Case 2: As a negotiating banker will you accept the following bills of lading submitted by your customer under an irrevocable letter of credit? Give reasons.
(a) Bill of lading with a printed clause that the carriers have a right to transship the goods although the relative letter of credit prohibits transshipment.
(b) Bill of lading is dated 16th August 1991 whereas the letter of credit calls for shipment on or before 15th August 1991. (Your customer reminds you that 15th August is National Holiday in India and the Customs and Port Trust also had a holiday.)
(c) Description on the Bill of lading of goods 100 bags Soda Ash as per “Shippers load and count” whereas the letter of credit calls for 100 bags light Soda Ash.
(d) Bill of lading is dated 12th October 1991 whereas the letter of credit calls for shipment—’middle of October 1991′. – Answers should be based on the provisions of Uniform Customs and Practice for Documentary Credits
Ans: (a) The bill of lading will be accepted. Article 23 (d) provides that even if the credit prohibits transshipment, banks will accept a bill of lading which incorporates clauses stating that the carrier reserves the right to transship.
(b)The bill of lading will not be accepted. Under Article 44 of UCIP, extension of due date of the credit due to holiday is applicable only for negotiation. If the last date for negotiation falls on a bank holiday or the bank remains closed on that date , the documents can be negotiated the following day when such bank is open. This provision is not applicable for last date for shipment.
(c) Under Article 37, the description of goods in the commercial invoice must correspond with the description in the credit. In all other documents, the goods may be described in general terms not inconsistent with the description in the credit. Therefore, the description of goods as ‘Soda Ash’ in the bill of lading in-stead of ‘light soda ash’ should be accepted. Under Article 31 a transport document which bears a clause on the face thereof such as ‘shipper’s load and count’ is acceptable.
(d) Under Article 47 (d) the terms ‘beginning’, ‘middle’, or ‘end’ of a month shall be construed respectively as the 1st to the 10th, the 11th to the 20th, and the 21st to the last day of such month, all dates inclusive. The bill of lading under reference is therefore acceptable.
Case 3: Your export client submits on 25th February 1992 documents for negotiation under an irrevocable LC from a bank in Middle East advised by you. The L/C stipulates one of the documents required as below:
“On Board full set of Bill of Lading in triplicate evidencing shipment not later than 20th February 1992, 100 cartons containing machine tools from Bombay to Dubai, marked ‘Freight Prepaid’.
The full set of bill of lading in duplicate submitted for negotiation is dated 18th February 1992 covering 100 cartons containing machine tools from Bombay to Dubai showing “Freight prepaid” and stamped “Loaded on Deck”.
The consignor as stated iri the Bill of Lading and the beneficiary of the credit are different.
The issues involved quoting the relevant articles of UCPDC 1993 Revision and whether the documents will be negotiated by you. If so, what precautions are to be observed?
Ans: The first requirement of the credit regarding the bill of lading is that it should be ‘on Board’. The bill of lading does not fulfil this condition as it is marked ‘Loaded on Deck’. Article 31(1) states that unless permitted by the letter of credit, a bill of lading which indicates that goods are loaded on deck is not acceptable.
Secondly, the letter of credit requires full set of bill of lading in triplicate whereas full set of bill of lading is presented in duplicate. Article 23 states that bill of lading in full set is acceptable. But the number of copies prepared as original to constitute the full set should conform to the requirement of the letter of credit. This requirement of the credit is not met by the documents presented.
Thirdly, the bill of lading evidences third party shipment as the consignor, as stated in the bill of lading, and the beneficiary of the credit are different. This, however, is not a discrepancy because such bills of lading are acceptable under Article 31 (iii).
The stipulations of the letter of credit with regard to the last date for shipment, description and quantity of goods and payment of freight are fulfilled by the bill of lading presented.
The bill may be negotiated by the bank provided the credit rating of the customer is good, there is no previous case of bills drawn on the particular importer having been dishonored and indemnity is furnished by the exporter. It should also be ensured that the marine insurance policy taken for the goods specifically mentions that the goods are carried on deck.