Are “Destination Haulage Charges Collect” a Discrepancy Under an LC?

A Practical Q&A with Mr. Old Man

In trade finance, additional charges shown on a bill of lading often cause unnecessary anxiety—especially under CIF/CIP terms where the line between commercial responsibility and LC compliance can get blurry. In today’s question, Julia raises a common concern: does the notation “Destination Haulage Charge Collect” create a discrepancy?

Let’s break it down.

Question

Dear Mr. Old Man,

I have a shipment under CIP terms and the L/C requires the B/L to show:

“3/3 CLEAN ON BOARD MARINE BILL OF LADING ISSUED TO THE ORDER OF ISSUING BANK, MARKED FREIGHT PREPAID WITH NOTIFY TO APPLICANT.”

We complied with all LC requirements in the B/L, but it also shows:

• ORIGIN PORT CHARGE PREPAID
• SEA FREIGHT PREPAID
• DESTINATION CHARGE COLLECT
• DESTINATION HAULAGE CHARGE COLLECT

In that, Destination Haulage Charge should actually be paid by us, but the B/L states “Destination Haulage Charge Collect.”

Does this create a discrepancy under the LC?

Looking forward to hearing from you.

Best regards,

Julia Truong

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Answer

Dear Julia,

Under CIF/CIP Incoterms, it is standard that certain destination charges are collected at the destination. However, when such charges appear as collect on the bill of lading, this does not automatically mean the consignee must bear them. Commercial arrangements—like your agreement to pay the destination haulage—do not need to appear on the B/L and do not affect LC compliance.

From a documentary examination standpoint, the decisive rule is UCP 600 sub-article 26(c), which permits a transport document to show references to charges additional to freight, by stamp or otherwise. This includes origin charges, destination charges, haulage charges, and whether they are prepaid or collect.

Further guidance comes from ISBP 821 paragraph E27:

• E27(a) – Only when the LC explicitly states that additional costs are not acceptable must the B/L avoid indicating them.
• E27(b) – Such costs may be shown either explicitly or through trade terms like FI, FO, FIO, or FIOS.

Since your LC does not prohibit the indication of additional costs, the notation “DESTINATION HAULAGE CHARGE COLLECT” is perfectly acceptable.

Conclusion:

No discrepancy arises. The B/L is compliant as presented.

Best regards,

Mr. Old Man

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Follow up question from Julia:

Mr. Old Man,

Thanks so much for your super detailed answer.

However, I am still confused. Our bank has considered this as a discrepancy based on ISBP 745 Paragraph D30. “A statement appearing on a multimodal transport document indicating the payment of freight need not be identical to that stated in the credit, but is not to conflict with data in that document, any other stipulated document or the credit.”. In this situation, “DESTINATION HAULAGE CHARGE COLLECT” makes a conflict with Trade Term CIP because Destination Haulage Charge should be paid by us. Does the bank have to examine docs following Incoterms? And you know any similar case of ICC related to this issue.

Looking forward to hearing from you

Best regards,

Julia

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Further answer from Mr. Old Man:

Hi

You didn’t mention whether you are the beneficiary or the applicant. However, in either case, it is important to remember that banks do not examine documents according to Incoterms. Banks examine documents only according to the terms of the LC, UCP 600 and ISBP.

Therefore, even if the commercial agreement under CIP requires the seller to bear destination haulage costs, a notation such as “Destination Haulage Charge Collect” on the bill of lading does not create any conflict for LC examination purposes.

Banks do not look behind the documents to assess whether the charges align with Incoterms obligations.

What matters is simply:

• the LC does not prohibit additional charges, and
• UCP 600 sub-article 26(c) allows transport documents to show additional charges,
• ISBP E27 confirms this is acceptable unless the LC expressly forbids it.

Hence, the indication “Destination Haulage Charge Collect” remains acceptable and not a discrepancy.

Best regards,

Mr. Old Man