of final destination’, vessel name is not required.

37) B/L should state the port of loading and the port of discharge as mentioned in the credit (LC) however it need not state the country even if it is stated in the credit.

38) If the credit requires that the port of loading or port of discharge can be any port in the indicated geographical area, the B/L should state the ACTUAL port located  in that geographical area

The credit states that port of loading can be ‘any port in the U.S’, the B/L that states that port of loading is ‘Houston’ is acceptable and the one stating ‘any port in the U.S’ is discrepant.

39) The above rule applies to cases where the credit provides an option of 2 or more ports, the B/L should indicate the name of the particular port

The credit states port of discharge can be Houston or Louisiana or New York, the B/L should state that one port which the shipment was discharged say ‘New York’, B/L stating all the 3 names as port of discharge will be construed to be discrepant.

40) If B/L indicates that shipment has taken place from more than one port, then each port should bear a dated on board notation.

Bill of Lading is a receipt issued by the carrier to the shipper for the underlying shipment to a particular buyer, The Bill of Lading is sent to the buyer (via issuing bank in case of under LC transactions) by the shipper upon payment for the goods. The delivery of the goods is made to the buyer (presenter of the B/L) against the original B/L.

Efforts are being made to substitute a paper based B/L with an electronic B/L. Electronic B/L will facilitate paper less trade as transport document is always presented in paper . Electronic B/L will crunch the processing time and costs. As of today 63 countries are exploring the option of using electronic B/Ls. Bill of Lading is a commercial contract and a document of title, hence is also subject to commercial law and regulations prevailing in the associated countries. The impediment in wider circulation of an electric B/L is that the court of law has certain reservations and discomfort in most countries when it comes to non-paper based document. This has led to some amount of uncertainty to the event of electronic B/L replacing the volume of paper based B/L. Secondly there are anywhere between 5-50 parties involved in a cross border transaction hence exchange of documents is conventionally considered to be a fool proof route as the the document delivery can be insured.