I surrender - Thoughts on Draft ICC Opinion TA949: Surrendered Bill of Lading
[This blog post represents the views of the author and may not represent the views of the ICC. Likewise, this blog post uses (where mentioned) AI technology.]
Introduction
Today, the ICC Banking Commission met in Dubai. One item on the agenda was the discussion on the Draft ICC Opinions – or rather ICC Opinion, because this time there was only one Draft Opinion to discuss.
Traditionally, this would signify a “smooth sail”: How much discussion can one Opinion trigger?
The answer is: A lot!
The purpose of this blog post is to present the main views expressed for and against the Draft Opinion and to spice it with some reflections and a “kind of research”.
Draft Opinion TA949
For starters, let’s look into the query:
The credit called for: “ONE COPY OF SURRENDERED B/L”
Three original bills of lading were presented. It did not include a “surrendered” stamp. However, presented bill of lading included (in the body below the description of goods) the following wording: “Original Bill Surrendered at Origin”.
The presented bill of lading was issued “to order” [of the shipper] and showing notify as the applicant to the documentary credit.
The presentation was refused citing the two following discrepancies:
1. Surrendered bill of lading not presented in copy (but 3/3 originals)
2. The surrendered bill of lading does not contain a surrendered stamp
On the back of that, the following was basically asked to the ICC:
1: What must be presented when the credit calls for “one copy of surrendered bill of lading” (original or copy)?
2: When a surrendered bill of lading is required, how is this to be shown on the document? Stamp or otherwise?
3: Are the discrepancies valid?
The Draft Opinion from the ICC basically stated that all original bills of lading should have been surrendered to the carrier or their agent and that any indication on the copy that the originals have been surrendered will suffice. In other words, the first discrepancy is valid, but not the second.
Interesting to note that the only reference to rules and practices in the Analysis of the Draft Opinion is ISBP 821 A6, i.e., “Copies of transport documents covered by UCP 600 articles 19-25”.
Comments from ICC National Committees (NC) on TA949
I have been part of the ICC Banking Commission for many years and do not recall having a Draft Opinion receiving such diverse response from the ICC National Committees.
There were received comments from 28 ICC National Committees, which I would evaluate to be a bit below average. Usually there are comments from a bit more than 30 ICC National Committees. In any case, the “vote” for TA949 was that:
=> 15 NCs agree with conclusion (8 with added comments)
=> 12 NC disagrees (5 with respect to discrepancy 1)
=> 1 NC unable to provide comment due to unfamiliarity with surrender bills of lading
This means that 53% of the NCs that has commented agree to the Draft Opinion. That is a close call!
Of course, the most elaborate comments are from the NCs that disagree with the Draft Opinion.
Below, the main comments disagreeing with the Draft Opinion will be mentioned and reflected upon.
Comments received from the NCs can be broken down into the following categories:
Application of UCP 600 sub-article 17 (d) and ISBP 821 paragraphs A29 d(iii) and A30 (b)
A key comment is that UCP 600 sub-article 17(d) is applicable to this case, suggesting that there is no conflict between the requirement in the documentary credit and what is actually presented. This for sure is debatable, since the requirement in the documentary credit is “ONE COPY OF SURRENDERED B/L” and an original was presented.
Other comments circle around ISBP 821 paragraphs A29 d(iii) and A30 (b):
Paragraph A29 d(iii) includes the example that a requirement in a documentary credit saying, “photocopy of invoice” or “copy of invoice” then this will be satisfied by the presentation of either a photocopy, copy or, an original invoice (the latter provided it is not prohibited in the documentary credit).
Paragraph A30(b) deals with the situation where a documentary credit requires the presentation of a copy of a transport document and indicates a disposal instruction for all originals of that document. In such case, an original transport document must not be presented.
Reading the two above ISBP 821 paragraphs may lead to different interpretations. Paragraph A29 d(iii) would suggest that an original may be presented in lieu of a copy. However, is it fair to use an example based on an invoice (issued by the beneficiary) to a bill of lading, being a document of title and providing access to the goods? To me, it does not,
If you are of the opinion that a “surrendered bill of lading” includes “disposal instruction” then it may be argued that ISBP 821 paragraph A30(b) would support that. At the outset, I supported that view but after some discussions and considerations I am not that sure. For sure this situation was not envisioned when drafting paragraph A30(b) and frankly IF there is such “disposal instruction” in simply requiring “ONE COPY OF SURRENDERED B/L” then it is indirectly and would require the document checker to understand such to some depth – which frankly seems unreasonable.
In any case, the ICC Technical Advisors in commenting on the above made the comment that, “It is agreed that this is a poorly drafted credit and that the issuing bank should bear the risk of any ambiguity in the context of how the ‘surrender’ of one or more original bills of lading was completed. Three originals bills of lading were presented - we do not see how this can be treated as anything other than a discrepancy, bearing in mind that the originals (or at least one) should have been surrendered and no longer be available.”
Surrender Bills of Lading not being referenced in UCP 600 or ISBP 821 / Responsibility of an issuing bank when issuing such a credit
Other comments circle around that fact that the Surrender Bills of Lading are not referenced in UCP 600 or ISBP 821 and the responsibility of the issuing bank in that respect. This has led to various “conclusions”; one being that such should not be required in a documentary credit. Another being that this should be captured in the ISBP. Yet another that the issuing bank is responsible for any ambiguity that may arise in connection with usage of such term for what reason the discrepancies are not valid.
For this, the ICC Technical Advisors in commenting agree that there was a responsibility for the issuing bank to explain how the ‘surrender’ was to be evidenced on the copy of the surrendered bill of lading.
The ICC Technical Advisors also mention however, that this does not detract from the fact that if a credit requires the presentation of a copy of a surrendered bill of lading, and therefore at least one original bill of lading (if not all originals) should have been retained by the carrier. If not, what would be the underlying purpose of requesting a copy of a surrendered bill of lading?
The meaning of Surrendered Bills of Lading
Other comments circled around the actual meaning of a surrendered bill of lading.
Some of those are in line with the view of the ICC Technical Advisors, i.e., that once “surrendered” there is no original hence such cannot be presented (or rather, it should not be possible to present such).
Some however, states that once a bill of lading is marked “surrendered” it can no longer be an “original” as it would not be possible to obtain the goods in exchange for the goods.
This will be further discussed below.
General Remarks
Other comments were made, prior to the meeting – and in the meeting. One is to seek clarification from the transport industry as to the actual meaning and practice around surrendered bills of lading.
Another was that, in the Draft Opinion there is a mix between banking practice and transport practice. Banking practice because it labels the clause “ONE COPY OF SURRENDERED B/L” as ambiguous and that the issuing bank should have elaborated further on the requirements. Transport practice because the conclusion assumes a transport practice that the original is physically presented to the carrier / agent hence only copies can be presented under the documentary credit.
Reflections on the NC comments
The comments from the ICC National Committees comments are really interesting. There seems to be a consensus to the argument that the “surrendered bill of lading” is not being referenced in UCP 600 or ISBP 821. This, indirectly, is even acknowledged in the Draft Opinion: As mentioned above the only reference to rules and practices in the Analysis of the Draft Opinion is ISBP 821 A6, i.e., “Copies of transport documents covered by UCP 600 articles 19-25”. This means that the Draft Opinion 1) assumes that a surrendered bill of lading is presented in copy form and therefore 2) the examination of such is subject to ISBP 821 A6.
However, neither UCP 600 sub-article 14(d), ISBP 821 paragraphs A29 d(iii), or A30 (b) are mentioned in the Draft Opinion.
Nevertheless, many comments from the NCs circle around ISBP 821 paragraphs A29 d(iii), or A30 (b), but how can those be relevant when there seems to be consensus that “surrendered bill of lading” is not covered by the rules or the practice?
In other words, Draft Opinion TA949 acknowledges, that there is no current practice around “surrendered bill of lading” but aims to provide such, that then could be built in the ISBP!
Outcome of the discussion at the ICC Banking Commission meeting
Given the diverse comments received before and at the meeting the ICC Technical Advisors suggested that written comments will be sought from the transport industry. The purpose of this would be to provide education to banks, especially issuing banks, as to the documentary requirements that are needed to issue a documentary credit that is in a form that will be understood by all parties.
It was also mentioned, that the ISBP revision working group can use the input from the transport industry to provide a text to be included in the proposed revision.
On the basis of the above, the draft Opinion will be postponed until transport industry feedback has been received.
Surrendered bill of lading – going beyond documentary credits
As part of writing this blog post, AI was consulted to understand what a surrendered bill of lading is and how it works.
First, it provided the general concept of a Bill of Lading by saying that “[t]his document, issued by a carrier to a shipper, serves three primary purposes:
=> Receipt of Goods: It acknowledges the receipt of cargo for shipment.
=> Contract of Carriage: It outlines the terms and conditions under which the goods will be transported.
=> Document of Title: It acts as a title to the goods, allowing the holder to claim possession.
The Bill of Lading can be either negotiable or non-negotiable, influencing how it is transferred and utilized in the trading process.”
Then a definition of a surrendered Bill of Lading was provided, i.e.:
“a non-negotiable Bill of Lading where the original document has been surrendered to the carrier. This typically occurs when the shipper or exporter chooses to surrender the original Bill of Lading to the carrier in exchange for a Telex Release or Express Release. This process facilitates the immediate release of cargo to the consignee at the destination port without the need for presenting the original Bill of Lading.”
Last but not least, the process:
“The process of surrendering a Bill of Lading involves several steps:
1. Issuance of the Original Bill of Lading: The carrier issues the original Bill of Lading to the shipper after receiving the cargo.
2. Surrendering the Original Document: The shipper submits the original Bill of Lading back to the carrier, requesting it to be surrendered.
3. Telex or Express Release: Upon surrender, the carrier issues a Telex Release or Express Release, notifying the destination port and the consignee that the cargo can be released without the original Bill of Lading.”
It is noted that the above is in line with the understanding of the ICC Technical Advisors on the topic. Fair to say however, that some NCs have suggested a different practice, where you may in fact still have the original after it has been “surrendered”, but that it cannot be considered an “original” because the goods have already been released based on its surrender. Frankly, “googling” this only makes you more confused.
Conclusion
A vital part of ICC Opinions is to establish and document practice thereby feeding practice into the ISBP.
From my perspective, the Draft ICC Opinion was perfectly balanced in that it acknowledged that no practice existed, thereby trying to create a banking practice taking outset in the actual transport practice. Thereby, providing guidance to document examiners – and issuing banks – in how to deal with such document.
From today’s meeting, I am still hopeful that this will happen, but for now it has been postponed until feedback has been received.
The good thing is that the outcome is that comments are sought from the transport industry, and that will hopefully turn out to be valuable.
Kind regards
Kim