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questions:
Ravi
Mehta:
UCP articles relating to transport documents are always in the news.
They always raise questions. They are debated. They are disputed. They
are litigated. They receive priority attention in UCP revision. They
receive clarifications in the ICC meetings. In short, these articles are
considered annoying and unhelpful. Is it because of:
- Misinterpretation of the articles, or
- Bad formulation of the articles.
Jia Hao:
It is really unfortunate to see transport documents gave rise to
too many queries and disputes and litigations, although the relevant
transport articles had been fully revised and categorized from UCP400 to
UCP500 for the purpose of reflecting the new transport practices as well
as limiting the possibilities for misinterpretation and misapplication.
Frankly speaking, it cannot be said that the formulation of the articles
are bad, but they may be revised better by fully consulting the ICC
Commissions on Transport and Insurance, some transport entities and
organizations, and some transport experts. In this respect, UCP500
revision is on the progress and efforts have been made for such purpose,
even though active feedbacks from other fields seem not easy to be
available upon consultation. On the other hand, due to lack of transport
expertise and experience, bankers may be apt to adopt rigidly literal
interpretations to the transport and insurance articles in UCP, ignoring
to understand the underlying intention of the drafters of such
stipulations and to cater to the trade practice with common sense. Some
misinterpretations were even reflected in some ICC Official Opinions,
such as R284 on the issue of shipment date of a shipped b/l(on board
date v. issuing date) overruled by Document 470/TA.464rev and ISBP para.
78, R229 on identification of port of loading(place of receipt v. port
of loading) superseded by R458, R460 and ISBP para. 80, R283 on intended
vessel issue(substitute vessel v. intended vessel) and so on.
Ravi
Mehta:
If there is misinterpretation, is it because of:
- Lack of understanding
- Lack of training
Jia Hao: Yes, and additionally and particularly, due to lack of
fully and timely communication and consultation with transport
specialists who may source well UCP revision update on transport. The
logical chains of solution way may be described as communication and
consultation that give birth to trainings that diminish misunderstanding
and misinterpretation.
Ravi
Mehta:
If there is lack of understanding, is it because of:
- UCP is in alien language, or
- UCP is not in easy language
Jia Hao: I do not think language is the problem for
understanding UCP well. To greatest extent, in my opinion, the
misunderstandings are attributed to lack of relevant basic knowledge and
experience of transport, e.g., some do not know why the articles should
be so stipulated and how the application of the articles may facilitate
trade practice and prevent traders from latent risks in trade.
Ravi
Mehta:
If there is bad formulation, what are the common errors and
controversies?
Jia Hao: Besides those mentioned in the answer to Q1, I may
list some others as follows:
1. Issue of “on board notation”
Example: on bill of lading the relative boxes
are filled in as follows:
pre-carriage: vessel A
place of receipt: port X
port of loading: port X
vessel voy(flag)/ocean vessel: vessel B
ICC R350, R352 and R457 concluded that the on
board notation should include: "on board vessel: vessel B, port of
loading: port X and on board date", as they analyzed that "named vessel"
must relate to the vessel which leaves the port of loading and not any
vessel which may appear in the pre-carriage box(R350) and reference to
loaded on board or shipped on a named vessel therefore refers to the
ocean vessel and not any pre-carriage vessel.(R352) and the drafting of
a/m example indicates that vessel A never leaves Karachi, so the on
board notation must be in respect of vessel B(R457).
However, ICC R220 analyzed that the essential
point was that the on board notation unambiguously indicated the name of
the vessel on which the goods have been loaded at the port of loading.
ICC R227 concluded that the Marine b/l may
indicate as the port of loading either the port where the goods have
been loaded on board the ocean vessel or the port where the goods have
been loaded on board the feeder vessel. ISBP paragraph 80 emphasizes
that the named port of lading may be stated in the field headed "place
of receipt" provided that the on board notation shows clearly goods are
loaded on the vessel at the port stated under "place of receipt". It
follows that the named vessel may also be stated in the field headed "pre-carriage"
provided that the on board notation shows clearly goods are loaded on
this vessel stated under "pre-carriage" at the port of loading. The on
board notation is the last word.
There is evidently an inconsistency among those
ICC opinions.
In my view, the on board notation in the a/m
example may be either "on board vessel A at the port of lading port X"
or "on board vessel B at the port of lading port X" depending on the
actual situation: it is vessel A or vessel B that leaves from port of
loading X.
2. Issue of “transport coverage in B/L”
I feel glad to quote the relevant comments from
Mr. Chris Gillespie, the Chair of FIATA, which just concerned such issue:
“It is hard to understand that the banking
community cannot grasp the
Significance of the fact that the contract of
carriage entered into between the
shipper and the carrier and indicating thereon a
“place of receipt”, “port of load”, “port of discharge”, and “place of
delivery” effectively commits the carrier to undertake movement of the
goods from that place of receipt to that place of delivery. ……The
wording of the revised article and I quote article 30 item A 3
“indicates shipment from the port of loading to the port of discharge
stipulated in the credit” (underlined by the writer). This remains a
problem because banks interpret this to mean the field entitled ‘port of
discharge’ or for that matter ‘port of loading’ must reflect that which
is indicated in the letter of credit.”
From the above comments, it may be seemed that
in maritime law and practice, it does not matter that the real port of
loading is filled in the field of place of receipt and the real port of
discharge in the field of place of delivery even if the credit clearly
calls for a port-to-port B/L, because the B/L has covered the point of
shipment to the point of destination stipulated in the credit and the
carrier’s obligation under the B/L remains unchanged.
3. Requirement for “ full set of original sea
waybills”
Both UCP500 and the latest revision draft
stipulate a requirement for full set sea waybills, which is against the
current shipping practice. Here, I feel convenient to quote my relevant
comments on the Article 20 a(iv) of UCP revision draft of 2006.3.6:
“As we all know that the sea waybill is not a
document of title and the consignee may take delivery of the goods
without presentation of original sea waybill. Moreover, the shipper
without holding original sea waybill may still exercise his power to
redirect the goods to someone other than the person who was originally
named as consignee. Under sub-rule 6(i) of the CMI Uniform Rules for Sea
Waybills 1990, the shipper is the only person free and entitled to give
instructions to change the name of the consignee provided that a) the
change is not prohibited by the applicable law; b) that reasonable
notice of the change in consignee is given to the carrier in writing;
and c) that the change is made before the original consignee claims
delivery of the cargo at destination.
Such practice is not the same as that of air
transport. In the case of the carriage of goods by air subject to Warsaw
Convention, the carrier should not follow the shipper/consignor’s new
instruction that requires it to deliver goods to someone other than the
person who was originally named as consignee, without requiring
production of the part of air waybill/consignment note for shipper/consignor.
That is why UCP500 stipulates the beneficiary must present the original
for shipper/consignor. Additionally, if the sea waybill contains a
clause of "NODISP" (A typical wording of such a clause is: “By
acceptance of this Waybill, the shipper irrevocably renounces any right
to vary the identity of the Consignee of the goods during transit.”),
the shipper's right of altering delivery instructions is waived. Also
according to CIM rule, the shipper can, however, relinquish such right
of control to the consignee at any time not later than the receipt of
the goods by the carrier, provided that such transfer of control is
recorded on the waybill. So banks prepared to accept a waybill as
security for a commercial credit may presumably insist on such a
transfer of control instead of presentation of full set of original sea
waybills.
Therefore, it is reasonable and logical to
removing the requirement for presentation of full set of sea waybills.
And whether full set are needed for presentation may depend on the
specific requirement in specific letter of credit basing on the rule of
free contracting. ”
I am glad that Mr.T.O.Lee has supported my views
in his opinions which is available on his web:
http://www.tolee.com/html/comments_ucp_revision_mar06.htm
4. A wording for easy misunderstanding
Under Article Road, Rail or Inland Waterway
Transport Documents, referring to the definition of transshipment, both
UCP500 and the latest revision draft use the wording “in different modes
of transport ” that will lead to misunderstanding that in the same
modes, unloading and reloading from one means of conveyance to another
means of conveyance is not deemed as transshipment. That is the
aftermath of the two meanings that the word “different” bears, one is
“not same”, the other is “distinct; separate”. So the correct
interpretation of “in different modes of transport” should be “in each
of the three different modes of transport”. Especially to those whose
mother language is not English, the current wording is not welcome.
(For easy reference, the para. is quoted as
follows:
“For the purpose of this article, transhipment
means unloading and reloading from one means of conveyance to another
means of conveyance, in different modes of transport, during the
carriage from the place of shipment to the place of destination
stipulated in the credit. ” )
Ravi
Mehta:
For right formulation/revision who should be involved and why?
- Commercial law professor
- Commercial law practitioner (lawyer)
- Trade finance consultant
- Representative of the transport industry or
freight fowarding industry or trade associaion.
Jia Hao: All of them should be invited to be involved in. And
it is glad to see in the course of UCP500 Revision, ICC has just done it
well with a creation of a Consulting Group as a “ sounding board” that
is comprised of more than just bankers - transporters, insurers, lawyers,
law professors and other professionals. The reason is simple: UCP must
consult them as documentary credit involves not only banking industry
alone, but also transport industry, insurance industry and commercial
law.
Ravi
Mehta:
Do you think UCP 600 would be a better vehicle of
rules , and the drivers (banking suppliers of LC service) and passengers
(users of LC service) will be happy on the highway of LC practice.
Jia Hao: I ensure UCP600 must be clearer, more functional, and
more user-friendly than UCP500. However, whether it gives birth to less
queries and disputes will depend on the extent of training with time and
costs, as it should always bear in mind that change, even positive
change, requires time, efforts and impetus. Hope UCP600 may give us a
good future of LC community.
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