Is it a Charter Party B/L – or is it a B/L issued subject to a Charter Party?


The great Soh Chee Seng recently posted a video on the social medias – such as Facebook:

 

https://www.facebook.com/photo.php?v10152352670320490

 

In the video he argues the recently approved ICC Opinion TA793rev. Please watch this before reading the below which is – my take on the matter.

 

In short the case is as follows:

 

LC requirements

Under documents required

Full set of clean on-board marine bills of lading consigned to order, blank endorsed, notify applicant and marked “freight payable as per charter party”

 

Under other conditions

Charter Party BL acceptable

 

The presented Bill of Lading indicated “Freight payable as per charter party” and was signed by XXX Logistics Co Ltd as agent for carrier YYY Shipping Lines Ltd.

The reverse page showed shippers blank endorsement as well as the typical shipping contract terms & conditions (i.e. not the usual Charter Party Bill of Lading terms & conditions).

 

Now – the question is if the presented transport document is signed correct.

In essence:

* If the document is examined according to UCP 600 article 20 (Bill of lading) then it is signed correct (i.e. as agent for a named carrier), however

* if it is examined according to UCP 600 article 22 (Charter Party Bill of lading) – then it is not – as UCP 600 article 22 does not cater for signing by a carrier or its agent.

 

The analysis and conclusion from the ICC Banking Commission includes the following statements

 

Quote

The credit required a marine bill of lading marked „freight payable as per charter party‟. In this respect, the credit was badly worded. The presented bill of lading was marked “freight payable as per charter party”.

 

[….]

 

Subsequently, the bill of lading presented under this credit is to be considered as a CPBL and checked under UCP 600 Article 22.

 

[….]

 

 

The discrepancy raised by the issuing bank, “Charter Party BL signatory‟s capacity not as master, owner, charterer or agent for any of the aforesaid”, is correct.

Unquote

 

There are a couple of issues that are interesting in this case.

 

First of all which transport article will be used for the examination of the document – article 20 (Bill of Lading) or 22 (Charter Party Bill of Lading)?

 

In order to answer that one must understand how transport documents are being examined under UCP 600 (which is not totally in line with the shipping industry’s understanding of transport documents):

 

1: The LC is the pointer:

The LC requirements will dictate the transport article to be used for the purpose of the examination. That sounds easy – but it may not be easy at all.

 

For example there are many ways to require a “bill of lading” such as:

 

* “Full set of bill of lading made out to the order of the issuing bank notify applicant, showing freight collect”

* “Ocean bill of lading”

* “Port-to-port bill of lading” or

* “Marine bill of lading”

 

However – sometimes that does not even offer a precise answer. For example D1(c) reads:

 

Quote

When a credit requires the presentation of a transport document other than a multimodal or combined transport document, and it is clear from the routing of the goods stated in the credit that more than one mode of transport is to be utilized, for example, when an inland place of receipt or final destination are indicated, or the port of loading or discharge field is completed but with a place which is in fact an inland place and not a port, UCP 600 article 19 is to be applied in the examination of that document.

Unquote

 

So even if the LC calls for a “bill of lading” – the examination of the transport document may still be subject to UCP 600 article 19 (Transport Document Covering at Least Two Different Modes of Transport) – if the routing of the goods (e.g. as reflected in SWIFT fields 44A, 44E, 44F and 44B) makes it clear that more than one mode of transport is to be utilized.

 

This of course places a great responsibility on the issuing bank to clearly express the transport document requirement in a clear and unambiguous manner, so that the nominated bank and the beneficiary fully understand the intention of the issuing bank. I.e. simply which article to use when examining the presented transport document.

 

 

2: The however named principle

When the UCP 600 transport article to be used to examine the document has been identified, then the “however named principle” applies. For example UCP 600 article 20 (Bill of lading) opens as follows:

 

Quote

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

Unquote

 

This mean that the transport document presented need not be titled as the identified UCP 600 article or for that matter as stated in the LC. It must however comply with the requirements of the transport document to be used for the examination (i.e. the article identified in 1 above).

 

So for example if the LC calls for a bill of lading, the transport document presented may be titled “Multimodal transport document” as long as it complies with UCP 600 article 20.

 

 

So for the case in question: The transport requirement in the LC is:

 

Full set of clean on-board marine bills of lading consigned to order, blank endorsed, notify applicant and marked “freight payable as per charter party”

 

The good question is if this requirement points towards article 20 or article 22

 

UCP 600 article 22 opens as follows:

 

Quote

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:

Unquote

 

So if one takes away the words “marine” and “on-board” then the LC requirement is quite close to the opening of article 22.

 

It seems to me that these words – especially “marine” – somehow “muddy” the discussion. The reason for that dates back to pre-2007 – i.e. to UCP 500 (the predecessor to UCP 600).

 

In the UCP 500 article 23 was titled “Marine/Ocean Bill of Lading.”

Therefore – for LC people – the word “Marine” creates a “link” to a traditional bill of lading – as opposed to a charter party bill of lading. There is however no rational reason for this: Marine means that it is related to the “sea.” This therefore applies to both the traditional bill of lading – as well as a charter party bill of lading.

The words “on-board” is also in LC transactions often used to identify a traditional bill of lading – but in reality UCP 600 article 22 also requires an “on-board” document (see UCP 600 article 22(a)(ii)).

For the reasons mentioned above the words “marine” and “on-board” has no value in determining if the presented transport document is to be examined according to article 20 or 22.

 

So in essence the LC calls for a bill of lading containing an indication that it is subject to a charter party; i.e. a clear pointer to UCP 600 article 22!

 

Had the LC had stopped there – it would have been a clear case: UCP 600 article 22 must be used to examine the transport document. For that reason the document should be rendered discrepant.

 

HOWEVER under other conditions the LC indicated:

 

“Charter Party BL acceptable.”

 

This requirement – to me – makes a mess because it confuses me as to what the issuing bank expects. It makes no sense calling for a Charter Party Bill of Lading – and then stating that Charter Party Bill of Lading is acceptable. This indicates that there actually is a choice to be made – but it is in no way clear what kind of choice that is. Is it between article 20 and 22? Or does this allow for the document to be examined according to article 20 – modified so that the transport document may indicate “freight payable as per charter party?” A lot of guesswork…

 

In other words: this requirement makes the LC ambiguous: The “transport document pointer” simply is not clear. Such ambiguity – to me – falls back on the issuing bank and the applicant.

For that reason it is wrong to refuse the transport document for this reason! I there find the conclusion of ICC Opinion TA.793rev to be wrong.

 

So coming back to the Chee Seng; I agree with his conclusion – but for different reasons ….

 

 

There is however one other thing that seems to have been forgotten in this discussion: Why is it so wrong that a Charter Party Bill of Lading is signed by a carrier – or by the agent of the Carrier? The obvious answer is because this is not catered for in the UCP 600. Here a Charter Party Bill of Lading must 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

 

I.e. NOT the “carrier” – or a named agent for or on behalf of the carrier.

 

ICC Opinion TA793rev address this issue by making reference to feedback received from the ICC Commercial Law and Practice Commission for ICC Opinion TA.775rev which stated:

 

Quote

“Where a credit simply allows for or requires the presentation of a charter party bill of lading (CPBL), a CPBL signed by a carrier or its agent is discrepant under UCP 600 sub- article 22 (a) (i). The reason for excluding such CPBLs from this sub-article was to avoid document examiners having to determine who, of a possible number of different entities ranging from the owner to charterers and sub-charterers, might be the contractual carrier under the contract of carriage as evidenced by or contained in the CPBL….

Unquote

 

Hmm … this is indeed an awkward argument.

Just look to article 20: A bill of lading must indicate the name of the “carrier;” but UCP 600 article 14(l) makes it clear that a transport document may be issued by any party other than a carrier, owner, master or charterer provided that the transport document meets the requirements of articles 19, 20, 21, 22, 23 or 24.

Or in English: A bill of lading may be issued by a freight forwarder, NVOCC or the like provided they state that they are “carrier” (or an agent for the carrier). Of course there are many forms of carrier – and often a freight forwarder is a “contractual carrier” (as it is not the owner of the vessel), but still the bill of lading is accepted as long as the freight forwarder has signed it “as carrier.” The document examiner does not use any energy determining what kind of carrier the freight forwarder is ….

I can see no good reason for refusing a Charter Party Bill of Lading because it is issued by carrier or its agent – and the fact is that they are being issued that way …. and that seems to work well…. except when presented under LCs issued subject to UCP 600.

 

This is the challenge of having “evolving practices” documented in rules that are revised evert 10 years or more. (more on this for example here: http://www.lcviews.com/index.php?page_id54)

 

Take care of each other and the LC!

 

Best regards

Kim

 



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