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UCP IN
WONDERLAND
Article 24
as Kim Revises in Dream
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Editor's note: Kim
Christensen is a great thinker. He thinks in real situations. He thinks in
dreams. He thinks solutions. He thinks innovations. In dream he innovates
article 24 to present it as a perfect solution to users of LC. He is great a writer - a prolific writer. What he thinks he writes. What he dreams he
writes. For example, dream article 24. What he writes - he writes to share.
His "thinking and writing" benefits the LC world. He is a great
commentator. He comments - on UCP, on UCP draft, on ISBP, on banker's views.
His commentary serves to enrich and improve LC knowledge management.
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Introductory
comments
Article 24 of
the UCP 500 covers the “Non-negotiable Sea Waybill”. I would rather see this
(along with the other transport articles) taken out of the UCP – and into
the ISBP. There are many reasons for that. The most important is to collect
all the provisions dealing with the examination of documents in one
document, in order to provide a single tool for the exporter in the phase of
producing the documents.
As a
consequence of this the following is based on the ISBP standard rather than
the UCP standard.
In addition
to that the order of the information has been changed to the same order as
can be found in the document itself.
Some of the
provisions may also apply to other transport documents – but are included
here in order to illustrate my view on these items.
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Non-negotiable Sea-waybill
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Introduction to the Non-negotiable sea waybill |
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The
Non-negotiable sea waybill is by nature different from the traditional bill
of lading. First of all it is not a document of title – i.e. it is not
possible to transfer the rights to the goods by endorsing the document.
Secondly the document itself does not provide access to the goods.
When choosing
the document to be required under the credit these issues should be
considered. In general the
Non-negotiable sea waybill is a “lighter” document
than the bill of lading, and may ideally be used where it is not likely that
the ownership of the goods are to be transferred while at sea.
There are a
number of ways for the parties to protect themselves – and for the
Non-negotiable sea waybill to make a good match with the credit; e.g.
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Require
that the Non-negotiable sea waybill be consigned to the issuing bank.
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Require
that the shipper transfer the right of control to the consignee (is-suing
bank).
[1] No doubt this statement is debatable – and
it may be argued that this has never been tested in court – and that it may
be different in various jurisdictions – and that it is not for the ICC to
comment on such issues. I would accept all such arguments – but see no other
way to push the usage of this document – and create the practice that seems
to be desperately lacking here
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Application of the Non-negotiable Sea-waybill |
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Paragraph x1:
If a credit
requires presentation of a Non-negotiable sea waybill, the transport
document presented must not show that it is “negotiable” or words to that
effect. This would include being issued “to order”.
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Consignor / Consignee |
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Paragraph x2:
a) The
document may show a consignor/shipper different from the beneficiary
mentioned in the credit.
b) The
credit should stipulate the consignee to be mentioned on the Non-negotiable
sea waybill. If the credit does not so stipulate, the beneficiary should be
mentioned as consignee.
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Port-to-port / Multimodal transports |
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Paragraph x3:
The
Non-negotiable sea waybill covers either port-to-port ir multimodal
transports – depending on the wording of the credit.
The
Non-negotiable must show transport of the goods between the port(s)/place(s)
mentioned in the credit.
Any transport
leg (s) outside the port(s)/place(s) mentioned in the credit will be
disregarded.
Paragraph
x4:
If the credit
requires transport from a place (rather than a port) the Non-negotiable sea
waybill must indicate that goods are taken in charge, received for shipment,
or shipped on board in the place indicated in the credit.
Paragraph x5:
In the credit
requires transport from a port, the Non-negotiable sea waybill must show
that goods are shipped on board.
Such on-board
notation must unambiguously indicate that the goods are shipped on board in
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the port
mentioned in the credit;
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on a named
vessel; and
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the date of
shipment.
Paragraph x6:
If a
pre-printed “Shipped on board” Non-negotiable Sea waybill is presented, its
issuance date will be deemed to be the date of shipment unless it bears a
separate dated on board notation, in which event the date of the on board
notation will be deemed to be the date of shipment whether or not the on
board date is before or after the issuance date of the bill of lading.
Paragraph x7:
“Shipped in
apparent good order”, “Laden on board”, “clean on board” or other phrases
incorporating words such as “shipped” or “on board” have the same effect as
“Shipped on board ”.
Paragraph x8:
The
information regarding where the goods are taken in charge or shipped on
board and the destination may be shown in the relevant fields on the
document, or anywhere else on the document
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Clean
non-negotiable sea waybills |
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Paragraph x9:
Clauses or
notations on Non-negotiable Sea waybills that expressly declare a defective
condition of the goods and/or packaging are not acceptable.
Paragraph x10:
The word
“clean” need not appear on a Non-negotiable sea waybill even though the
credit may require a “clean on board sea waybill” or one marked “clean on
board”.
Paragraph x11:
If the word
“clean” appears on a Non-negotiable sea waybill and has been deleted, the
Non-negotiable sea waybill will not be deemed to be claused or unclean
unless it specifically bears a clause or notation declaring that the goods
or packaging are defective.
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Corrections and alterations |
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Paragraph x12:
Corrections
and alterations on a Non-negotiable sea waybill must be authenticated. Such
authentication must appear to have been made by the carrier, master
(captain), the multimodal transport operator or any of their agents (who may
be different from the agent that may have issued or signed it), provided
they are identified as an agent of the carrier or the master (captain) or
the multimodal transport operator.
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Freight |
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Paragraph x13:
If a credit
requires that a Non-negotiable sea waybill shows that freight has been paid
or is payable at destination, the Non-negotiable sea waybill must be marked
accordingly.
Paragraph x14:
Applicants
and issuing banks should be specific in stating the requirements of
documents to show whether freight is to be prepaid or collected.
Paragraph x15:
If a credit
states that costs additional to freight are not acceptable, a Non-negotiable
sea waybill must not indicate that costs additional to the freight have been
or will be incurred.
Such
indication may be by express reference to additional costs or by the use of
shipment terms that refer to costs associated with the loading or unloading
of goods such as Free In (FI), Free Out (FO), Free In and Out (FIO) and Free
In and Out Stowed (FIOS). A reference in the transport document to costs
which may be levied as a result of a delay in unloading the goods or after
the goods have been unloaded, e.g. costs covering the late return of
containers, are not considered an indication of additional costs in this
context.
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Signing and freight forwarders |
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Paragraph x16:
The name of
the carrier must appear from the Non-negotiable Sea waybill.
The
Non-negotiable Sea waybill must be signed by:
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The carrier
or a named agent for an on behalf of the carrier, or
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The master
or a named agent for and on behalf of the master
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The
multimodal transport operator or a named agent for and on behalf the
multimodal transport operator
The capacity
of the party signing the document must appear from the document.
Paragraph x17:
A
Non-negotiable Sea waybill may be issued by a freight forwarder.
Paragraph x18:
The Credit
should not use terms like “Non-negotiable Sea waybill issued by freight
forwarders are not acceptable” or “Non-negotiable Sea waybill issued
by freight forwarders are acceptable”. Instead the credit should be
precise as to the intention regarding who may / may not issue the document
and/or the capacity of the issuer.
a) If a
credit states “Freight Forwarder’s sea waybill is acceptable” or uses
a similar phrase, then such will be disregarded, as this is already
permitted.
b) If a
credit states “Freight Forwarder’s sea waybill is not acceptable” or
uses a similar phrase, then the document must not appear to be issued by a
freight forwarder. There are a number of ways, by which such appearance can
be identified. Some examples are:
* If the document issued is a “FWB – non-negotiable FIATA Multimodal
Transport Waybill” or “HAWB – House Air Way Bill”
* If the form used is that of an international or national association of
freight forwarders. I.e. FIATA or BIFA.
* The words “freight forwarder” forms part of the name of the issuer of the
document.
This clause has no effect on the capacity of the party signing the document,
and paragraph x16 should still be complied with.
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The Dream Debate to suggest what Earthly UCP should say
on Transport Documents
HE SAYS. AND, HE SAYS. THEN HE SAYS
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Kim’s Dream
Revision of Article 24 Tempts
Jia
Hao to Review
it |
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Kims Counter Comments |
| When bankers review
UCP, they casually glance at or skip the Article 24 focusing on the
stipulations about Non-negotiable sea waybills. They seem to ignore
those stipulations partly because they consider they may seldom
encounter sea waybills in their daily work and partly because those
stipulations are almost the copy of UCP Article 23. However,
unfortunately, they are not right. Given the fact that the vessel
arrives before the bill of lading due to ever shorter sea voyage mainly
attributed to the container revolution in recent years and the emergence
of fast container ships, sea waybills are now used primarily in trade
between Europe and North America and the Far East, as well as in
intra-European trade and in some trade between Europe and the Middle
East or North Africa. [1] Different from bill of lading,
sea waybill acts as receipt and provides evidence of the contract of
carriage, and lacks the third characteristic of the bill of lading,
namely document of title. Therefore, the relevant stipulations about the
sea waybill should be different from those of the bill of lading to some
extent. In this respect, Kim provides us with his valuable
considerations, insights and suggestions. Here, I am tempted to comment
on some aspects so far as I am induced by his words.
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Those are great
comments. Thanks a lot. In general I agree with most - so I will mainly
provide some explaining / answering: |
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Application of the
Non-negotiable Sea-waybill |
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Paragraph x1: |
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I support
Kim’s suggestion. That is the essential aspect that differs from the
bill of lading. To be more consistent and easily understood, the wording
may be suggested to be similar as that of ISBP para. 154 regarding air
waybills: “Non-negotiable sea waybills should not be issued ‘to order’
or ‘to order of’ a named party because they are not documents of title.
Even if a credit calls for a non-negotiable sea waybill made out ‘to
order’ or ‘to order of’ a named party, a sea waybill presented showing
goods consigned to that party, without mention of ‘to order’ or ‘to
order of ‘, is acceptable.” |
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I know of this
provision for AWB's. The reason that I have not included it here is that
this carries a potential danger: Namely the danger that the consignee
cannot get the goods delivered at port of destination.
The TACT Rules for AWB's (6.1.6.d) reads:
Definition of the term "Not Negotiable"
The term "Not Negotiable" printed on top of
the AWB means that the AWB is a straight or Non-Negotiable bill of
lading which is contrary to a negotiable bill of lading; no IATA members
issue "to order" or negotiable AWB's. Therefore the words "Not
Negotiable" must not be crossed out or tampered with.
First of all - I have examples of airline
companies refusing to deliver the goods to the consignee if the AWB is
issued to order - and demand for the issuing airline company to amend
this before delivery.
Secondly - I do not know if similar exist of sea
waybills - but in any case it is a very bad practice to issue
non-negotiable documents "to order" so such should be discouraged.
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Consignor / Consignee
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Paragraph x2: |
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Kim stipulates that the
beneficiary should be mentioned as consignee when the credit does not so
stipulate. I am curious to know the reason
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Okay; got me there :-)
Should of course have been the applicant ... The reason is that the
document is non-negotiable - so the goods will be delivered to the party
mentioned as consignee. Therefore this is an attempt to make sure that
the applicant does not find himself in a situation where he has to pay
under the credit - but goods are consigned to a totally different
party...
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Port-to-port / Multimodal
transports |
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In my view, with the stipulation “The Non-negotiable must
show transport of the goods between the port(s)/place(s) mentioned in
the credit.” in paragraph x3, the stipulation of Paragraph x8
seems unnecessary, so long as the entire carriage appears to be covered
by the sea waybill.
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You are right of
course. The reason for including this is that there in the past has been
some confusion regarding this - which has resulted in e.g. ISBP
paragraphs 80 and 81. So the purpose is just to underline that the
issuer is not "locked" by the standard fields on the document - but may
include this information anywhere on the document.
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Corrections and alterations
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Paragraph x12: |
| I do not quite support
the position of ISBP regarding the authentication requirement for
signature or initials of the party who makes corrections and/or
alterations besides the indication of by whom the authentication has
been made. Such requirement seems to be of no practical sense as the
documentary checker can not and may not identify the genuineness of the
signature or initial. In this respect, Mr. T.OLee held the same
position.[2] Therefore, I am curious to want to know
whether Kim also realizes the issue and holds the same position as us,
as in his stipulations there is not such a requirement at all.
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I have to give this a
few thoughts. I am not sure that this gives many problems (??). In any
case I do not support the argument that "the document checker cannot and
may not identify the genuineness of the signature or initial”. I think
this is covered by the (UCP 500) wording/principle “appears on its face..”
meaning that if a party has e.g. signed a document then the document
checker will not verify the correctness of such signature. I see this
principle as a CMA[1] principle – saying that if a
document appear to be signed correct then the document checker has
fulfilled his/hers obligation – and cannot be blamed for fraud /
falsification in that respect.
I will read T.O. Lee’s article and consider
matter more thoroughly.
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Signing and freight forwarders
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Paragraph x17:
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What if no
such stipulation? Should the rule that if it is not prohibited under UCP
it will be allowed under UCP be applied, it may be okey for a freight
forwarder to issue the sea waybill/bill of lading as long as the
requirement including the signing requirement in Art 24/23 have been
met.
Of course, given an express allowance, it may be better
to avoid unnecessary relevant disputes.
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I am not quite sure I
understand what you are saying here.
I would rather no such provisions were necessary;
and from a technical point of view I really do not think that they are.
I however accept FIATA’s argument that such provisions are necessary in
certain parts of the world – otherwise banks will interpret it so that
transport documents issued by freight forwarders are not allowed.
(And I almost dare not say – but it seems that
many banks need good solid guidance here :-)
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Paragraph x18:
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to be the issuer of the document, ISBP para. 25 may be referred to and
applied. So to judge the issuer of the sea waybill/bill of lading, the
letterhead/logo may be checked and if no letterhead/logo, the signing
may be checked.[3] Here, Kim specifies the ways.
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Yes – and in fact the
word “issued” has a rather wide definition in L/C situations.
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“full set” and “original” sea waybills required to be presented, I
am glad to see Kim at the same side of me by removing the sub-provision
b(v) under UCP500 Art.24. However, the latest UCP Revision draft seems
not to take our considerations.[4]
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Indeed – but it seems
that we are shouting against the wind here … in any case the June 2006
UCP 600 draft still carries the “Full set rule”. Sadly. |
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| Jia
Hao Footnotes: [1]
See the United Nations Conference on Trade and Development (UNCTAD),
Report on “The Use of Transport Documents in International Trade”,
UNCTAD/SDTE/TLB/2003/3, dated November 26, 2003; available on-line at
http://www.unctad.org/en/docs//sdtetlb20033_en.pdf
, at paras. 67 and 97.(This quotation is noted from Professor
William Tetley’s unpublished book, Marine Cargo Claims(4th Edition),
Chapter 45 Waybills, available at
www.mcgill.ca/maritimelaw ); also see John F
Wilson, Carriage of Goods by Sea(4th Edition),Pearson Education, 2001,
P167 (increasing use is being made of the waybill and a current writer
reports(citing Gronfors, K, Cargo Key Receipt and Transport Document
Replacement, 1982, P13)that at the present time as much as 85 percent of
the trans-Atlantic trade in containerized cargo could be carried on
waybills.Typical examples are provided by in-house movements of goods
between different branches of a multinational firm, the shipment of
household or personal effects, and open account trading with
long-standing and trusted overseas buyers where security is not needed.
It must also be remembered that general cargo is rarely sold in transit,
while cargo of mixed ownership in containers packed by freight
forwarders is never so sold. All these shipments provide opportunities
for the use of waybills since they are destined for delivery solely to
the named consignee.)
[2] See his relevant
argument at
http://www.tolee.com/html/query_authentication_date.htm
[3] As to the futher
analysis regarding issue of how to judge issuer, may see my article Case
Comment on Rabobank v. BOC Case[3]: A Warning and Challenge to Banks’
“usual” Practice, at
http://www.lcviews.com/rabo_v_boc.htm
[4] As far as I know,
Mr. T.O.Lee also submitted his suggestion of removing such requirement
to ICC Canada. As to my reasons for removing such requirement, see Jia
Hao on UCP articles relating to transport documents, at
http://www.lcviews.com/court_of_public_opinion.htm
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Kim
Chistensen footnotes: [1]
Pardon my French: ”Cover my A..” |
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