CHARGES ADDITIONAL TO FREIGHT

QUERY

From: NGUYEN HANH HIEN
To: Nguyen Huu Duc (DNG)
Subject: Discrepancy found in B/L

Dear Old Man,

Please give us your opinion about discrepancy found in our documents with details as follows :

Quote

– L/C issued by BANK N. on 03 Aug. 09 for USD102,145
– Delivery condition: CFR Rotterdam
– Field 46B (Documents required) regarding B/L :
Full set of clean on board B/L, to order, blank endorsed, marked 'Freight Prepaid' and notify applicant stating full address.

+Documents presented are in order in our counter.

+However, the issuing bank found the following discrepancy : '' On B/L face, appearing the freight surcharge clause : Destination charges collect per line tariff and other charges to be collected from the party who lawfully demands delivery of the cargo without prejudice to the carriers rights against merchant '' which is not allowed for delivery on CFR clause.

In addition to, BANK N. has confirmed that in R191 of ICC, '' marine B/L presented under L/C for CFR or CIF deliveries and bearing a clause of this nature should be considered as not appearing on their face to be in accordance with the terms and conditions of the credit. This does not apply to deliveries on a FOB basis, since in this case the freight charges have to be born by the buyer (consignee) away ''.

And, the issuing bank also determines that in Art.113 of ISBP : '' . . . such indication may be by express refence to additional costs or by the use of shipment terms . . . . '' I.E. the additional costs must be express I/O indeterminated.

Unquote

+ We have disagreed with their above-mentioned discrepancy and sent the issuing bank an authenticated swift to explain such as : As per L/C terms, B/L shows ' Freight Prepaid ' and the clause ' Destination . . . against the merchant' is not prohibited to show on B/L as well as CFR clause is not stipulated not to be allowed to mention its on B/L. So, this is strictly complied with L/C terms and conditions.

+ In the middle of this month (Sep.'s 09) , the other set of documents with B/L presented like as above to Malayan Banking Berhad in Singapore. This paying bank has accepted B/L and settled the full claim amount I.E. all terms and conditions of the credit have been complied with.

+ Have you agreed on discrepancy that BANK N. has found on B/L ? Please give us the way to display with them. After receiving our swift, BANK N. has not still effected the payment. And, may you show us the main content of R191 of ICC ?

Thanks and regards.

Intl payment Dep. – VCB CT

COMMENT
________________________________________
From: Nguyen Huu Duc (DNG)
To: NGUYEN HANH HIEN
Subject: RE: Discrepancy found in B/L

Hi,

1) I think the bill of lading bearing the clause as described in the query is acceptable, i.e. not discrepant. My view is based on ISBP para. 113 and UCP 600 Article 26 (c), which says: “A transport document may bear a reference, by stamp or otherwise, to charges additional to the freight”.
As usual, the comment is made without any liability on my part.

2) ICC Opinion R191 deals with queries under UCP400, hence, no soft copy is available. As far as I’m concerned, I have lost the paper copy of ICC Opinions under UCP400.

So, very sorry for not being able to furnish you with a copy of ICC Opinion R191.

Best regards,
Mr. Old Man

P/s: I have forwarded your query to international experts for their further comments (which will be reverted to you soon).
________________________________________
From: NGUYEN HANH HIEN

To: Nguyen Huu Duc (DNG)
Subject: Re: Discrepancy found in B/L by BANK N.

Hi Old Man,

Thank you so much for your early reply .

Up-to-date, BANK N still keeps their decision and has not effected the payment.

Thanks for your relay of our said query to international experts.

Best regards.

Intl Payment Dept. – VCB CT

________________________________________
From: Nguyen Huu Duc (DNG)
To: NGUYEN HANH HIEN
Subject: RE: Discrepancy found in B/L by BANK N.

Hi Hanh Hien,

As promised, I forward you international experts's comments with regards to your query.
Hope it's helpful.

Best regards,
Mr. Old Man

P/s: Also, please let me know if I can forward your case to VCB TF members.

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COMMENTS FROM INTERNATIONAL EXPERTS (DC-Pro Discussion Forum)
N.H. Duc – Viet Nam Posted 23 Sep 09

Dear all,

Your comments on the following case are highly appreciated:

L/C requirements:
– Full set of clean on board B/L, to order, blank endorsed, marked “Freight Prepaid' and notify applicant stating full address.
– Term of Delivery: CFR Rotterdam

B/L presented meets the requirements but it contains a clause on its face as follows: “Destination charges collect per line tariff and other charges to be collected from the party who lawfully demands delivery of the cargo without prejudice to the carriers rights against merchant".

The issuing bank refuses the documents stating that “on the B/L face appearing the freight surcharge clause “Destination charges collect per line tariff and other charges to be collected from the party who lawfully demands delivery of the cargo without prejudice to the carriers rights against merchant ' which is not allowed for delivery on CFR clause”.

To support their view the issuing bank also quotes ICC Opinion R191 (which I can’t trace on DCPro): '' Marine B/L presented under L/C for CFR or CIF deliveries and bearing a clause of this nature should be considered as not appearing on their face to be in accordance with the terms and conditions of the credit. This does not apply to deliveries on a FOB basis, since in this case the freight charges have to be born by the buyer (consignee) away ''

Is the discrepancy raised by the issuing bank valid?

I think the bill of lading bearing such a clause is acceptable, i.e. not discrepant. My view is based on ISBP para. 113 and UCP 600 Article 26 (c), which says: “A transport document may bear a reference, by stamp or otherwise, to charges additional to the freight”.

Looking forward to your comments.

Regards,
N.H. Duc
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Daniel D – Switzerland Posted 24 Sep 09

Actually, R191 appears in the "Opinions of the ICC Banking Commission 1989-1991" and the conclusions of M. Muller were accepted. This is strange in light of art. 31d. (UCP 400). A few years earlier the Banking Commission had refused to deal with this matter (R78). I think this opinion is now outdated. It is a pity that the Banking Commission does not publish a paper or something similar specifying the opinions which are no longer applicable

Daniel

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JSMITH – United Kingdom Posted 24 Sep 09

I have managed to track down a copy of the opinion which I think dates from June 1990. There is no denying that the opinion does seem to suggest that the Commission regarded the ‘price basis’ / ‘shipping ‘term’ / ‘Incoterm’ (call it what you will) as a possible relevant factor in determining the compliance of documents, something that I can of course only deprecate and regard as being wholly wrong. Overall, it seems to me that the decision shows very sloppy thinking indeed.

Turning to NHD’s query:

1. I certainly would not describe the clause quoted as being a 'freight surcharge clause&#0
39; (as NHD does) as it does not seem to have anything to do with 'freight' but 'destination' and other unspecified charges.
2. it seems to me abundantly clear that the charges mentioned in the clause referred to by the issuing bank are ‘charges additional to FREIGHT’ [my capitals] and are therefore covered by UCP600 sub-Art. 26(c) and thus are expressly permitted by UCP600 and no opinion can override this. Furthermore, should the price basis be relevant -which I deny- on what basis can the issuing bank say that a CFR contract does not allow such 'destination' and other unspecified charges to be borne by the buyer? It is not as if the price basis quoted Incoterms 2000 so what is the source for its opinion? Furthermore, if one does look at Incoterms 2000 there is nothing that I can see that would be automatically incompatible with the -to me quite vague- BL clause quoted: see ‘Division of costs’ A6 & B6 in publication 560.

Overall, I have no doubt that the issuing bank is 100% incorrect.

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N.H. Duc – Viet Nam Posted 24 Sep 09

Daniel and Jeremy,

Your inputs are really helpful. Truly appreciated.

Best regards,
N.H. Duc …