INTRODUCTION
Research motivation
The ocean shipping industry is vital to global trade, providing significant storage capacity and competitive freight rates, which is why approximately 90 percent of goods in foreign trade are transported by waterways, as reported by the International Chamber of Shipping This underscores shipping's essential role in the global economy and highlights the importance of understanding ocean transport documents and procedures for individuals and companies engaged in import and export activities.
Overseas trade is characterized by the movement of goods across national borders, necessitating international shipping that involves a complex chain of documentation This process includes various stakeholders such as buyers, sellers, freight forwarders, and banks, each playing a crucial role in ensuring the fulfillment of obligations and secure payment collection The documentation required for international shipping is categorized into commercial, transport, insurance, and financial documents This article focuses specifically on transport documents, with particular emphasis on the Bill of Lading.
A Bill of Lading (B/L) is a crucial document in the transit of goods, essential for both the movement of cargo and the receipt of payment It plays a vital role in international shipping and financial transactions However, the various types of Bills of Lading can lead to confusion among traders, often resulting in commercial disputes related to foreign trade A common issue arises from misunderstandings or a lack of knowledge about this document, particularly when discrepancies occur in transport documents associated with Letter of Credit payments.
The bill of lading is essential for mitigating risks in business transactions This article aims to provide valuable insights into the effective use of bills of lading by examining their various classifications, key features, and the governing regulations that oversee them.
Research scope and objective
The issuance of transportation documents in global trade is crucial for both cargo delivery and the international payment process, influenced by various sources such as sale contracts, international conventions, and banking practices This discussion primarily centers on the bill of lading's role in overseas payments, particularly through the documentary credit method, which has become the preferred choice for traders due to its numerous advantages Consequently, the analysis focuses on UCP 600 and ISBP 745, the updated editions that significantly impact banks, import/export companies, and logistics professionals involved in international business.
Research questions and purpose
This thesis aims to offer essential recommendations for utilizing the Bill of Lading in Letter of Credit transactions, with the goal of minimizing risks, preventing fraud, and reducing discrepancies in the presentation of this critical transport document To achieve these objectives, the research will involve a comprehensive review of the Bill of Lading's general background, including its classifications, functions, and governing rules, to better understand its application in international trade.
Below is a list of questions which offers readers a general viewpoint on what aspects this research shedding the light on:
> What are different types of Ocean Bill of Lading and in which cases that to use them?
> What are the popular disputes concerning to Bill of Lading in the international trade?
> Which types of Bill of lading should be applied under the Letter of credit to
> What to notice when issuing and inspecting the Bill of Lading in term of letter of credit transaction?
Hopefully, at the end of this thesis all of these above questions can be solved probably.
Research methodology
In order to obtain a comprehensive understanding, it is imperative to investigate all available databases covering the topic of the traditional bill of lading.
This analysis involves a comprehensive review of existing literature and comparative research on traditional documentation in maritime transport, specifically focusing on the Bill of Lading By identifying gaps in the current body of knowledge, the study aims to provide necessary recommendations for its use Employing a legal dogmatic approach, the thesis will detail relevant laws and practices related to the subject matter The conclusions drawn will be based on interpretations and insights derived from the literature review.
In short, it may be said that qualitative and comparative methodology in nature is constituted the main way to conduct this research
LITERATURE AND THEORETICAL REVIEW
Literature review
This review will concentrate on three key themes that consistently emerge in the literature regarding the Bill of Lading, despite the extensive range of theories available on the subject.
2.1.1 Development of Bill of Lading
The bill of lading has been a fundamental document in maritime trade and the transportation of goods for centuries Extensive research into its history and origins is crucial, as understanding the roots of this document enhances our comprehension of its role and significance in modern shipping practices.
Mitcheihill (1990) and McLaughlin (1925) trace the origins of the bill of lading to Medieval Italy in the 11th century, where a paper form similar to the bill was used In the absence of a formal "sea code," disputes frequently arose between shippers and shipmasters To address this, various cities mandated that shipmasters carry a clerk responsible for recording the goods received from the shipper in a ship's register, marking the earliest known practice of documenting shipped goods.
During this time, the "book" served as evidence of delivery rather than the "bill" of lading As merchants stopped sailing with their goods, they began to request receipts from ship-owners Consequently, a copy of the relevant entry in the Book of Lading naturally evolved into what we now recognize as the Bill of Lading.
According to Daniel E Murray (1983) and Mitcheihill, the bill of lading gained legal significance and became widely used only in the sixteenth century This historical document has evolved into a form that persists to this day Among the eleven sixteenth-century bills found in the Seldon Society Publications, eight are considered 'modern' bills of lading, as they include phrases such as "In witness of the truth," which are still used in contemporary bills During this period, the details regarding the condition of shipped goods became more precise, requiring essential information such as the quantity of merchandise, identifying marks, the condition of the goods, the consignee's name, and the freight amount.
In her 2002 thesis titled “Development of the Bill of Lading: Its Future in the Maritime Industry,” Samantha Peel examines the historical evolution of the bill of lading (B/L) and its adaptation to changes in the business environment She highlights that the emergence of non-transferable bills and other specialized types of bills indicates a growing demand for varied documentation within the industry Peel asserts that, given its adaptable nature, the bill of lading will continue to evolve in response to future industry needs.
The use of bills of lading in international maritime transport has historically been governed by various international frameworks, including the Hague Rules (1924), Hague-Visby Rules (1968), and Hamburg Rules (1978) Currently, there are ongoing efforts to establish a universal agreement through The Rotterdam Rules; however, consensus among nations has not yet been achieved.
The 1971 UNCTAD report highlighted the necessity for revising The Hague Rules concerning the use of Bills of Lading in international trade This sentiment was echoed by Mitcheihill in his 1925 book, “Bills of Lading - Law and Practice.” Established in 1924 during the Brussels conference, The Hague Rules, officially known as the “International Convention for the Unification of Certain Rules Relating to Bills of Lading,” outline critical aspects of carrier liability Approximately 90 percent of countries adhere to these rules, which were adapted by the United States in 1936 as the Carriage of Goods by Sea Act (COGSA).
The Hague Rules were slightly amended (beginning in 1931, and further in 1977 and
The Hague-Visby Rules, established in 1982, modernized maritime law, while the U.N introduced the Hamburg Rules in 1992 for a more equitable framework Additionally, the Rotterdam Rules offer a comprehensive set of regulations, but as of November 2015, only three countries have ratified them, preventing their implementation.
Besides those above mention rules, Stephen Mills also mentioned to UCP and Incoterms as current practices and good guidance, particularly the version of UCP 500 and Incoterms 1990.
2.1.3 Bill of Lading problems in international trade
Numerous scholars have explored complex issues that arise in the course of the bill of lading performing its basic functions.
Yiannopoulos (1958) identified significant conflicts related to bills of lading in international trade He noted that differing domestic standards and conflict of laws can lead to the same clause in an international bill of lading being valid in one jurisdiction while invalid in another This discrepancy results in varying levels of liability for carriers depending on the chosen or accidental legal forum.
Many authors, writing about Bill of lading, realized the same thing: “The more important a document, the more perhaps it is vulnerable for fraud” John Bassindale
Bills of lading have long been recognized as vulnerable to fraud, as highlighted by a 1996 study that identified various opportunities for manipulation in commodity trades The inherent functions of these documents contribute to this risk, making the findings of this research relevant even in today's context.
In his 2013 research, Andreas Sioulas explored various types of bills of lading fraud, emphasizing documentation frauds such as counterfeit bills of lading, fraudulent activities by both sellers and buyers, and inaccuracies in cargo statements.
In his 2013 study, Mohammad El Hawawy highlighted the complexities of the cargo shipping process and the numerous entities involved, which can be exploited by fraudsters He identified various types of fraud, including cargo theft through forged documents and other deceptive practices, as well as the improper use of shipping documents To combat these issues, El Hawawy provided several recommendations aimed at preventing specific types of fraud in the industry.
Theoretical review
A Bill of Lading, often referred to by various names such as Ocean Bill of Lading, Marine Bill of Lading, Liner Bill, and Port to Port Shipment Bill of Lading, serves as a crucial document in shipping and logistics.
A bill of lading is a crucial document that defines the contractual agreement between a shipper and a transportation company It functions as a title document, a contract of carriage, and a receipt for the goods being transported Issued by the carrier or the ship's master after the goods are loaded or received for shipment, it serves as confirmation for the shipper This legal document outlines essential details such as the type, quantity, and destination of the goods being carried.
2.2.2 Roles of Bill of Lading in the international trade
• Receipt of goods for carriage:
A bill of lading serves primarily as a receipt for goods, detailing essential information such as the date of receipt, the apparent condition and quantity of the goods, and the relevant ports of loading and discharge It acts as proof that the carrier has accepted the goods from the shipper in good order, including critical details like marks, numbers, and weight This description is vital for the consignee or endorsee, who typically cannot verify the quantity and quality of the goods before purchase, relying instead on the accuracy of the bill of lading.
Accurate issuance of bills of lading is crucial for owners or charterers, as these documents must precisely describe the goods received on board The carrier is responsible for delivering the cargo to the consignee in the condition recorded in the bill of lading In cases of disputes concerning the quantity, quality, or condition of the goods, the bill of lading serves as prima facie evidence that the goods were shipped as stated.
• Evidence of the contract of carriage:
The bill of lading serves as a crucial document that evidences a contract of carriage by sea, as outlined in the Hague Rules It confirms the carrier's responsibility for taking over or loading the goods and ensures their delivery upon the surrender of the document.
The Bill of Lading (B/L) is a crucial document that acts as evidence of the contract of carriage, establishing a legally-binding agreement It enables the carrier to handle the cargo in accordance with the original terms set forth by the carrier and the shipper or freight owner.
In the context of shipping, the term "title" refers to the right to possess goods from the carrier, which is established through the possession of a document, specifically a bill of lading Only the individual presenting an original bill of lading has the authority to require the carrier to deliver the consignment upon its arrival at the destination.
In international trade, the transfer of goods is influenced by the transfer of a document of title, which accompanies changes in possession A bill of lading serves as this document, representing the consignment of goods and transferring practical ownership only when it is classified as "negotiable."
A bill of lading can be classified as either negotiable or non-negotiable, depending on its characteristics A non-negotiable bill of lading ensures delivery exclusively to the named consignee, allowing for release even without presenting the document at the destination In contrast, a negotiable bill of lading mandates the carrier to deliver goods either to the consignee or their order, enabling the document to be transferred multiple times during transit This transferability allows for the initial sale and subsequent reselling of the consignment while still at sea Additionally, a negotiable bill of lading can be used as collateral for bank loans, a function that will be explored further in the subsequent section.
The Bill of Lading serves as a crucial document of title in international sales financing, symbolizing ownership of goods and enabling them to be pledged However, a pledge requires that actual or constructive possession of the goods be transferred to the bank, which is not feasible for cargo that is still at sea, as it cannot be delivered to either the bank or the buyer.
The bill of lading facilitates the transfer of constructive possession of goods, enabling the bank to receive this possession and establish a pledge.
The Bill of Lading (B/L) significantly boosts international trade finance, as banks and financial institutions regard it as reliable security or collateral for letters of credit issued to importers or exporters, thanks to their confidence in the document's credibility.
“document of title” feature of the bill of lading.
2.2.3 Bill of Lading standard terms and conditions
Every shipping line or airline utilizes its own Bill of Lading (B/L) format, yet the essential information required is largely consistent across different formats A standard B/L typically includes key details such as the consignor, consignee, description of goods, shipping instructions, and terms of carriage.
Shipper is the name and address of whom is shipping the cargo.
The entity responsible for the cargo may not necessarily be its owner or manufacturer; it could also be a trader, exporter, or freight forwarder This party, who books space with the shipping line and pays the freight charges, has the authority to modify the shipper information.
Consignee is the name and address of whom is receiving the cargo.
The consignee listed on a bill of lading may not always be the actual owner or recipient of the cargo; it could represent a trader, importer, or freight forwarder The entries in the consignee box can vary based on the bill of lading's nature, including terms like "bearer," "holder," or a specific name Additionally, it may include the phrase "to order," with or without a named consignee, or be left blank entirely Each of these variations significantly impacts the transferability of the bill of lading and the delivery of goods.
ANALYSIS
Advantages of Negotiable Bill of Lading over Non-Negotiable Bill of Lading
In international transactions involving letter of credit payments, the Bill of Lading serves a crucial role as a "document of title." This function is significant because when the issuing bank provides credit under letter of credit arrangements, it effectively offers trade finance to facilitate the shipment for beneficiaries on behalf of importers.
Under normal circumstances, when the beneficiary presents compliant documents, the issuing bank will pay or agree to pay in exchange for a counter payment or acceptance from the applicant This process allows for the release of the documents necessary for clearing the cargo Once the goods are released, they become part of the importer's current assets, serving as available security for any outstanding obligations to the bank.
As the result, the relevant banks in the L/C transaction would like to secure the goods as collateral against their expenses and risks by having the original B/L as the
A negotiable bill of lading (B/L) serves as a crucial "document of title," establishing proof of possession and enabling the sale of goods in transit From the perspective of issuing banks, the negotiable B/L is the most dependable transport document, safeguarding their rights over the goods.
An LC issued, calling for negotiable copies of the Bill of Lading, usually made out
"To order" facilitates smooth delivery of goods, particularly in transactions involving a Letter of Credit (LC) In such cases, the issuing bank mandates the submission of a bill of lading consigned "To the order of the issuing bank" to secure their collateral interests.
Types of Bill of Lading that banks do not prefer in the Letter of Credit
Issuing banks typically decline to accept non-negotiable ocean bills of lading (B/L) as transport documents due to their limited assurance regarding the goods, which undermines the bank's security position Key categories of B/L that contribute to this issue include those that lack sufficient guarantees.
A Straight Bill of Lading (B/L) does not transfer ownership and is non-negotiable, making it unsuitable for collateral security This document allows the buyer to receive the goods without needing to present any transport documents.
The customer can receive goods from the carrier without an original bill of lading, provided they present valid identification, allowing the shipping company to release the goods However, from a banker's viewpoint, this type of bill of lading poses risks, as it undermines the security typically associated with letter of credit transactions.
• Received for shipment B/L: A “received for shipment B/L” does not acknowledge the shipment of the goods by the carrier, it has a limited function as a
“document of title Many Letters of Credit require a “Shipped On board Ocean Bill of
A Bill of Lading labeled as “Lading” provides greater security for importers and their banks compared to a “Received for Shipment B/L.” To meet the necessary requirements, the Bill of Lading must be original and include a “Shipped On Board Date.”
A Charter-party Bill of Lading (CPBL) is a blank back transport document that references a charter party contract for consignment delivery, but it does not serve as evidence of the actual terms and conditions of the carrier's or ship owner's contract of carriage If a ship owner fails to receive payment from the charterer or faces disputes, they can reclaim the vessel and assert claims on the shipped goods, unless the House Bill of Lading (HBL) is presented as permitted by the letter of credit The HBL, printed on the freight forwarder's bill of lading format, only outlines the forwarding company's terms, which can hinder the consignee's ability to secure lawful insurance for lost or damaged cargo Furthermore, in cases of financial disputes between the freight forwarder and the carrier, the consignee may struggle to collect their goods at the port of discharge by surrendering the HBL to the carrier.
If a bank declines to accept a freight forwarder’s bill of lading (B/L), it can indicate this by adding a statement in field “47-A: Additional Conditions” of the letter of credit (L/C), specifying that “Forwarder’s bill of lading not acceptable.”
“Transport documents issued by freight forwarder are not acceptable”
A Surrendered Bill of Lading (B/L) poses challenges in letter of credit transactions, as Article 17 of UCP 600 mandates the presentation of at least one original document While exporters typically do not retain the Original B/L, they must submit a full set to the shipping company, complicating compliance with payment requirements The non-negotiable nature of a Surrendered B/L allows buyers to claim goods upon arrival, diminishing banks' control over shipped cargo, which often leads to banks rejecting this type of B/L.
3.4 Update interpretations involving Bill of Lading in UCP 600 and ISBP 745
This article will analyze the enhanced regulations governing transport documents, specifically the Ocean Bill of Lading, as outlined in UCP 600 and ISBP 745, compared to earlier versions UCP and ISBP serve as essential guides for banks, import/export companies, logistics professionals, and other entities involved in international trade These documents work together to clarify whether the presentation of documents aligns with the requirements of Letters of Credit, a process known as "complying presentation" in banking This term refers to the submission of documents that adhere to the terms and conditions of the credit, as well as the relevant provisions of these rules and international standard banking practices, as stated in UCP 600 Article 2 The aim of this section is to update the rules for managing and reviewing Bills of Lading to minimize discrepancies in Export Documentation under Letters of Credit.
3.4.1 Bill of Lading clauses under ISBP 745
The initial version of the Banking Practice, ISBP 645, has evolved significantly over the years, leading to the adoption of improved versions, ISBP 681 in 2007 and ISBP 745 in 2013.
ISBP 745 is the most current edition providing the latest ICC rules for all parties in documentary credit transactions Compared to its predecessor, ISBP 681, this updated version includes significant expansions and new topics, such as transfer and amendments, enhancing its comprehensiveness As a result, ISBP 745 aims to minimize discrepancies among banks handling letters of credit.
ISBP 745 serves as an essential companion guide to UCP 600, emphasizing its relevance in the updated title The latest version, ISBP 745 (2013 by ICC), is officially recognized as the International Standard Banking Practice for the Examination of Documents under UCP 600, replacing the previous title, International Standard Banking Practice for the Examination of Documents under Documentary Credits - ISBP 681 (2007).
In the "Preliminary Considerations" section regarding the publication's scope, it is emphasized that this publication should be read alongside UCP 600, highlighting the interconnectedness of these legal documents This explicit assertion of their close relationship is notably absent in version 681.
Stipulation handling with bill of lading is found in paragraph E ( from E1- E28) in the version of ISBP 745 ISBP 745 offer more specific interpretations in examiningB/L process which comprises following detailed topics:
- Place of final destination and port of discharge.
- Shipper ,consignee, notify party and endorsement
- Indication of name and address of delivery agent at port of discharge
- Release of goods with more than one transport document to be surrendered
These walkthroughs is written on the basis of the former edition of ISBP 682, however added much news and updates related to following clause:
“Issuance, carrier, identification of the carrier and signing of a bill of lading”
ISBP 681 provides guidance specifically on the signing of the bill of lading, while ISBP 745 offers a broader scope, addressing not only the signing process but also the issuance, carrier details, and identification of the carrier as outlined in paragraphs E3 to E5.
According to ISBP 745, in addition to the four previously recognized entities authorized to sign a Bill of Lading—namely the carrier, the carrier's agent, the vessel's master, and the master's agent—a fifth entity has been introduced: a branch of the carrier As stated in Paragraph E5.b, if a Bill of Lading is signed by a specific branch of the carrier, that signature is deemed to be made by the carrier itself.
This section outlines the conditions under which a "Freight Forwarder’s Bill of Lading" or "House Bill of Lading" is deemed acceptable According to the previous ISBP guidelines, if a letter of credit specifies that a transport document issued by a freight forwarder is acceptable, the freight forwarder may sign the document as the carrier without disclosing the carrier's identity Specifically, when a credit states that a Freight Forwarder’s Bill of Lading is acceptable, the freight forwarder can sign it in their capacity without needing to identify themselves as the carrier or agent for the named carrier, and there is no requirement to include the carrier's name (ISBP 681).
Clean Bill of Lading
A clean bill of lading certifies that goods were received in good condition, without any damage or loss during shipment Issued by the product carrier after a thorough inspection, it confirms that the packages are free from defects, damages, or missing quantities This document assures that the carrier accepted the goods in optimal condition prior to shipping.
In contrast to a clean bill of lading, a claused bill of lading, also known as an unclean bill, is issued when the received goods are damaged or fail to meet specifications A clean bill can be transformed into a claused bill if any notation or clause indicates defects in the goods or packaging Examples of such defects include broken or leaking cases, empty barrels, wet materials at the time of loading, or inadequate packaging for sea transit.
Many buyers depend on letters of credit for their imports, but banks often reject funding if a claused bill of lading is submitted Importers prefer clean bills of lading, as they do not want to risk receiving damaged or substandard products Since importers cannot inspect the goods before arrival, a clean bill of lading serves as the most reliable assurance of product quality, providing confidence to both importers and banks.
When a Letter of Credit (L/C) stipulates the need for a "clean" bill of lading, the explicit mention of the word "clean" is not mandatory, provided there are no negative remarks regarding the condition of the container or packaging.
Shipper, consignee and notify party names
Shipper: It must require the correspondence between the name of shipper in the
In a triangular trade involving a supplier, trader, and end client, the use of a back-to-back letter of credit is common The trader opens a letter of credit for the supplier, which requires the initial set of bills of lading to be issued with the factory listed as the shipper Once the goods are released from the factory to the trader, this first set of bills of lading is exchanged for a second set, which must designate the trader as the shipper.
The consignee is a crucial detail on the bill of lading (B/L) that identifies the shipment's owner and must be included in the letter of credit (L/C) Banks will meticulously review the B/L before processing payments for documents to ensure they are listed as the consignee, either directly on the front or through an endorsement on the back Additionally, banks will verify that the endorsements demonstrate a continuous chain of title leading to them.
When a Letter of Credit (L/C) specifies “No made out to order of shipper and blank endorse,” the consignee's designated box should simply state “to order,” leaving the endorsee blank This arrangement permits anyone in possession of the bill to claim delivery.
When a letter of credit (L/C) specifies that it should be "made out to order of shipper," the shipper must endorse the document, and the bill of lading (B/L) must list "to order + name, address of shipper" as the consignee If the endorsement is made for the exact and correct name and address of the issuing bank as specified in the consignee field, the bank may refuse to honor the payment for that letter of credit Additionally, the importer can only collect the goods if there is a signature from the issuing bank.
Signature
Under UCP 600, a Multimodal Transport Operator is regarded as functioning in the same capacity as a carrier, making the signature provisions for both types of bills of lading largely equivalent Regardless of their naming conventions, all Ocean Bills of Lading and Multimodal Bills of Lading must clearly state the carrier's name and be signed by one of the designated entities.
• The branch of the carrier.
• The master of the vessel
• The agent acting on behalf of the carrier or the master
The carrier or multimodal transport operator must then be identified either at the signature line or elsewhere on the face of the bill of lading.
When a master signs the bill of lading, their signature should clearly indicate their role as either the captain or master It is not necessary to include the master’s name alongside the signature.
When an agent signs a transport document, it is crucial to specify whether they are acting on behalf of the carrier or the vessel's master According to UCP 600, a signature without the agent's name is permitted, but if the agent is signing for the master, the master's name must be clearly identified.
When a credit specifies that a "Freight forwarder’s bill of lading" or "Freight forwarder’s multimodal transport document" is acceptable, the freight forwarder is authorized to sign the document In this case, it is not required to disclose the name of the carrier, and the multimodal transport operator's name does not need to be included.
For Charter party bill of lading, UCP 600 article 22 states that it must appear to be signed by:
• An agent on behalf of the master or the owner or the charterer.
Banks typically do not accept the Carrier's Proforma Bill of Lading (CPBL) signed by a carrier or its agent due to potential confusion This confusion stems from the difficulty faced by document inspectors in identifying the contractual carrier among various parties involved, such as the owner, charterers, and their agents, as specified in the transport document.
Port of discharge and Port of loading
A letter of credit specifies both the port of loading and the port of discharge, which must be clearly indicated on the ocean or marine bill of lading It's important to note that the port of loading may be listed under the "place of receipt," while the port of discharge could be noted as the "place of final destination." Clarity in these designations is essential for smooth shipping operations.
• That the goods were moved from the place of receipt or transported to the place of final destination by vessel, and
The on-board notation indicates that the goods were loaded onto the vessel at the designated place of receipt, with the port of discharge specified as the final destination.
A letter of credit can specify either the port of loading or the port of discharge within a defined geographical area, such as "Any USA West Coast Port." In such cases, transportation documents must reflect the actual ports of loading and discharge within that area For instance, if the letter of credit states "Port of loading: Any Ho Chi Minh City Port," the Bill of Lading (B/L) may list any port within Ho Chi Minh City, such as Cat Lai Port or VICT Port This practice also applies to the port of discharge.
The requirement for Date of shipment
4.2.6.1 Importance of the Date of shipment in Letter of credit payment
When arranging international transactions via a letter of credit, the specified shipment date is crucial as it governs the relationship between the carriage contract, the sales agreement, and the letter of credit itself This shipment date serves as a key factor for banks to assess any discrepancies that may arise during the transaction process.
Exporters must ensure that shipments are completed by the deadline specified in the letter of credit Failure to meet this obligation will result in the issuing bank identifying a late shipment discrepancy and denying payment to the beneficiary.
• Late presentation of transport document: A complying presentation including the original transport document must be made not later than 21 calendar days after the date of shipment,
The payment timeline for a bill of exchange under a letter of credit can be defined by the acceptance of a "Usance bill of exchange," which may specify a due date based on the shipment date For instance, a bill of exchange may state that payment is due "60 days after the bill of lading date."
4.2.6.2 Determination of the Date of shipment
The issuing date and the Shipped On Board date on a bill of lading are crucial for determining the shipment date, yet misunderstandings between these two terms frequently arise in international business.
• Issuing date: It refers to the date that B/L has been officially issued (also called as
Date of Issue) You can usually see this date near the signatures of the document
The "Shipped On Board Date" refers to the date when the container with cargo is loaded onto the vessel This date will be further addressed in the recommendations section regarding the inspection of the On Board Notation.
The "Shipped On Board Date" and "Bill of Lading Date" are distinct dates that may not align This discrepancy arises because a container can be loaded onto a ship on one date, while the Bill of Lading may be issued to the customer either before, after, or on the same date.
The bill of exchange indicates a payment term of "30 days after the bill of lading date," which refers to the on-board date specified in the bill of lading document.
On this occasion the on board date could be on or prior to or later than the issuance date of the bill of lading (UCP 600).
The Bill of Lading (B/L) may or may not include a Shipped on Board date, affecting how the Date of Shipment is determined If the B/L does not show a Shipped on Board date, the Issuing date will be considered the Date of Shipment Conversely, if a Shipped on Board date is provided, it will be recognized as the Date of Shipment In cases of partial shipment, Article 31 of UCP 600 specifies that if multiple transport documents indicate different shipment dates, the latest date from any of the documents will be deemed the Date of Shipment.
The requirement for On board Notation
4.2.7.1 Appearance of On Board Notation on the Bill of Lading
The "On Board Notation" is a crucial confirmation from the carrier that the goods have been shipped, created at origin by the carrier or their agent and prominently displayed on the surface of the Bill of Lading (B/L) Typically appearing as a stamp or typed words within the body of the B/L, this notation may also include the Shipped on Board Date, serving as definitive proof of the goods' loading onto the vessel.
On Board Notation can be recognized by one of these following phrases in the transport document:
ISBP 745 clarifies that when the port of loading and the port of receipt are the same, a "shipped on board" Bill of Lading only requires the issuing date to be recognized as the shipment date, eliminating the need for additional on-board notation Conversely, when a Bill of Lading is marked "Received for shipment," it still necessitates an on-board notation in a specified field or box, even under the same conditions.
If the place of receipt differs from the port of loading, an on-board notation is necessary, unless the bill of lading clearly indicates that the "shipped on board" statement pertains to the specified vessel and the stated port of loading in the credit.
4.2.7.2 Data components of the On Board Notation
Issues related to "On Board Notation" arise when the bill of lading lists a place of receipt or pre-carriage details that differ from the port of loading specified in the credit This discrepancy raises the question of whether an on board notation is necessary to indicate the vessel's name and port of loading, even if these details match those on the bill of lading Consequently, the ICC Banking Commission Recommendations regarding on board notations conclude that such notations must include more than just a date.
> On board notation bears the Shipped on board date:
When a bill of lading specifies a place of receipt, such as Amsterdam, that differs from the port of loading, like Rotterdam, and does not mention a means of pre-carriage, it aligns with the guidelines set forth in ISBP 745.
> On board notation bears the Shipped on board date and the name of the vessel
If the bill of lading contains the indication "intended vessel" or similar qualification in relation to the name of the vessel (UCP 200, Article 20a, ii)
> ON board notation bears Shipped on board date, the name of the vessel and the
• “If the bill of lading does not indicate the port of loading stated in the credit as the port of loading”
The bill of lading may specify a place of receipt distinct from the port of loading, such as indicating Amsterdam as the receipt location while Rotterdam serves as the loading port Additionally, if there is a mention of pre-carriage means in either the pre-carriage or place of receipt fields, this information is crucial (ISBP 745).
When specifying the place of receipt, it's essential to include the name of the container yard or container freight station, as well as the port of loading If these details are provided, they will be considered equivalent, meaning that an on-board notation does not need to be included alongside the port of loading and the vessel's name.
• If Bill of lading contains the indication “intended” or similar qualifications in respect of the port of loading (UCP600 Sub-article 20 a,iii)
Partial Shipment Allowance
Under the provisions of Article 31 UCP600, A bank will consider it a partial shipment if:
• Shipment with more than one means of conveyance
• Shipment with more than one journey
• Shipment ends at different ports of discharge
When a letter of credit prohibits partial shipments, the Bill of Lading (B/L) must accurately reflect the complete delivery quantity in the "description of cargo" section, adhering to the allowable tolerance specified in the letter of credit Any discrepancies arising from a "less-than-full cargo description" may lead to issues with compliance.
Amendments on the Bill of Lading
Bankers should pay close attention to amendments made to the bill of lading, as it can be corrected and changed even after its release However, banks will only accept these modifications if they are certified by the carrier, the captain, or their authorized agent.
Conclusion
In international business, the ocean bill of lading serves as a crucial document that facilitates multiple relationships, playing a vital role in freight forwarding and transportation, as well as in payment transactions, especially when utilizing the letter of credit method.
For exporters, preparing the correct set of Bill of Lading (B/L) documents is crucial to ensure a smooth and secure transaction Banks honor letters of credit solely based on compliant documentation, meaning that exporters must present the "right" documents at the "right" time to meet all letter of credit requirements Failure to do so will result in the shipper being unable to receive payment approval from the banks.
Banks must exercise caution when reviewing documentation, particularly transport documents like the bill of lading, which serves as a vital tool for securing collateral If a buyer fails to make payment, the bank may detain the documents and, in worst-case scenarios, resell the cargo to recover the owed amount Thus, it is essential for banks to meticulously verify all documents to mitigate potential risks.
The "3C criteria" serve as a valuable guideline for bankers to evaluate documents, ensuring they are Complete, Correct, and Consistent This means that all required documents must be submitted within the designated timeframe and must contain relevant, logically connected information that aligns with the credit requirements.
This research aims to provide valuable insights and recommendations regarding transport documents, specifically focusing on clarifying the use of the Bill of Lading By addressing the ambiguities associated with this document, the study seeks to minimize discrepancies in its presentation when banks finance shipments.
This thesis primarily examines the application of the Bill of Lading in the context of Documentary Credit payments Consequently, it identifies potential gaps for future research regarding this document in relation to other international payment methods, such as Document Collection.
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