Multimodal transport documents and a port-to-port shipment

LC requirement: Multimodal transport documents and a port-to-port shipment

By Kim Christensen

Introduction

At the meeting in the ICC Banking Commission in October 2007 – a number of “ICC Opinions” were approved. Amongst those was TA.629[1]. At the time of the meeting – and subsequently – there have been many discussions regarding this one – and the rationale behind it.

It seems that this opinion touches the very backbone of what a transport documents for the purpose of UCP 600 is – and adds to that the “new” SWIFT fields showing where goods are to be sent from and to[2].

From the perspective of the author of this article, the Opinion given by the ICC in this case is correct, and the purpose of this article is to discuss why.

Case facts

The LC in question for ICC opinion TA.629 contained the following requirements:

Under documents required:

Full set of at least 3/3 original clean on board marine bill(s) of lading endorsed to order of bank XX showing freight prepaid notify buyers.

Field 44E: Port of loading / airport of departure

Umea, Sweden

Field 44F: Port of discharge / airport of destination

Port Jebel Ali, Dubai by vessel

Under additional conditions:

Multimodal transport document is acceptable

The bill of lading presented was issued as follows:

The bill of lading mentioned that goods were “received for shipment” and not containing any on board notation.

This Graphic illustrates the case fact.

As it happened the issuing bank refused the documents citing the following discrepancy:

B/L doesn’t show port of loading as required under L/C field 44E.

The good question was – and the topic for Opinion TA.629 – if this was a correct refusal.

The conclusion of the opinion

Opinion TA.629 concluded the following:

Based on the structure of the documentary credit and the fact that a document was presented to cover a multimodal transport between Umea and Jebel Ali, the multimodal transport document complies. The fact that Umea is not shown as the port of loading but as place of receipt reflects the nature of the multimodal transport that occurred. Hamburg, being shown as the port of loading, correctly reflects the transport from that port to Jebel Ali. Due to the fact that a multimodal transport has occurred, the transport document marked “received for shipment” and dated as of that date is acceptable.

The ICC Banking commission ruled that the documents were complying – and that the refusal made by the issuing bank was not correct – notwithstanding the transport documents obviously did not comply with SWIFT field 44E; i.e. “Umea” was not mentioned in the “port of loading field” and there were no on board notation in Umea.

The UCP 600 transport document principles

In order to understand the conclusion in ICC in Opinion TA.629 one must understand how the UCP 600 perceives the transport documents.

The general principles are:

1: The LC wording points to the transport article to be used for examination

The main purpose of the transport document wording used in the LC is to specify which UCP 600 transport article that are to be used as a basis for the document examination.

This is reflected in e.g. ISBP (2007)[3] paragraph 91 which reads:

If a credit requires presentation of a bill of lading ("marine", "ocean" or "port-to-port" or similar) covering sea shipment only, UCP 600 article 20 is applicable.

This means that if the LC calls for e.g. “Marine bill of lading” UCP 600 article 20 will be used as a basis for the document examination.

2: The “however-named-principle”.

Once the relevant transport article has been identified, you meet the “however-named-principle”. This is e.g. reflected in UCP 600 sub-article 20(a):

A bill of lading, however named, must appear to…

The purpose of this principle is to underline that it is not the title of the document that matters – it is whether or not it complies with the relevant UCP 600 transport article.

In many ways this is opposite to what you will meet in the transport industry.

E.g. you can have a document that does in fact show more than one mode of transport – but still complies with UCP 600 article 20 – which covers a port-to-port shipment, or you can have a document titled “Multimodal transport bill of lading” that will not comply with UCP 600 article 19 – which covers a “.. at least two different modes of transport”.

3: The places/ports in the documents must comply with those stated in the LC

The UCP 600 transport articles are very detailed when it comes to the ports and places to be mentioned in the document, i.e. from where to where the goods must be shipped. This is e.g. reflected in UCP 600 sub-article 20(a)(iii) which reads:

… indicate shipment from the port of loading to the port of discharge stated in the credit …

[Emphasis added]

Therefore there must be a connection between the required transport document – and the ports and/or places that the goods are to be sent from and to.

For example where the LC calls for a bill of lading it is expected that it also indicates a “port of loading” and a “port of discharge”.

An analysis of ICC Opinion TA.629 based on UCP 600

The LC in question calls for a bill of lading – but at the same time allows for a multimodal transport document. The consequence of this is the beneficiary must either present a bill of lading to be examined based on UCP 600 article 20 or a multimodal transport document to be examined based on UCP 600 article 19.

In this case it seems clear that the beneficiary has chosen to present a multimodal transport document – as if shows “Umea” in the “place of receipt” field. The tricky part however is that the “places” mentioned in the LC is stated in the SWIFT fields 44E and 44F – representing respectively “port of loading” and “port of discharge”. How does this match with UCP 600 article 19?

The starting point for article 19 is as follows:

A transport document covering at least two different modes of transport (multimodal or combined transport document), however named, must appear to …

Two issues are important to note: one is that it must cover “at least two modes of transport”. The other one is the “however named” principle as mentioned above.

The first issue is described further in ISBP (2007) paragraph 68. This one reads (including comments):

ISBP (2007) paragraph 68:

The authors comments:

If a credit requires presentation of a transport document covering transportation utilizing at least two modes of transport (multimodal or combined transport document), and if the transport document clearly shows that it covers a shipment from the place of taking in charge or port, airport or place of loading to the place of final destination mentioned in the credit, UCP 600 article 19 is applicable.

This part of the paragraph describes the principle mentioned above, that it is the wording of the LC that points to the relevant article.

Important for this case is also that it clarifies that it is the transport route mentioned in the LC that it important.

In such circumstances, the transport document must not indicate that shipment or dispatch has been effected by only one mode of transport, but it may be silent regarding the modes of transport utilized.

This part of the paragraph qualifies the statement from UCP 600 sub-article 19(a) that it must cover at least two modes of transport. What it says is that it must not show that only one mode of transport has been used. It may however be silent regarding the modes of transport utilized.

With this in mind; looking at the LC in question you will note that on one hand it allows for a multimodal transport document – which per definition covers at least one mode of transport, but on the other requires a transport route between two ports i.e. only one mode of transport. This is of course not possible – you can not do both, therefore the LC is ambiguous, and according to ISBP (2007) paragraph 2: “The applicant bears the risk of any ambiguity in its instructions to issue or amend a credit”[4].

The next question is what would be the consequence of the LC ambiguity? It is really had to answer in general terms – but it seems that the conclusion given by the ICC provides the answer for the specific case:

Abstract from the conclusion in TA.629	The authors comments:
The fact that Umea is not shown as the port of loading but as place of receipt reflects the nature of the multimodal transport that occurred.	The opinion underlines that since a multimodal transport document is acceptable in the LC – it is acceptable that such is presented.
Hamburg, being shown as the port of loading, correctly reflects the transport from that port to Jebel Ali.	The opinion acknowledges that the specific LC requirement “Port Jebel Ali, Dubai by vessel” has in fact been complied with in the document.
Due to the fact that a multimodal transport has occurred, the transport document marked “received for shipment” and dated as of that date is acceptable.	The opinion makes reference to UCP 600 article 19, by saying that for such document an on board notation is not required. It is sufficient that it shows goods received for shipment.

Based on the above it seems that the criteria for the ICC have been to evaluate if the beneficiary has in fact made his best attempt to comply with ambiguous LC requirements. The conclusion is that he has indeed.

The objections considered

During the discussions of this case a number of objections have been raised. The most important ones claims that the document could in fact have complied with the requirements in the LC – i.e. that the LC is not ambiguous, as the multimodal transport document could for example be completed as follows:

Place of receipt:	Stockholm
Port of loading	Umea, Sweden
Port of transshipment	Hamburg
Port of discharge	Port Jebel Ali, Dubai by vessel

It should remain unsaid if that was in fact possible in the specific case. The point however, is that “Stockholm” (used as an example here) would as such be “outside” the LC. As mentioned above it is a guiding principle that it is the ports/places mentioned in the LC that should be reflected in the document. Further the above example is not – according to the UCP 600 perception of transport documents – a multimodal transport document. It is a bill of lading. If the above was the intention there would be no point in stating that “multimodal transport document is acceptable” – as the above would be acceptable had the LC just called for a bill of lading (assuming of course that it is shows a correct on board notation in Umea).

Taking this further – it seems clear that the above example would satisfy the requirements of a bill of lading in accordance with article 20, so the real test to “clarify” if the LC is ambiguous would be to find a reasonable scenario that:

Complies with UCP 600 article 19 (multimodal transport document), AND
Does not comply with UCP 600 article 20 (bill of lading) AND
Fulfills all requirements in the LC – including the port-to-port requirement.

The only examples presented so far that would in fact comply with all three points mentioned above, seems far out theoretical – like:

> On board at Umae, Sweden (including on board notation) to Hamburg port

> On truck from Hamburg to Rotterdam

> On board Rotterdam and on to Jebel Ali Port by vessel

Most would agree that such transport route is simply not realistic. So to recapture: The consequence of claiming that the port-to-port requirement must be complied with would be that it is simply not possible (under the regime of UCP 600) to present a multimodal transport document.

Another objection would be that – looking at a map – the only logical transport route from Umea to Hamburg would in fact be by vessel. It is an argument that is hard to relate to – given the abstract nature of the LC instrument: Could such an argument be used to refuse documents under an LC – or to object to a refusal. It is not likely.

Conclusion

Based on the above line of argumentation the transport document presented does comply with the terms and conditions of the LC:

The LC states that “multimodal transport document is acceptable” – and such is presented.
The transport document presented is silent regarding mode of transport between Umea and Hamburg – and indicates that the transport from Hamburg to Jebel Ali is done by vessel, hence in line with ISBP (2007) paragraph 68.
The LC calls for a transport to “Port Jebel Ali, Dubai by vessel” – and the transport document presented shows exactly that.

The lesson learned in this case is the importance of clear and unambiguous LC wordings – in line with the principles of the UCP 600 – even where such may be illogical from an industry perspective.

Kim Christensen

TF Business & Product Specialist

Vice President at Nordea

[1] ICC Document 470/TA.629 (UCP 600). ICC meeting October 2007

[2] Respectively “44A: Place of Receipt”, “44E: Port of Loading”, “44F: Port of Discharge” and ”44B: Place of delivery”

[3] “International Standard Banking Practice (ISBP) for the Examination of Documents Under Documentary Credits, 2007 Revision for UCP 600”, ICC publication No. 681

[4] In all fairness it must be assumed that this risk also lies with the issuing bank.

LC requirement: Multimodal transport documents and a port-to-port shipment