FREIGHT PREPAID VS FREIGHT PAYABLE AT BASEL

QUESTION

Dear Mr. Old Man,

The LC requires a full set of original Bills of Lading made out to the order of the issuing bank, marked “FREIGHT PREPAID.”

The presented Bill of Lading is marked “FREIGHT PREPAID” and also states “FREIGHT PAYABLE AT BASEL.”

May this be considered a discrepancy on the grounds that the Bill of Lading contains conflicting information regarding freight payment, i.e. it shows both “FREIGHT PREPAID” and “FREIGHT PAYABLE AT BASEL”?

I would appreciate your view on this matter.

Thank you and best regards,
Have a nice weekend.

NGLC

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ANSWER

Hi,

This is not a discrepancy.

The Bill of Lading marked “Freight Prepaid” complies with the LC requirement. The wording “Freight Payable at Basel” should be regarded as additional information indicating the place where the freight is payable and does not contradict the prepaid status.

For reference, please see my response to a similar question published in 2011.

QUOTE

December 1, 2011

FREIGHT PREPAID OR NOT

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
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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

UNQUOTE

Kind regards,
Mr. Old Man