THE BENEFICIARY CERTIFIES THE VESSEL IS SEAWORTHY — REALLY?

INTRO

Here is an interesting question from Jawad in Pakistan about a Certificate of Seaworthiness under an LC.

At first glance, the proposed wording looks harmless:

“Beneficiary certificate certifying that the carrying vessel is seaworthy required.”

But Mr. Old Man thinks there is a small problem here:

The beneficiary may be selling the goods… but is he also a marine surveyor?

Let’s take a look.

QUESTION

Dear Mr. Old Man,

I hope you are doing well.

I have a question regarding a certificate of seaworthiness requirement.

We usually include the following clause in field 46A:

“Shipping company or their authorized agent certificate certifying that the carrying vessel is seaworthy required.”

However, the applicant has now asked us to amend the clause as follows:

“Beneficiary certificate certifying that the carrying vessel is seaworthy required.”

My question is: Can we specify “Beneficiary” instead?

If so, how can the beneficiary ensure that the carrying vessel is seaworthy? I believe this is something that is under the control of the shipping company or another party with the technical expertise to assess the vessel.

Thank you.

Jawad
Pakistan

_______

ANSWER

Dear Jawad,

Thank you for your question.

I agree with your concern.

If an LC requires a Certificate of Seaworthiness, it would normally be more appropriate for the certificate to be issued by a party that has the relevant knowledge and ability to assess the vessel, such as:

1. The shipping company or its authorized agent; or
2. An independent inspection or classification organization, such as SGS, Bureau Veritas, etc.

There is, however, nothing in UCP 600 that generally prevents an LC from requiring a certificate to be issued by the beneficiary. The issue is whether the beneficiary is actually in a position to make such a certification.

The beneficiary normally does not own or operate the carrying vessel and would not ordinarily have the technical expertise or means to determine whether a vessel is seaworthy. Requiring the beneficiary to certify something that is essentially outside its control may therefore create a rather impractical documentary requirement.

More importantly, under UCP 600, the bank examines documents, not the underlying facts. If the LC requires a beneficiary’s certificate stating that the vessel is seaworthy, the bank would examine that certificate for compliance with the LC terms. The bank would not normally investigate whether the vessel is, in fact, seaworthy.

Therefore, although the applicant may specify “Beneficiary,” I would not consider this a well-designed requirement. It would be more logical to require the certificate from the shipping company, its authorized agent, or another competent party capable of certifying the vessel’s seaworthiness.

In your situation, I would suggest explaining this practical concern to the applicant and recommending that the original wording be retained.

Best regards,

Mr. Old Man