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Question: |
Name: Mohammad Ali
In our region, we have enough industry practice to
import bulk commodities and call for a charter party bill of lading (CPBL).
Over the time, we have been facing increased number of queries and concerns
over the requirement of CPBL and the risks associated with this kind of
transportation. It would be of great assistance from your side if you could
express your views for the following two points:
1) What are the risks associated with charter party
Bills of Lading?
2) The methodology to mitigate these risks?
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Answer
(from Jee-Meng Chen) |
Conventionally, Banks that are involved in "plain
vanilla" financing i.e. one-legged (import) do not delve into the mechanisms
of Charter party Bills of Lading. Unless, the financier is involved on both
the export and import legs, it is difficult to exercise control. There was
one bank in Singapore that I am aware of, adopted a very "strict" stance of
prohibiting charter party bills of lading. This, however, does not indicate
the "risk awareness" of the said institution. On the contrary, it suggests
that the institution concerned was not familiar with commodity trading /
shipment.
The structured trade financier can request that the
middleman submits the Charter party Agreement and/or Fixture Note (whichever
the case may be).
The rationale: Look for clauses that may potentially
detriment the financier's interests e.g. issuance of 2nd set B/L against
charterer's own LOI.
In addition, where the financier is financing the
freight payments, the institution may want to issue notification to the
disport agent.
Diversion of vessel is a real risk.
Unless the whereabouts of the vessel is tracked, the
financing bank may end-up losing control over the cargo.
But even for a structured trade financing
institution, the ability to "control" shipment is not necessarily easy. Say,
if the middleman is purchasing on CFR terms, he doesn't charters the vessel;
the end-seller does. The risk-mitigation depends on a host of other factors,
e.g. container shipments, the end-buyer imposing a requirement that NVOCCs
is strictly prohibited, etc..
Not to forget, issues such as ultimate ownership of
the vessel. It is not always a straightforward case of the shipper or
middleman contracting directly with the ship owner.
What about the discharge port in-question? Would it
be a case that the vessel has to unload its cargo onto smaller barges for
transportation to the port? Could a risk of diversion occur at this juncture?
It is by no means easy to address the
following-mentioned two queries.
To mitigate risks: Know Your Customers, Know the
Commodity, Know the Buyer-Seller, Understand the intricacies of Charter
parties, Knowing the conditions of the various ports and understand one's
legal rights in respect of Charter party B/Ls.
Regards,
Jee Meng
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