The general rule is that whenever there is a commercial transaction for export of containerised cargo covered by a Letter of Credit (LC), the clauses/requirements covered in the LC have to be strictly followed.. If it is not followed, the banks can reject the documentation submitted..
There have been cases where the clause in the red box (below) has been the bone of contention between a shipper,the bank and shipping line..
The shipper insists on the LC being endorsed Clean On Board as per the requirement of the LC.. The shipping line insists that they cannot issue a Bill of Lading with a Clean On Board notation and can issue only a Shipped on Board..
Solution..??
Any bank that insists on a Bill of Lading with a Clean on Board notation being produced, should refer to UCP600 Article 27 which reads as below :
UCP 600 – Article 27
Clean Transport Document
A bank will only accept a clean transport document. A clean transport document is one bearing no clause or notation expressly declaring a defective condition of the goods or their packaging.
The word “clean” need not appear on a transport document, even if a credit has a requirement for that transport document to be ”clean on board”.
Problem solved.. Since the UCP600 clearly states that the word “Clean” need not appear on a transport document, the banks should not insist on the issuance of a Bill of Lading with a CLEAN ON BOARD notation and should be able to accept a bill of lading with a SHIPPED ON BOARD notation..
Has anyone faced any issues like above, maybe you can share your experiences..
My question is : If the UCP600 states clearly as above, why does an Issuing Bank (which would also follow the UCP600) ask for or allow the use of the Clean On Board notation requirement when issuing an LC for a containerised shipment..??
Also read my previous articles regarding Implications of issuing a Clean on Board bill of lading and Why won’t a shipping line pre-date or back-date my bill of lading..?? You can also download a great Guide to LC from this blogs’ Downloads page..
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Shipped on board bill of laiden
would prefer shipping line manifesting as “declared as clean by shipper”, instead….
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Yes, Hariesh, it works. shipping company can issue the relevant letter with reference to UCP 600 for bank and as a rule bank accepts it. As bank staff is not competent enough in transport business so they usually draws up discrepant requirements.
Hi Hariesh , for further clarification, the term “clean on board”does not actually exist and has caused much confusion over the years by being incorrectly typed on letters of credit and misinterpreted. It actually refers to 2 conditions:
1 Clean – as defined in your article
2 On Board – which is actually a contraction of the term “Shipped on Board” – which distinguishes the condition from “received for shipment”.
Where it appears on an LC therefore it should be typed as “clean , on board ” ie there must be a comma between the 2 terms. – semantics yes but can make a big difference legally.
The problem is that the banks do not know anything about shipping. I have had experiences in insurance where they have insisted on having war risks when the consignment is not going near the sea. War risks are only covered for whilst the cargo is on the open sea, not on land, so most of their requirements which are not correct are made through ignorance.
It is difficult to change habits of bankers, this is the same for the terms of Bill of Lading or Multimodal Bill of Lading or PORT TO PORT Bill of Lading. They need some time to change.