Some issuing banks add an additional condition to the letters of credit they have issued, indicating that freight forwarder’s bill of lading is not acceptable.
- Why issuing banks disallow freight forwarder’s bill of lading?
- What happens if issuing bank forbids presentation of a freight forwarder’s bill of lading under a letter of credit?
If an issuing bank wants to prohibit presentation of a freight forwarder’s bill of lading, can achieve this aim simply by adding a condition under field 47-A Additional Conditions.
Below you can find some example texts, disallowing presentation of freight forwarder’s bill of lading.
Sample Texts from Selected Letters of Credit
- Forwarder’s bill of lading not acceptable.
- Transport documents issued by freight forwarder are not acceptable.
- Goods must be shipped through the nominated liner which will be advised by the applicant in a certified format with applicant’s seal, a copy of the same must be presented for negotiation and the bill of lading, (freight forwarder’s bill of lading is not acceptable) must evidence that the goods have been shipped on the liner specified therein.
Why issuing banks disallow freight forwarder’s bill of lading?
Issuing banks want to secure themselves as much as possible by requesting not a freight forwarder’s bill of lading, but a carrier’s bill of lading.
A carrier’s bill of lading, which is known as master bill of lading, give more security to the issuing banks comparing to freight forwarder’s bill of lading, which is known as house bill of lading.
What Does the Letter of Credit Rules Tell About Disallowing Freight Forwarder’s Bill of Lading?
UCP 600:
UCP 600 sub-article 14(l) states that
“A transport document may be issued by any party other than a carrier, owner, master or charterer provided that the transport document meets the requirements of articles 19, 20, 21, 22, 23 or 24 of these rules.”
UCP 600 sub-article 20(a) states that
a.A bill of lading, however named, must appear to:
i. indicate the name of the carrier and be signed by:
– the carrier or a named agent for or on behalf of the carrier, or
– the master or a named agent for or on behalf of the master.
ISBP 745:
ISBP 745 states that
“A stipulation in a credit that “Freight Forwarder’s Bills of Lading are not acceptable” or “House Bills of Lading are not acceptable” or words of similar effect has no meaning in the context of the title, format, content or signing of a bill of lading unless the credit provides specific requirements detailing how the bill of lading is to be issued and signed. In the absence of these requirements, such a stipulation is to be disregarded, and the bill of lading presented is to be examined according to the requirements of UCP 600 article 20″.
- According to latest version of international standard banking practices, “Freight Forwarder’s Bills of Lading are not acceptable” or “House Bills of Lading are not acceptable” stipulations in a letter of credit has no meaning unless banks defines how the bill of lading is to be issued and signed.
- If no specific requirements have been mentioned in the letter of credit in regards to issuance and signature of the bill of lading, then banks, nominated bank, confirming bank and issuing bank, have to disregard such a stipulation.
Official Opinion R643 / TA669rev – 2005-2008:
If a transport document states “freight forwarder bills of lading are not acceptable” or “house bills of lading not acceptable”, can the freight forwarder or agent sign the bill of lading according to the requirements expressed in sub-article 20 (a) (i)?
Query
ICC Opinion TA 572 – Issue No. 1 (October 2004) describes the situation in which the documentary credit states that “Transport document issued by Freight Forwarder not acceptable”. The conclusion of the Opinion was that ” … the bank would be obliged to accept a bill of lading that was signed ‘as carrier’ irrespective of any knowledge it may have as to the capacity of the issuer” – i.e., even when the transport document was entitled “FBL BIFA Negotiable FIATA Multimodal Transport Bill of Lading”.
a-The above Opinion was given subject to UCP 500, and we ask you kindly to inform us if the same position would apply under UCP 600.
b-Also kindly advise if the conclusion above would be the same had the documentary credit stated that “House bill of lading not acceptable” or similar.
Analysis
One of the reasons behind conditions such as “freight forwarder bills of lading are not acceptable” or “house bills of lading not acceptable” is to require the issuance of a bill of lading by the carrier, albeit that the freight forwarder or agent could sign the bill of lading according to the requirements expressed in sub-article 20 (a) (i). If a freight forwarder or agent signs as carrier, the bill of lading becomes a carrier document.
Conclusion
The same position applies under UCP 600.
If the credit states “house bill of lading not acceptable” or similar, the same position will apply.
FAQs
“A stipulation in a credit that “Freight Forwarder's Bills of Lading are not acceptable” or “House Bills of Lading are not acceptable” or words of similar effect has no meaning in the context of the title, format, content or signing of a bill of lading unless the credit provides specific requirements detailing how the ...
Is the bill of lading not acceptable? ›
Short form bills of lading are not in high demand. Especially under the letters of credit payments, issuing banks generally demand long form bills of lading, by simply prohibiting presentation of short form bills of lading. Some examples are: Short form, blank backed bill of lading not acceptable.
Which bill of lading is not generally acceptable to the banker? ›
However, most banks refuse to accept any claused bills of lading. Thus, if a receiver files a claused bill of lading and the exporter relies on letters of credit to pay for the goods originally, they will not receive repayment for the goods, and thus will experience a loss.
Do freight forwarders issue bills of lading? ›
A Forwarder's Bill of Lading is a legal document issued by freight forwarders to acknowledge the receipt of cargo. Unlike the Master Bill of Lading, which is issued by the shipping line to the freight forwarder, the Forwarder's Bill of Lading is directly between the freight forwarder and the shipper.
Is a bill of lading issued by a freight forwarder acceptable under UCP 600? ›
"If a freight forwarder or agent signs as carrier, the bill of lading becomes a carrier document." In other words: a freight forwarder (or for that matter a NVOCC) may indeed sign the transport document "as carrier" and that would be acceptable under UCP 600.
How do I know if a freight forwarder is legit? ›
A legitimate freight forwarder will have a proven track record, as well as licenses and credentials that can be verified by checking for them online. It is also important to maintain direct communication with all parties involved in the transportation arrangement, including carriers and brokers.
What happens if the bill of lading is wrong? ›
If you complete your ocean bill of lading incorrectly, you could face delays in delivery, delays in getting paid, denial of claims, incidental costs incurred through delays in delivery, and even penalties (which may apply for fraudulently completing the bill of lading form).
Who validates the bill of lading? ›
A bill of lading is a legal document that's issued by a carrier to a shipper detailing the type, quantity, and destination of the goods being carried. This document must accompany the shipped goods and must be signed by an authorized representative from the carrier, shipper, and receiver.
What makes a bill of lading valid? ›
The bill of lading is only legally binding once signed. It must list the responsible parties, origin and destination, number of packages, contents of the packages, and package details to be binding. The responsible parties in a standard bill of lading are the shipper, the consignee, the carrier, and the notify party.
What is a dirty bill of lading? ›
A Claused Bill of Lading, also known as a “Dirty Bill of Lading” or “Unclean Bill of Lading,” is a type of shipping document that contains specific clauses or notations indicating discrepancies, damages, or irregularities in the goods.
In simple, a draft *BL is a preliminary version (Rough outline) of an actual BL, Normally the BL is prepared at the Place of Origin that is from where the cargo is exported.
Is it illegal to not have a bill of lading? ›
(c) A copy of the bill of lading must accompany a shipment at all times while in your (or your agent's) posses- sion. Before the vehicle leaves the resi- dence of origin, the bill of lading must be in the possession of the driver re- sponsible for the shipment.
Is a freight forwarder liable for cargo? ›
The freight forwarder company arranges the transport and is responsible for the cargo from when it is received until it reaches its destination, depending on the agreed incoterm. Thus, they will always be held liable if things go wrong, so they need insurance to protect their liability.
Do all shipments need a bill of lading? ›
A BOL is required for all freight shipments, regardless of transportation method or piece count, and must contain specific information to be considered legally binding.
What is the purpose of bill of lading in freight forwarding? ›
It functions as a contract for the movement of the goods, with the fine print – the terms of the contract – frequently outlined on the back of the bill. It also serves as a receipt for the cargo and can act as proof of ownership of the goods being transported. In short, it's an important document!
Why is charter party bill of lading not acceptable? ›
Here are some of the risks associated with Charter Bills of Lading: Discrepancies and Disputes: Differences in the information contained in the Charter Bill of Lading, such as cargo quantity or condition, can lead to disputes and legal challenges between the parties involved.
Can an Nvocc issue an ocean bill of lading? ›
A Non-Vessel-Operating Common Carrier (NVOCC) is: a common carrier that holds itself out to the public to provide ocean transportation, issues its own house bill of lading or equivalent document, and does not operate the vessels by which ocean transportation is provided.
Can a freight forwarder act as an importer of record? ›
Can the freight forwarder be the Importer of Record? Not all freight forwarders or couriers may be willing or able to act as the IOR. They may not possess the correct licenses and permits required to perform a compliant import.
