What options are available to a FCA seller in the event when the carrier nominated by buyer fails to provide suitable containers


[21 March 2008]


When the seller intends to have the goods stuffed in container(s) at CFS, he can deliver the goods “FCA stuffed in container(s)” at CFS.

A FCA delivery of FCL cargo at CFS is in practice made on the conditions that the risk of loss or damage to the goods shall pass from the seller to the buyer at the time of completion of stuffing of goods in container(s), thus a modification of Incoterms 2000.

It is buyer’s responsibility to arrange with the nominated carrier for timely provision of containers subject to acceptance by seller and independent surveyor and for provision of necessary dunnage materials required for stowing, lashing and securing the goods in containers. The buyer has also to notify the seller in advance when the containers are available for stuffing. But what happen if the independent surveyor rejects the containers provided by nominated carrier or the nominated carrier fails to provide the containers in due time? Here is an example of clause I use in FCA contracts to address such situation:


“In the event when the nominated carrier fails to provide suitable containers and take the delivery of goods within the time schedule agreed …… for other reasons than Force Majeure, the Seller shall procure itself 20’ TEU containers and deliver the stuffed containers to a freight forwarder against a Forwarder’s Certificate of Receipt evidencing that goods are held at its disposal. All the additional costs incurred by Seller for this operation, including the costs of procuring the containers and insuring the goods while at Container Freight Station, shall be evidenced in the commercial invoice and be added to the final price of goods.

In such circumstances the Seller shall be entitled to present under documentary credit instead of Bill of Lading the Forwarder’s Certificate of Receipt accompanied by a Survey Report issued by Messrs. ….… attesting that containers are in a satisfactory condition …...”

For L/C I drafted a special clause to allow the seller receive the payment against tender of FCR instead of Bill of Lading.

47 ADDITIONAL CONDITIONS:

In the event when the nominated carrier fails to provide suitable containers and take the delivery of goods until the date …/…/…… , the payment shall be made against the presentation of  the following documents:

- One original plus two copies (1/1) of Commercial Invoice

- One original and one copy (1/1) of Forwarder’s Certificate of Receipt issued by Messrs. ………… evidencing that the goods have been taken in charge on the date …/…/ ….  and that the goods are held at the disposal of ………(beneficiary)[1], stuffed in containers.

Forwarder’s Certificate of Receipt to show the container nos. and that the type of container used for stuffing of goods is 20’ … container.

- One original and one copy (1/1) of Container Survey Report issued by Messrs. … attesting that containers used for stuffing of goods are in a satisfactory condition and that …………..”

Except for Bill of Lading, in SWIFT Field 47A will have to be stated again the conditions for the rest of documents: invoice, inspection certificate, packing list; to prove that seller met his delivery obligations.


 

[1] Forwarder’s Certificate of Receipt to show Seller as consignee, NOT THE BUYER. After the bank accepts the documents and pay the Seller then the Seller can give instructions to forwarder to release the goods to buyer’s representative.

 


[Comment added 5 April 2008]

I have been asked to clarify why I said that FCR to indicate that goods be held at the disposal of supplier (i.e. L/C beneficiary). The company for which I had been asked to write the respective terms was transporting the goods by rail to CFS for stuffing in containers and then the stuffed containers were moved to a nearby port terminal. I wrote the respective clause to address the situation when the freight forwarder nominated by buyer is unable to arrange timely delivery of suitable containers to CFS, as it may happen in heavy shipping season. It must be made a distinction between the situation when the freight forwarder is hired by buyer and the situation when the freight forwarder is hired by seller.
If forwarder is hired by the buyer, then it acts as agent of buyer and once it has taken the goods in charge the seller losses the control over them. That's why in FCA sales of LCL cargoes the bank issuing the L/C is required to be named as consignee in FCR. 
When forwarder is hired by seller it acts as agent of seller in following the instructions set in FCR. Named consignee, e.g. issuing bank, can cancel the seller's instructions for holding the goods and give new instructions only after it surrenders FCR to forwarder, so seller is would be protected. However, most exporters are not willing to take the chance and require a document with which they can keep control over the goods at CFS.


The problem with FIATA FCR is that it has been designed for two options only:
 

  • either for the situation when the freight forwarder receives instructions to hold the goods at the disposal of consignee 
     

  • or for the situation when the freight forwarder receives instructions to forward the goods to the consignee named in document.
     
    To give exporter I dealt with the peace of mind I suggested that FCR show him as both supplier and consignee since the document was required to indicate that goods are held at his disposal. In the meantime I get the idea that instead of ticking one of the two boxes available for the options inserted on FCR, the exporter may require his trusted freight forwarder to make a notation on the face of FCR confirming that the goods have been stuffed in containers and taken in charge at the named place and date and are held at the disposal of supplier pending further
    instructions. Here is an example of wording for L/C:
     
    "One original and one copy (1/1) of Forwarder's Certificate of Receipt issued by Messrs. ......... confirming that the goods have been stuffed in containers and taken in charge at ... (CFS) ... on the date .../.../ ... and are held at the disposal of beneficiary pending further instructions.
    Forwarder's Certificate of Receipt to show the container nos. and that the type of container used for stuffing of goods is 20' ... container."


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