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Bills of Lading – One more function!


Jagan - December 21, 2020 - 6 comments

The Middle East Branch of the Institute of Chartered Shipbrokers conducted a Masterclass on Bills of Lading by way of a webinar conducted on 28th Nov and 12th Dec 2020. The author was fortunate to attend the webinar and to hear from Capt Norman Lopez1, FICS, Mr Krishna Prasad2,FICS and Mr Jeffrey Blum3,FICS. While most of us in the shipping industry would be involved or aware of Bills of Lading (“Bs/L”) and the important role it plays in International Trade, attending such webinar’s keep us not only aware of the developments but also be aware of the issues which regularly crop up. This article touches on the fourth function propounded by Capt Norman Lopez together with some of the comments made by Mr Vincent O’Brien4 on UCP 600.

  1. The various “functions” of the BsL developed keeping in line with the technological advances in the shipping industry. Prior to the development of BsL, goods loaded on board a vessel were noted in a Book, known as the Book of Lading (lading in archaic English means the action of loading a ship with cargo) and which formed the basis of freight contributions once the adventure was accomplished. When it was possible for the merchants to avoid travelling with their goods, they were issued a Bill of Lading (“bill” meaning a documentary copy of an extract from the Book of Lading) and which acted as a Receipt for the goods loaded. Subsequently the other functions of the BsL developed such as the Evidence of the contract of carriage and a Negotiable document of Title5. Invariably, all of the leading shipping textbooks list the above 3 functions of the BsL i.e., receipt, evidence of contract of carriage and a document of title.
  2. During the Master Class, Capt Norman Lopez propounded on a possible Fourth Function of the Bill of Lading as being the evidence of the  Facts when the document was issued, say the “Statement of Facts” function. In this regard, the details mentioned in the Bill such as the name of the Vessel, Port of Loading,  Cargo details, Date of Issue of the BsL and the Shipped-on Board dates are important facts which are relied upon by the trade. If any of these are incorrect or have been misrepresented, then the parties involved in the transaction may suffer losses such as loss in value, sanction by relevant government authorities, etc. Although this function has not been focussed on in any of the text books, this function of the BsL is an important function, given that it  keeps the cogs of trade moving.
  3. We have pondered on this “Statement of Facts” function and quite agree with Capt Norman. We believe that this is perhaps the most important function of the BsL as fraudulent, or incorrect details have a significant impact in any trade transaction. As time goes by, it is possible for other functions of the BsL to develop or be curtailed, as the case may be, and which would depend on various factors including technological advances and innovations.
  4. Mr Vincent O’Brien also attended the webinar on 12th Dec 2020 and commented on Clean on Board and Transhipment Bills of Lading with respect to Uniform Customs & Practice for Documentary Credits 600 (commonly known as “UCP 600”). He mentioned that if cargo interests seek a “Clean on Board” endorsed Bills of Lading, they should be directed to Article 27 of the UCP 600 which clearly states that “The word “clean” need not appear on a transport document, even if a credit has a requirement for that transport document to be “clean on board”. With respect to Transhipment, he did mention on the provisions in Art 20 of UCP 600 that even if the letter of credit prohibits transhipment, if the goods have been shipped in container, trailer or lash barge and transhipped, this would be acceptable.
  5. The Middle East Branch of the Institute of Chartered Shipbrokers have been organising webinars and Master Classes on various topics. The quality of the Tutors together with the interaction with the participants lead it to be a very enjoyable  learning experience. While the pandemic has certainly curtailed lot of activities, it has also given opportunities to use other modes of communication and which have a far greater reach than traditional modes such as face to face seminars. The Middle East Branch of the Institute of Chartered Shipbrokers has taken to this new mode of communication with aplomb. We strongly urge shipping professionals to consider attending and participating, in such webinars conducted by the Institute of Chartered Shipbrokers, particularly on topics which may be of their interest.

 

1. Capt Norman Lopez, FICS, Extra Master, Solicitor, LLB, BAdVocT, MA, Marine Consultant is presently the Education officer of the Australia and New Zealand Branch of the Institute of Chartered Shipbrokers. He has had a chequered career for more than 50 years including sailing in ships, educator, maritime author, Solicitor and a P&I Correspondent.

2. Mr Krishna Prasad, FICS, (KP as he is popularly known as) is presently the Chairman of the Middle East Branch of the Institute of Chartered Shipbrokers. Further details of his extensive CV can be seen at https://www.icsmiddleeast.org/committee

3. Mr Jeffrey Blum, FICS, has been involved in shipping and trading since 1972. He is a member of the Baltic Exchange and has worn many hats including that of a shipbroker, charterer, shipowner & operator, Lloyd’s underwriter, gasoil futures broker and commodities trader in London and abroad. He also acts as an Arbitrator and is frequently involved in giving lectures in Shipping topics at various institutions. Further details of Jeffrey can be seen at https://www.linkedin.com/in/jeffreydblum/?originalSubdomain=uk

4. Mr Vincent O’Brien is the director of ICC UAE. His further details can be viewed at https://www.iccuae.com/images/advocacy/vincent.pdf

5. See an article on The Functions of the Bills of Lading by West of England P&I and which can be viewed at https://www.westpandi.com/getattachment/907f94bf-b7dd-469e-913f-4baae23fca1d/p-i_guide_bills_of_lading_1_2pp_v2_lr.pdf

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6 comments

  1. Suresh N Amirapu

    Dear Jagan and team
    I have been reading your NAU newsletters with interest and often times leave very impressed. In terms of variety of topics covered and the effective capture of the gist, be it highlight a different facet of an age old document or process ( as with the article on B/L above) or precautions to be taken due change in circumstances- I find the newsletters of just the right mix of brevity and importance. Keep up the good work! and Seasons Greetings to your whole team !
    rgds
    Suresh

  2. L M Mohamed Ismail

    Hi Jagan
    I have the following comments to make on your article.
    In paragraph 4 of your article it is mentioned that if the terms “Clean on board” or transhipment prohibition appears , the beneficiary of the credit document can fall back on the provisions of the UCP 600. This is easier said than done. Document checkers in financial institutions are usually of a lower rank and follow the conditions stipulated in the letter of credit to the final full stop. In most circumstances negotiating banks will not attempt to negate the requirements found on the documentary for fear of the payment being rejected for non compliance by the opening bank. This may leave the seller in a lurch as the LC will be termed as discrepant and the payment can either be delayed or even refused.
    The safest way for the beneficiary of the letter of credit is to have the requirement(s) on clean Bill of Lading and or transhipment restrictions removed by way of an endorsement.

    Associate Director
    Acclaim Insurance Brokers Pte Ltd
    Singapore

    • Jeffrey Blum

      Hi Jagan
      Thanks for including me in your report of the last 2 webinars in 2020 of ICS ME Branch, to which I was delighted to contribute.

      I like your cleverly revised logo of “NAU”…

      There is actually an important fifth function of a Bill of Lading, albeit only applicable to dry cargo laytime calculations, namely the quantity laden on board stated in Long or Short Tons if the daily load or discharge rate in the governing charter party is in Metric Tonnes… that conversion is crucial to determine accurate laytime allowance.

      Dear Mr LMM Ismail, whilst I certainly agree with most of your comments, the main lesson to be taken is therefore surely to educate bank clerks better, to give them a much wider commercial perspective of why they should do what they do… which is the education which Vincent and I and others have been providing to international bankers for many years ~ obviously our tuition still needs to reach many more bank operatives…

      Best wishes to all for a much better year ahead, in close cooperation and continued camaraderie.
      Jeffrey

  3. CAPT LALIT CHANDER DHARMANI

    Hi Jagan
    I find the News Letter so informative and full of useful content. Having been involved with academics with Advance Shipmamagement students for the past 10 years
    I have been able to share such information with my students.
    The fourth function of bill of lading , I agree is the most important and complete. It will be my topic today afternoon !!
    warm rgds
    Lalit

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