Necessity of freight forwarders bills of lading
Friday, 21 March 2008
Zahid H. Firoze
A bill of lading (B/L) is a document bearing the evidence of a shipment from one country to another. An export B/L means a B/L relating to export of a country upholding the 'Title to Cargo'. 'Title to Cargo ' evidences the actual owner of a cargo, which is the only document to be submitted at banks. A negotiable bill of lading is the document issued by a carrier to an exporter to submit along with other export documents to an authorised dealer (AD) of the Bangladesh Bank. There are other bills of lading known as straight bills of lading issued by other carriers from origin (export end) and transhipment ports as evidence of carriage/receipt of the shipment. These B/Ls are surrendered or released to the respective carriers from whom the shipment has been received. "Carrier" means the company stated on the front of a bill of lading as being the carrier and on whose behalf the bill of lading has been signed.
The controversy with issuance of bills of lading by freight forwarders and ocean/marine carriers and endorsement of both bills of lading by a bank started by the middle of year 2002. Then an exporter on the cause of issuing straight bills of lading accused some senior officials of a reputed steamer agency at a court at Chittagong.
Marine/ocean bill of lading calls for a document covering a 'port to port' shipment. Multimodal transport document calls for a document covering at least two different modes of transport.
The accusation was made on basis of circular no.: 07/96 dated 02-06-1996 of Chittagong office of the Bangladesh Bank that all bills of lading have to be endorsed by the respective AD, irrespective of whether it is main carriers' bill of lading (B/L), freight forwarders B/L or feeder operators' B/L.
The controversy aroused by certain quarters of the country (Bangladesh) to endorse multiple export bills of lading (B/L) by the banks needs to be clarified with a clear proposal for the sake of promoting and upholding export interest of the country.
The scheduled banks as the authorised dealers (ADs) of the Bangladesh Bank are controlling the payment system where always an export number (on basis of clause 10, Chapter 22 of the Guidelines for Foreign Exchange Transactions (GFET) Vol I) is issued to monitor the return of proceeds of exporters payment. Without the endorsement by the bank of bill of lading, no delivery order (D/O) can be issued against any consignment at destination.
It can be strongly opined that bank endorsement of sub-contractors bills of lading will hamper the export of the country as the overseas importers' port cost and delivery may be effected for a variety of reasons.
Due to several consignees' cargo in the same FCL the delay or refusal on the part of only a single consignee to receive a cargo will stuck all others' cargo in that FCL container.
Carrying FCL container to private warehouse to save higher demurrage of a consignee at port will entail demurrage in the case of any delay or rejection of cargo.
It will not be possible to unstuff the container to avoid container and port demurrage in case of long delay or rejection of cargo.
Payment in conformity with L/C terms or sale contract is necessary to effect any third country delivery.
The onforward shipment from port of discharge to final place of delivery within same territory will not be possible without the afore-mentioned endorsement.
The endorsement is necessary to facilitate onforward shipment from port of discharge to final place of delivery of another territory.
The rejection of shipment or for any other related cause will not it possible to re-sell the consignment to another buyer of the same territory or another territory.
The bill of lading issued to an exporter represents the 'title to cargo' only, others are as evidences or contracts of carriage only. The air, sea & land transport owners and/or their agents act as the sub-contractors of freight forwarders who issue bills of lading as evidence or contract of carriage only.
In this context, the guideline of the Bangladesh Bank issued on December 31, 1996, has superseded the Chittagong office circular no.: 07/96 dated 02-06-1996 of the Bangladesh Bank that all bills of lading have to be endorsed by the respective authorised dealers (ADs).
Endorsement of sub-contractors' bill of lading (B/L) by the respective authorised dealers (scheduled banks) is detrimental to the clause 8(1) of Chapter 22 in page 114 of Bangladesh Bank Guidelines for Foreign Exchange Transactions' dated December 31, 1996. The clause is based on section 20(3) of Foreign Exchange Regulation Act of 1947 (Amendment) ordinance, 1976 (ord. No LXXVI of 1976).
The bills of lading holding 'title to cargo' should be drawn to the order of a designated AD (a scheduled bank). Therefore, it can be concluded that the documents not holding the title to cargo should only be treated as evidence of sub-contract and should not be drawn to the order of an AD.
The Bangladesh Bank itself is accepting the feeder vessel operators' bill of lading without mentioning any bank's name from Bangladesh to Singapore, Malaysia & Sri Lanka as transhipment ports and not as destination points.
Airline operators can not mention local (negotiating) bank's name when there is a HAWB due to high demurrage that is incurred at the destination airports, according to clause 8(11) of Chapter 22 in page 115 of Bangladesh Bank 'Guidelines for Foreign Exchange Transactions', dated December 31, 1996.
The president of Bangladesh Garments Manufacturers and Exporters Association(BGMEA) in his letters to the Governor of the Bangladesh Bank (no. BGA/CUS/2003/131) and dated January 02 & 05, 2003 admitted the problem of endorsement by banks of all BLs by mentioning the same to accept as 'exceptions'.
It does not also conform to UCP-500 on Documentary Credit (Article 30 and 13). Para 2 of Act 13 reads as follows: "Documents not stipulated in the credit will not be examined by banks. If they receive such documents, they shall return them to presenter or pass them on without responsibility".
Since the B/L negotiating bank is the consignee in any B/L holding 'title to cargo', the L/C opening bank or the notification party in the B/L is solely responsible for arranging payment unto the order, if it is not a late shipment. Moreover, the party notifying destinations is liable to claim insurance coverage for any misdelivery, pilferage, damage or loss of cargo. In case of non-payment, the negotiating banks can apply through the International Chamber of Commerce (ICC).
The president of the Bangladesh Steamer Agents Association (BSAA), in his letter (ref. no.: 20/02/03 dated January 12, 2003) noted that the B/L upholding the title to cargo only should be accepted as the negotiating instrument by the banks. Even if it is freight forwarders' bill of lading, the similar practice is being followed in case of import cargo to Bangladesh.
Keeping the afore-mentioned views into consideration, the B/L documentation issue, as is related with the central bank, is being stated below for its redress in the interest of facilitating smooth trade activities of Bangladesh.
Proposal to send all additional sea export documents through bank: Non-receipt of proceeds occurs due to not only delivery without releasing any document by banks endorsing the B/Ls but also other reasons like late shipment, quality of cargo, market demand loss etc. The amount not received due to delivery without bank-endorsed B/L is 0.001% of the RMG export value.
For the sake of maintaining smooth operations of the country's trade and commerce, the BL issuance procedures should continue to conform to number the UCP number: 500 and international trading practices. To ensure delivery against bank endorsement, any of the additional sea shipment documents like C.O., Visa or export license, whichever is applicable for the country in matters of payments not received in advance, should be sent through the concerned bank.
Any misinterpretation can be avoided, if it is written in, or added to, in the relevant clause of the Bangladesh Bank guidelines, the sub-contractors' BL as being only evidences or only contracts of any carriage.
The word "carrier" may be inserted therein, instead of the words "steamer companies in the 'Guidelines for Foreign Exchange Transactions'. This will be in compliance with the clause 20(3) of 1947 Foreign Exchange Regulations Act, where the word, "carrier" is mentioned, instead of the words, "steamer companies".
Most deliveries of cargo to the actual consignees by agents' at destination points without releasing any import documents by the concerned bank at destination-end are said to be nominated in favour of freight forwarding agents. This will not be possible to avoid. Therefore, the restriction on issuance of house bill of lading is not adequate.
It should be taken into account that the freight forwarders of a country can help expedite business activities at different inland destinations by various other available modes of transportation with the help of overseas working partners, no matter where the overseas importers are located. It is to be noted freight forwarders are in position to comply with the customer requirements and the above-mentioned facilities, which, in many cases, the main carriers can not. Therefore, proper interpretation (as per the afore-mentioned above proposal relating to the clause 8(1) of Chapter 22 of 'Guidelines for Foreign Exchange Transactions' is very much necessary vis-a-vis the circular of the Bangladesh Bank's Chittagong office circular bearing number 07/96 dated Jne 02, 1996. This will contribute to maintaining discipline in the country's export sector.
However, the foreign exchange circular (being number: 04 dated March 29, 2006) of the Bangladesh Bank to negotiate export bills against FCRs and HAWBs indicates a thorough and gradual working process of the concerned persons of the central bank with a good and positive intention for the sake of promoting the country's business activities. The limitation to issue B/L by freight forwarders because of the insertion of the words, "steamer companies" under Clause 10 of Chapter 22 of the 'Guidelines for Foreign Exchange Transactions' should not obstruct this in any way.
The writer is Managing Director, Awards Transportation Ltd.
A bill of lading (B/L) is a document bearing the evidence of a shipment from one country to another. An export B/L means a B/L relating to export of a country upholding the 'Title to Cargo'. 'Title to Cargo ' evidences the actual owner of a cargo, which is the only document to be submitted at banks. A negotiable bill of lading is the document issued by a carrier to an exporter to submit along with other export documents to an authorised dealer (AD) of the Bangladesh Bank. There are other bills of lading known as straight bills of lading issued by other carriers from origin (export end) and transhipment ports as evidence of carriage/receipt of the shipment. These B/Ls are surrendered or released to the respective carriers from whom the shipment has been received. "Carrier" means the company stated on the front of a bill of lading as being the carrier and on whose behalf the bill of lading has been signed.
The controversy with issuance of bills of lading by freight forwarders and ocean/marine carriers and endorsement of both bills of lading by a bank started by the middle of year 2002. Then an exporter on the cause of issuing straight bills of lading accused some senior officials of a reputed steamer agency at a court at Chittagong.
Marine/ocean bill of lading calls for a document covering a 'port to port' shipment. Multimodal transport document calls for a document covering at least two different modes of transport.
The accusation was made on basis of circular no.: 07/96 dated 02-06-1996 of Chittagong office of the Bangladesh Bank that all bills of lading have to be endorsed by the respective AD, irrespective of whether it is main carriers' bill of lading (B/L), freight forwarders B/L or feeder operators' B/L.
The controversy aroused by certain quarters of the country (Bangladesh) to endorse multiple export bills of lading (B/L) by the banks needs to be clarified with a clear proposal for the sake of promoting and upholding export interest of the country.
The scheduled banks as the authorised dealers (ADs) of the Bangladesh Bank are controlling the payment system where always an export number (on basis of clause 10, Chapter 22 of the Guidelines for Foreign Exchange Transactions (GFET) Vol I) is issued to monitor the return of proceeds of exporters payment. Without the endorsement by the bank of bill of lading, no delivery order (D/O) can be issued against any consignment at destination.
It can be strongly opined that bank endorsement of sub-contractors bills of lading will hamper the export of the country as the overseas importers' port cost and delivery may be effected for a variety of reasons.
Due to several consignees' cargo in the same FCL the delay or refusal on the part of only a single consignee to receive a cargo will stuck all others' cargo in that FCL container.
Carrying FCL container to private warehouse to save higher demurrage of a consignee at port will entail demurrage in the case of any delay or rejection of cargo.
It will not be possible to unstuff the container to avoid container and port demurrage in case of long delay or rejection of cargo.
Payment in conformity with L/C terms or sale contract is necessary to effect any third country delivery.
The onforward shipment from port of discharge to final place of delivery within same territory will not be possible without the afore-mentioned endorsement.
The endorsement is necessary to facilitate onforward shipment from port of discharge to final place of delivery of another territory.
The rejection of shipment or for any other related cause will not it possible to re-sell the consignment to another buyer of the same territory or another territory.
The bill of lading issued to an exporter represents the 'title to cargo' only, others are as evidences or contracts of carriage only. The air, sea & land transport owners and/or their agents act as the sub-contractors of freight forwarders who issue bills of lading as evidence or contract of carriage only.
In this context, the guideline of the Bangladesh Bank issued on December 31, 1996, has superseded the Chittagong office circular no.: 07/96 dated 02-06-1996 of the Bangladesh Bank that all bills of lading have to be endorsed by the respective authorised dealers (ADs).
Endorsement of sub-contractors' bill of lading (B/L) by the respective authorised dealers (scheduled banks) is detrimental to the clause 8(1) of Chapter 22 in page 114 of Bangladesh Bank Guidelines for Foreign Exchange Transactions' dated December 31, 1996. The clause is based on section 20(3) of Foreign Exchange Regulation Act of 1947 (Amendment) ordinance, 1976 (ord. No LXXVI of 1976).
The bills of lading holding 'title to cargo' should be drawn to the order of a designated AD (a scheduled bank). Therefore, it can be concluded that the documents not holding the title to cargo should only be treated as evidence of sub-contract and should not be drawn to the order of an AD.
The Bangladesh Bank itself is accepting the feeder vessel operators' bill of lading without mentioning any bank's name from Bangladesh to Singapore, Malaysia & Sri Lanka as transhipment ports and not as destination points.
Airline operators can not mention local (negotiating) bank's name when there is a HAWB due to high demurrage that is incurred at the destination airports, according to clause 8(11) of Chapter 22 in page 115 of Bangladesh Bank 'Guidelines for Foreign Exchange Transactions', dated December 31, 1996.
The president of Bangladesh Garments Manufacturers and Exporters Association(BGMEA) in his letters to the Governor of the Bangladesh Bank (no. BGA/CUS/2003/131) and dated January 02 & 05, 2003 admitted the problem of endorsement by banks of all BLs by mentioning the same to accept as 'exceptions'.
It does not also conform to UCP-500 on Documentary Credit (Article 30 and 13). Para 2 of Act 13 reads as follows: "Documents not stipulated in the credit will not be examined by banks. If they receive such documents, they shall return them to presenter or pass them on without responsibility".
Since the B/L negotiating bank is the consignee in any B/L holding 'title to cargo', the L/C opening bank or the notification party in the B/L is solely responsible for arranging payment unto the order, if it is not a late shipment. Moreover, the party notifying destinations is liable to claim insurance coverage for any misdelivery, pilferage, damage or loss of cargo. In case of non-payment, the negotiating banks can apply through the International Chamber of Commerce (ICC).
The president of the Bangladesh Steamer Agents Association (BSAA), in his letter (ref. no.: 20/02/03 dated January 12, 2003) noted that the B/L upholding the title to cargo only should be accepted as the negotiating instrument by the banks. Even if it is freight forwarders' bill of lading, the similar practice is being followed in case of import cargo to Bangladesh.
Keeping the afore-mentioned views into consideration, the B/L documentation issue, as is related with the central bank, is being stated below for its redress in the interest of facilitating smooth trade activities of Bangladesh.
Proposal to send all additional sea export documents through bank: Non-receipt of proceeds occurs due to not only delivery without releasing any document by banks endorsing the B/Ls but also other reasons like late shipment, quality of cargo, market demand loss etc. The amount not received due to delivery without bank-endorsed B/L is 0.001% of the RMG export value.
For the sake of maintaining smooth operations of the country's trade and commerce, the BL issuance procedures should continue to conform to number the UCP number: 500 and international trading practices. To ensure delivery against bank endorsement, any of the additional sea shipment documents like C.O., Visa or export license, whichever is applicable for the country in matters of payments not received in advance, should be sent through the concerned bank.
Any misinterpretation can be avoided, if it is written in, or added to, in the relevant clause of the Bangladesh Bank guidelines, the sub-contractors' BL as being only evidences or only contracts of any carriage.
The word "carrier" may be inserted therein, instead of the words "steamer companies in the 'Guidelines for Foreign Exchange Transactions'. This will be in compliance with the clause 20(3) of 1947 Foreign Exchange Regulations Act, where the word, "carrier" is mentioned, instead of the words, "steamer companies".
Most deliveries of cargo to the actual consignees by agents' at destination points without releasing any import documents by the concerned bank at destination-end are said to be nominated in favour of freight forwarding agents. This will not be possible to avoid. Therefore, the restriction on issuance of house bill of lading is not adequate.
It should be taken into account that the freight forwarders of a country can help expedite business activities at different inland destinations by various other available modes of transportation with the help of overseas working partners, no matter where the overseas importers are located. It is to be noted freight forwarders are in position to comply with the customer requirements and the above-mentioned facilities, which, in many cases, the main carriers can not. Therefore, proper interpretation (as per the afore-mentioned above proposal relating to the clause 8(1) of Chapter 22 of 'Guidelines for Foreign Exchange Transactions' is very much necessary vis-a-vis the circular of the Bangladesh Bank's Chittagong office circular bearing number 07/96 dated Jne 02, 1996. This will contribute to maintaining discipline in the country's export sector.
However, the foreign exchange circular (being number: 04 dated March 29, 2006) of the Bangladesh Bank to negotiate export bills against FCRs and HAWBs indicates a thorough and gradual working process of the concerned persons of the central bank with a good and positive intention for the sake of promoting the country's business activities. The limitation to issue B/L by freight forwarders because of the insertion of the words, "steamer companies" under Clause 10 of Chapter 22 of the 'Guidelines for Foreign Exchange Transactions' should not obstruct this in any way.
The writer is Managing Director, Awards Transportation Ltd.