FREIGHT PREPAID RAILWAY BILL AND DIVISION OF COSTS UNDER DAF

QUERY FROM PENGUIN
Sent To: Mr. Old Man

What happened to you? Hope you get well soon and Have a nice weekend!
I have 1 question for Monday. 🙂 Field 46a of LC: RWB.
Original Railway bill consigned to …xxx Bank, marked freight prepaid notify the applicant.?

Is this need to marked freight on RWB?
In what case it marked freight prepaid, collect,…?
I want to know clearer about division of freight in transport by railway, (DAF Incoterms 2000)

Thanks very much

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MR. OLD MAN’S REPLY

Hi Penguin,

Thank you for asking Mr. Old Man. I have a date with doctors next Monday. Hoping things are ok.
RWB be marked “freight prepaid” or “freight to collect”

UCP 600 Article 24 dealing with road, rail or inland waterway transport documents does not require transport documents to be marked “ freight prepaid” or “freight to collect”. Yet, ISBP para. 168 says: “If a credit requires a UCP 600 Article 24 transport document show that freight has been paid or is payable at destination, the transport document must be marked accordingly”. ISBP para. 169 also adds: “Applicants and issuing banks should be specific in stating the requirements of documents to show whether freight is to be prepaid or collected.”

In view of the above, the said RWB should be marked “freight prepaid” as required by the LC.

When RWB marked “freight prepaid” and when RWB marked “freight to collect”?

It depends on the trade term agreed in the contract of sale signed between the seller or the buyer. For example, under FCA the buyer must contract at his own expense for carriage of the goods to the named place except when the contract of carriage is made by the seller if requested by the buyer; whereas under DAF, the seller must contract at his own expense for carriage of the goods to the named point, if any, at the place of delivery at the frontier.

Division of costs under DAF

DAF (delivery at frontier” means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export, but not cleared for import at the named point and place at the frontier.

Division of costs under DAF is as follows:

The seller is obligated to pay:

+ freight under the contract of carriage
+ all costs relating to the goods until the time they have been delivered at disposal of the buyer on arriving means of transport unloaded at the named place of delivery at the frontier.
+ where applicable, the costs of customs formalities necessary for export of the goods.

The buyer is obligated to pay:

+ all costs relating to the goods from the time they have been delivered at disposal of the buyer on arriving means of transport unloaded at the named place of delivery at the frontier, including the unloading cost.
+ all additional costs if he fails to take delivery of the goods when they have been delivered on arriving means of transport unloaded at the named place of delivery at the frontier.
+ where applicable, the costs of customs formalities necessary for import of the goods.

Last but not least, RWB is not a document of title, thus, it should not be issued “to order”, even “to order of the issuing bank”.

Best regards,
Mr. Old Man (Nguyen Huu Duc) …