One LC, Two Modes of Transport in One Presentation: What Are the Risks?

Introduction

A reader recently asked whether I have encountered an LC requiring both ocean and land transport documents under the same LC and what risks such an arrangement may create for the beneficiary and the applicant.

That is enough—it sets up the Q&A naturally without giving away the answer.

Question

Dear Mr. Old Man,

I’d like to ask you a question: Have you ever encountered a situation where a Letter of Credit (LC) presentation includes both ocean freight and land freight transport documents under the same presentation?

What are the risks of the beneficiary doing this?

And what are the risks of the applicant?

Firas

______

Answer

Dear Firas,

I understand you mean a case where the LC expressly requires both an ocean Bill of Lading and a land transport document, such as a CMR or truck waybill, to be presented under the same LC.

When I was working at my bank, I sometimes came across LCs that required both an ocean Bill of Lading and a land transport document to be presented under the same LC, although not necessarily in the same presentation.

It is quite possible for an LC to require both an ocean Bill of Lading and a land transport document, depending on how the LC is structured.

For example:

45A – Description of Goods

Goods shipped by sea:
ABC
Quantity: 5
Unit price: USD 5,000
Sub-total: USD 25,000

Goods shipped by truck:
XYZ
Quantity: 5
Unit price: USD 1,000
Sub-total: USD 5,000

Total amount: USD 30,000

46A – Documents Required

1. Commercial invoice
2. Bill of Lading
3. Road transport document
4. …

Potential risks to the beneficiary

1. Late presentation or LC expiry

The beneficiary may be exposed to a late presentation or even an LC expiry discrepancy if it cannot arrange the two shipments and obtain the corresponding transport documents in sufficient time to make a complying presentation before the presentation period or LC expiry date.

2. Partial shipment discrepancy

Another potential risk concerns partial shipments.

Where the goods covered by the LC are shipped by different means of transport—for example, part by sea and part by truck—the shipments may be regarded as partial shipments under UCP 600 Article 31, even if the two shipments are effected on the same date.

Therefore, if the commercial arrangement requires the goods to be shipped by different means of transport, the LC should allow partial shipments.

In practice, I would recommend that the beneficiary carefully review the LC before shipment and, where necessary, request an amendment to clarify the shipment arrangements and expressly permit partial shipments.

Potential risks to the applicant

In my opinion, a potential risk to the applicant is that the goods may not arrive at the destination at the same time because they are transported by two different modes of transport. This could be inconvenient for the applicant, particularly if the goods are intended to be used or sold together.

Best regards,

Mr. Old Man