A Case of Damaged Steel Coils and Conflicting Clauses: Is this an Unclean Bill of Lading?

QUESTION

Dear Mr. Old Man,

We appreciate if you give your opinion on the following case:

We presented the documents including 3/3 original bills of lading under the letter of credit to the issuing bank.

The bill of lading indicates:

SHIPPED at the Port of Loading in apparent good order and condition on board the Vessel for carriage to the Port of Discharge or so near thereto as she may safely get the goods specified above.

However, it also contains in Description of Goods REMARK ON M/R as follows:

1. The steel coils were crumpled/scratched for the packing covers
2. The steel coils were torn for the packing covers
3. The steels coils were bent/dented for the rim/packing covers

The issuing bank refuses the documents stating the discrepancy “Unclean bill of lading presented”.

Is the issuing bank correct in raising such a discrepancy?

Thank you for your soon reply.

Best regards,

D.B

——–

ANSWER

Hi D.B,

Thank you for your question. Please find my response below:

The issuing bank is correct in raising the discrepancy “Unclean bill of lading presented.” Let’s break this down:

What is a “clean” versus “unclean” bill of lading?

A clean bill of lading is one that does not contain any clauses or notations expressly declaring a defective condition of the goods or packaging. It implies that the goods were received by the carrier in apparent good order and condition.

By contrast, a bill of lading is considered unclean (also known as a claused or foul bill of lading) when it contains remarks noting damage, irregularities, or any apparent defect in the condition of the goods or packaging.

What about this case?

Although the bill of lading includes the standard phrase:

“SHIPPED at the Port of Loading in apparent good order and condition on board the Vessel…”

…it also contains the following remarks under the description of goods / M/R:

1. The steel coils were crumpled / scratched for the packing covers
2. The steel coils were torn for the packing covers
3. The steel coils were bent / dented for the rim / packing covers

These are explicit notations of damage, and therefore negate the presumption of good order and condition. The presence of such remarks renders the bill of lading unclean, regardless of the standard printed shipped clause.

Conclusion

The issuing bank is justified in refusing the documents due to the unclean bill of lading, in accordance with UCP 600 Article 27, which allows banks to reject transport documents bearing clauses or notations that expressly declare defective condition of the goods or packaging.

I hope this helps clarify the issue.

Best regards,

Mr. Old Man