Name: Kapjin

Can you please advise if this is a discrepancy...?

L/C requires that "full set of B/L made out to the order of AB bank and marked freight prepaid"

The B/L shows “freight prepaid at Brisbane” and “freight payable at Tokyo”. A scanned version of the B/L is available here (PDF).

The bank came back with discrepancy saying conflicting information... it should be same both Brisbane or both Tokyo.

I am not sure if "freight payable" should be examined as B/L definitely show "freight prepaid".

Freight payable at Tokyo in BL is like additional information for the company as the company agree to have freight prepaid in Brisbane and Brisbane agent is payable in Tokyo.

Please advise your opinion.

Note that: This posting has been revised on 15 September 2008 in response to the comments from Mr. Bose below.

Freight is either "collect" or "prepaid".

If the freight is to be collected, it should be collected at port of discharge, or Pusan, South Korea in this particular case.  But the freight is marked "Payable at Tokyo" in the BL, which is neither a port of loading (being Tiwai, New Zealand in the BL) nor a port of discharge (being Pusan, South Korea in the BL).  If the freight were to be collected, according to shipping practice, it should be at the port of discharge - Tiwai, New Zealand, and not at Tokyo.  Hence I have good reason to believe that this information is provided for the convenience of the shipper or consignee for payment of freight, whether prepaid or collect, to be at Tokyo, where the carrier Mitsui OSK Line has its head office.  In fact, it is also possible that the prepayment is done at Tokyo.  Therefore “Payable at Tokyo” appears more to be an additional information that is not required under the credit and should not be examined for compliance.  It also does not have any conflict with markings in the BL like "Freight Prepaid" and "Prepaid at Brisbane", the place where the BL is issued.

The bill of lading has ‘FREIGHT PREPAID’ stamped on its face two times.  From common sense point of view, the issuing party must be absolutely certain that freight has been paid. Otherwise it would not be so stupid to add this stamp on, twice!  The serious consequence is that the carrier cannot deny this fact (freight prepaid) as “the bill of lading is a prima facie evidence that freight has been paid” according to the judicial decisions in many English cases on bills of lading.  From this observation, I have good reason to believe that the chance for freight collect is very slim indeed, based on balance of probability, a tool often used by the courts of law to determine contradictory evidences.  This is different from pure personal speculation.   

So the marking of "Payable at Tokyo" in this BL is not a valid discrepancy that can warrant payment dishonour.

To be fair, I would say “Payable at Tokyo” is unclear and a bit confusing but not necessarily conflicting.  If the port of discharge is also Tokyo, then the confusion is more serious.

It is quite common that bankers have double standard. 

On one hand they ignore the backbone doctrines and trade practices of transport and cargo insurance, if they prefer, (for the purpose of making it easier to do their job and to support their refusal to learn or to KYC, to know their customers' trade practices). One example is a BL marked "Congenbill" can be deemed to be a marine BL (not a charter party BL, although this fact is quite obvious because "Congenbill" is a BIMCO code word for "BL subject to the General Charter (GENCON) Party").  ICC Document 470/TA.635rev makes such an incorrect decision, ignoring my objection.  

Yet on the other hand, if they wish to fabricate discrepancies, for whatever reasons, they may look at those data content that need not be examined in the first place (such as "Payable at Tokyo" in this particular case) and some of them are even outside the scope of banking knowledge.  So "One country, two systems" is not exclusive for Hong Kong, but also applicable to document checkers who are discrepancy hungry. 

Best regards,

T. O.

Swq_103, 27-Aug-08

Question:Prepaid or collect

RESPONSE

1-Sept-08

The following is my response to the question from Kapjin (SWQ_103, 27.8.2008) and comments of Mr. T. O. Lee.

Background

The question reveals the following facts:

1. LC requirement: B/L marked ‘Freight prepaid’.

2. Narration on B/L: (a) Freight ‘Prepaid at Brisbane’ and also (b) Freight ‘Payable at Tokyo’.

3. Bank claimed document to be discrepant for reason: ‘Conflicting information…(in B/L)’.

The question was whether the bank was correct in claiming the B/L to be discrepant.

Analysis

Some of the Articles pertaining to the issue under reference are as follows:

1. ISBP 681, Article 112: ‘Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.’

2. ISBP 681, Article 111: ‘If a credit requires that a bill of lading show that freight has been paid or is payable at destination, the bill of lading must be marked accordingly.’

3. UCP 600, Article 26(c): ‘A transport document may bear a reference, by stamp or otherwise, to charges additional to freight.’

4. UCP 600, Article 14(d): ‘Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit.’

ISBP 681, Article 111 stipulates that freight in a B/L must be shown as either ‘collect (i.e. to pay, payable)’ or ‘pre-paid’; it cannot show both.

The questions we need to answer are: Was the B/L marked accordingly? Next, ‘Did the B/L conform to the terms of the credit and the related rules?

With regard to freight, the B/L shows two boxes adjacent to each other. One has a pre-printed narration viz., ‘Prepaid at’; the very next one is marked ‘Payable at’. ‘Brisbane’ is inserted in the first box, ‘Tokyo’ in the second. The B/L, therefore, showed freight as both ‘prepaid’ (at Brisbane) and ‘collect’ (at Tokyo!).

Analysing the data in the B/L in the light of Article 14(d) of UCP 600, we now ask ourselves:

1. Was the data in the document (B/L) when read in context with the document itself (the B/L) in conflict with data in that document? The answer is a clear ‘Yes’. (For, two adjacent boxes, duly pre-printed to show the status of freight – whether prepaid or collect – showed both.)

2. Was the data in the document (the B/L), when read in context with the credit, in conflict with that stipulated in the credit? Once again, the answer is ‘Yes’. This is because the B/L showed freight prepaid and also as payable. Which of the two is correct is, therefore, indeterminate.

Kapjin claims:

1. ‘I am not sure if "freight payable" should be examined as B/L definitely show "freight prepaid".’

2. ‘Freight payable at Tokyo in BL is like additional information for the company as the company agree to have freight prepaid in Brisbane and Brisbane agent is payable in Tokyo.’

My response:

1. The B/L definitely shows freight ‘Payable at (Tokyo)’, as much as it shows freight as ‘Prepaid at (Brisbane)’ The two pre-printed, tagged boxes bear equal status in all respects. If the first is taken cognizance of by a bank, so should the very next.

2. His claim that freight ‘Payable at Tokyo’ (marked in the) BL is like additional information….etc.’ is illogical, unjustified, groundless and untenable. If ‘Prepaid at (Brisbane)’ is not additional information, it defies logic or reason why ‘Payable at (Tokyo)’ should be considered as such.

To Mr. T. O. Lee’s observations:

1. In his statement ‘But the freight is marked "Payable at Tokyo" in the BL, which is either a port of loading…etc.’ I assume the word should be ‘neither’, not ‘either’.

2. He states that, ‘It also does not have any conflict with markings in the BL like "Freight Prepaid" and "Prepaid at Brisbane"…’. 

The conflict here is not between ‘Freight Prepaid’ and ‘Prepaid at Brisbane’. It is between ‘Prepaid at Brisbane’ and ‘Payable at Tokyo’.

3. He says, ‘Hence it is obvious that this information is provided for the convenience of the shipper or consignee for payment of freight, whether prepaid or collect.’

My questions are:

1. When both the boxes are filled, when both the boxes appear to have equal relevance, what conclusion can one draw from the B/L with regard to freight (‘whether prepaid or collect’)? Frankly, unless one applies ‘double standards’, which conclusion appears more obvious?

2. Why should an examining bank not ‘look at those data content’ or it ‘need not be examined in the first place (such as "Payable at Tokyo" in this particular case)’? Is it because the data, and the consequence of examining it, inconveniences the beneficiary?

It is apparent that ‘Tokyo’ is neither the port of departure or of destination. But this is not ground enough to jump to the ‘obvious’ conclusion conveniently proffered. That would be facile and factitious. Should ‘Tokyo’ (but not ‘Brisbane’!) then be considered as shipping mark or (as being claimed) ‘additional information’, and thereby escape from being the cause of discrepancy? With regard to the claim of ‘additional information’ in the shipping document said to have been ‘provided for the convenience of the shipper or consignee…’ let us refer to ISBP 681 once again:

• (Article 35): ‘Shipping marks contained in some documents often include information in excess of what would normally be considered “shipping marks” and could include information such as the type of goods, warnings as to the handling of fragile goods, net and/or gross weight of the goods, etc. The fact that some documents show such additional information while others do not is not a discrepancy.’ (emphasis added)

• (Article 34): ‘The purpose of a shipping mark is to enable identification of a box, bag or package. If a credit specifies the details of a shipping mark, the documents mentioning the marks must show these details, but additional information is acceptable provided it is not in conflict with the credit terms.’ (emphasis added)

Even if, for a moment, we accept Mr. Lee’s assertion that the insertion of the name ‘Tokyo’ is ‘additional information’ on the shipping document, the issue according to Article 34 of the UCP is, is this so-called ‘additional information’ in conflict with the credit terms? Obviously, it is. The B/L could be termed as discrepant on this ground, too.

Conclusion

I differ with Mr. Lee’s verdict. A bank is expected to abide by the rules and apply them - not go beyond the documents to speculate, or interpret them to suit any party’s convenience. In my opinion, based on facts and facts alone, the bank acted correctly in claiming discrepancy on account of ‘conflicting information’ (in the B/L).

Finally, I submit that the comments about bankers were (to say the least) inappropriate, uncalled for, unjustified and unwarranted.

With best regards to all.

Rupnarayan Bose

(Formerly: Managing Director, Fina Bank Ltd., Nairobi, Kenya; Managing Director, TransAfrica Bank Ltd., Kampala, Uganda; General Manager, Diamond Trust Bank, Nairobi, Kenya; Director, Centurion Bank Ltd, Bombay, India.)

E-mail: rnbose@gmail.com  

I understand Brisbane is the loading port and Tokyo the discharge port.

Freight prepaid means the freight has been paid or prepaid by the shipper.

The trade terms CFR, CIF, DAF, CPT, CIP, DDU, DDP, DES and DEQ require a prepayment of the cost of main carriage.

Freight collect/payable at XXX means that the freight still has to be paid by the consignee. The trade terms FOB, FAS, EXW and FCA require a collection of the cost of the main carriage.

In respect of UCP 600 sub-article 4(d) the B/l is discrepant.

Best regards,
Bogdan.

I have been thinking quite a lot about this case. On one had I do not like it – but on the other my (at least initial) view was in line with the answer given by Mr. T.O. Lee above.

The reason that I add a comment to this case – which has been enriched by some fine comments already – is the following:

A few days back I visited an old friend of mine who is a very experienced freight forwarder. I presented him this case - and he commented straight away that this bill of lading was too far out, and that he would never ever do it that. In fact he said that his best guess was that the only reason any transport company would issue a bill of lading this way would be that they are under pressure from their customer!

Most importantly however: He would simply not consider this a “freight prepaid” bill of lading!

Best regards

Kim