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FREIGHT PREPAID OR NOT

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QUESTION

Dear Nguyen,

Have you ever received B/L which claimed "freight prepaid" while with evidence showing freight not yet paid? (See the attachment)

This B/L was presented under our issued LC (the LC, under CIF basis, requires ocean B/L marking "freight prepaid"; the shipping route stipulated in the LC: port of loading – Laem Chabang, Thailand, port of discharge – Shantou, China).

We have had different internal opinions on this B/L, the main issue is that the B/L indicated "freight prepaid" and simultaneously with notation of "freight payable at Port Kelang", from the B/L we can infer that the freight had not yet been paid when the B/L was issued, otherwise the B/L need not state "payable at port Kelang". But it is hard to locate where is the place for freight collection (we hope it is in the transit port) and also hard to judge when the freight is paid.

Anyway, can you tell whether the freight has been really paid when the cargo has arrived at the port of discharge?

P.S. I have also posted this question in letterofcreditforum and expected someone from shipping industry could kindly give us some explanation. Also I thank Abrar for generous sharing comment on this in the forum, although I think this issue has not yet clarified.

Best regards
Sheilar
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ANSWER

Dear Sheilar,

I have checked the attached B/L and understood that Laem Chabang, Thailand is the port of loading and Shantou, China is the port of discharge.

I also understand that "freight prepaid" would mean the freight has been prepaid by the shipper and that "freight payable" would mean the freight is to be paid at the port of discharge or at the final destination.

In my own opinion, the B/L that indicates "freight prepaid" has satisfied the L/C requirement. The statement "freight payable at Port Kelang" should be treated as additional information. When the carrier states in its B/L that the freight has been prepaid or similar wording, "freight prepaid", they cannot claim freight from the consignee.

Best regards,
Nguyen Huu Duc
———————————–

Thank you, Nguyen.

I have also got some significant response from my customer (an exporter). She said that when they sign export contract their importer customer on FOB basis, who was actually a middleman and may sign a further contract with the ultimate buyer on CIF basis, then when they arranged shipment and finally got a bill of lading, the bill of lading would indicate freight payable at xxx (e.g. Hong Kong, the place of the middleman). … So I think wording of "freight prepaid" was aimed to comply with the LC requirement and "payable at some point of transit" was some kind of arrangement (which was similar to Abrar's opinion.)

Anyway, as long as the B/L did not say "payable at destination by the consignee", I think it is acceptable.

Thank you
Sheilar

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7 Comments

  1. anonymous

    December 9, 2011 at 1:12 pm

    Anonymous writes:Dear Nguyen Huu Duc,Isn't it data conflict mentioning "Freight Prepaid" and ""freight payable at Port Kelang" in the same B/L?Pls comment.Monir

    Reply

  2. mroldmanvcb

    December 10, 2011 at 7:12 am

    Hi Monir,I understand some document checkers will raise the discrepancy “data conflict” based on sub-article 14 (d), but I think they may soon waive the discrepancy when receiving a full and clear interpretation of the intention as in Sheilar’s further interpretation and mine. There are two reasons for the said BL to be accepted: (1) “Freight payable at Port Kelang” should be treated as the additional information that the freight is to be paid at that transit port; and (2) B/L marked “FREIGHT PREPAID” satisfies the credit requirement.As far as I remember, T.O Lee (a famous L/C expert) has ever answered the same.Nice weekend!

    Reply

  3. thuylinh101288

    September 4, 2012 at 5:09 pm

    Dear Mr. Old ManI appreciate your answer for this issue:An American company buys goods from Vietnamese company and sells back to Pakistan customer. so, the container will be shipped directly from VN to Pakistan.On the contract and Invoice between American company and Pakistan, shipping term shows as " CNF". On the BL issued in VN shows:- Shipper: " VNese company on behalf of American company"' – Cosignee:" To order of American company".American company will pay for shipping fee.My question is if BL must show shipping term as " CNF"?.If BL shows Shipping term "FOB", is it considered discrepancy?All payments as T/T payment.Thanks in advance

    Reply

  4. mroldmanvcb

    September 4, 2012 at 10:09 pm

    Hi,BL can indicate any party as shipper in the BL. No need to show a Vietnamese company on behalf of American company as shipper.Under FOB term, the seller (Vietnamese company) has no obligation to the buyer (American company) to make contract of carriage. However, if requested by the buyer the seller may contract for carriage at the buyer's expenses. So, in your case where the freight is to be collected from the American company, the proper term of delivery should be used is FOB.It is understood that the payment method between the American company and Pakistant customer is by T/T and not by LC. So, the Pakistant customer cannot refuse to pay based on the discrepancy regarding the delivery term (FOB vs CNF) between the invoice/contract and the BL.Best regards,Mr. Old Man

    Reply

  5. thuylinh101288

    September 5, 2012 at 11:09 am

    Hi Mr. Old Man,Thanks for your reply!American company is asking Vietnamese company to show Shipping term on BL and CO as "CNF". The shipping company aware of this and they said it's acceptable.Will there be any problem with the Customs or other government procedure later on?

    Reply

  6. mroldmanvcb

    September 5, 2012 at 10:09 pm

    No.

    Reply

  7. ellen12

    May 15, 2013 at 1:05 pm

    Thanks a lot for sharing these informative information with us. I am so glad that I found this post. It's been really great to be here. You have done an awesome work. Keep updating!http://www.americanfreightways.net/

    Reply

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