TT Talk - International Standard Banking Practice on UCP 600 – freight forwarders’ documents


  • Date: 05/09/2007
  • Source: TT Talk 101

In TT Talk Edition 99 we mentioned that UCP 600, the new ‘ICC Uniform Customs and Practice for Documentary Credits’ replaced its predecessor UCP 500 per 1 July 2007. UCP does not have automatic force of law, but is almost universally recognized and incorporated by the parties into their documentary credit (or ‘letter of credit’) contract. As announced in TT Talk Edition 99, the International Chamber of Commerce (ICC) has now issued the ‘International Standard Banking Practice for the Examination of Documents under Documentary Credits’ (ISBP) for UCP 600. The ICC states that ‘ISBP was conceived as an intelligent checklist of procedures for document checkers to follow in examining the documents presented under letters of credit. While not a substitute for the UCP, which remains the guiding text, the ISBP demonstrates how the UCP is to be integrated into day-to-day practice’.

Freight forwarders (Transport Operators) are not themselves party to the documentary credit contracts, but become implicated because their transport documents are regularly used under the documentary credit.

a) Principle

As UCP 500 established already, a transport document issued by a freight forwarder is acceptable under a documentary credit, if the document indicates the name of the freight forwarder as a carrier or multimodal transport operator or indicates that the freight forwarder acts as agent on behalf of a carrier or multimodal transport operator.

b) Extending the principle

In addition to this general principle, the International Standard Banking Practice (ISBP) on UCP 600 specifically addresses the situation where the documentary credit contract, when calling for a transport document, contains one of the following phrases (or uses a ‘similar phrase’):

- Combined carriage (Article 19 UCP 600): ‘Freight Forwarder’s Multimodal transport document is acceptable’;

- Carriage by sea – Bill of Lading (Article 20 UCP 600): ‘Freight Forwarder’s Bill of Lading is acceptable’;

- Air carriage (Article 23 UCP 600): ‘House air waybill is acceptable’ or ‘Freight Forwarder’s Multimodal transport document is acceptable’.

If the documentary credit contains any of these (or similar) phrases, ISBP explains in its commentary on Articles 19, 20 and 23 of UCP 600 that the document ‘may be signed by a freight forwarder in the capacity of a freight forwarder without the need to identify itself as carrier or agent for the named carrier. In this event, it is not necessary to show the name of the carrier’.

As the ISBP do not define the phrase ‘in the capacity of a freight forwarder’, it is not entirely clear how the ISBP understand the term "freight forwarder" in this context. One possible interpretation would be that the ISBP perceive the ‘freight forwarder’ here as a ‘forwarding agent’ or other intermediary who does not assume liability as a contracting carrier.

The ISBP do not comment on Non-Negotiable Sea Waybills (Article 21 UCP 600) issued by freight forwarders; it is not entirely clear whether this is a deliberate omission or whether the ISBP intend to apply the principle expressed Articles 19, 20 and 23 UCP to sea waybill too.

With regard to ‘Road, Rail or Inland Waterway Transport Documents’ (Article 24 UCP 600), the ISBP clarify that the word ‘carrier’ does not need to appear at the signature line, ‘provided the transport document appears to be signed by the carrier or an agent on behalf of the carrier, if the carrier is otherwise identified as ‘the carrier’ on the transport document’.

c) Documents which are not considered ‘transportation documents’ under UCP 600

Please note that ISBP also lists documents which ‘are commonly used in relation to the transportation of goods’ but ‘do not reflect a contract of carriage and are not transportation documents as defined in UCP 600 articles 19-25’. As examples of such documents are listed ‘Delivery Order, Forwarder’s Certificate of Receipt, Forwarder’s Certificate of Shipment, Forwarder’s Certificate of Transport, Forwarder’s Cargo Receipt and Mate’s Receipt’.

The ‘Forwarder’s Certificate of Receipt’ (FCR) and the ‘Forwarder’s Certificate of Transport’ (FCT) are documents created by FIATA. Under a FIATA FCR the freight forwarder certifies that he is in possession of the goods with irrevocable instructions to dispatch them to the named consignee or to keep them at the consignee’s disposal. By issuing a FIATA FCT the freight forwarder assumes the obligation to deliver the goods at destination through a delivery agent appointed by him, but acts as a forwarder, not as a carrier.

A ‘Forwarder’s Cargo Receipt’, like the FIATA ‘Forwarder’s Certificate of Receipt’, is shortened to ‘FCR’, which can cause confusion. ‘Forwarder’s Cargo Receipts’ are regularly encountered in the Far East. In the Hong Kong High Court case of Hirdaramani v Orient Consolidation Services (2000), Stone J found that the ‘Forwarder’s Cargo Receipt’ was used in place of a house bill of lading, but was not itself a document of title. However, there is no generally recognized definition of what a ‘Forwarder’s Cargo Receipt’ precisely is.

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Like the text of UCP 600 itself, the ‘International Standard Banking Practice for the Examination of Documents under Documentary Credits’ (ISBP) is available on the ICC website www.iccbooks.com against payment. UCP 600 connoisseurs will already know that UCP 600 t-shirts are available in four sizes - surely an inventive way to mark a new set of rules.

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