Recently, I published a “Guide to Issuing a Bill of Lading” that explores the essential roles of a bill of lading, the practical implications for incorrect issuance including the inclusion of commercial information like Incoterms®, and the vital points to consider before issuing an original bill of lading..
If you haven’t downloaded it, please download it for free here.. A reader who downloaded it has below question :
Quote
The “Guide to issuing a Bill of Lading” is very helpful, particularly the point 6) non-inclusion of commercial terms in the Bill of Lading. Nevertheless, there has been a grey area, sparking a lot of debate. Following is a scenario to illustrate the issue.
Scenario 1
- A buyer (consignee) purchases products from a supplier (shipper) under FCA terms
- The supplier books shipment space with the forwarder nominated by the consignee.
- The supplier picks up the empty container to load the cargo and returns the laden container to the depot or terminal as per the booked carrier’s instructions.
- While the laden container awaits loading onto the vessel, the consignee instructs the forwarder to stop the shipment, believing they have the right to do so under FCA terms.
Question: Is it correct for the nominated forwarder to follow the consignee’s instructions?
Reader’s Opinion: In my view, the forwarder should not get involved in the commercial terms or incoterms between the buyer and the supplier. They should follow the common practice of arranging the shipment based on the booking made by the supplier.
If the forwarder stops operations, resulting in the shipment not meeting the last shipment date of the L/C, the supplier may face issues in withdrawing payment from the L/C and could potentially sue the forwarder for not adhering to the booking.
Scenario 2
- If the booking is made by the consignee with their nominated forwarder, who then contacts the supplier to coordinate the shipment:
- The supplier picks up the empty container, loads the cargo, and returns the laden container to the designated depot or terminal.
- Under FCA terms and with the booking made by the consignee, should the forwarder follow the consignee’s instruction to stop the shipment?
Reader’s Opinion: In this case, with the booking under the consignee’s control, the forwarder might have more justification in following the consignee’s instructions.
Unquote
I thought it would be a good idea to pose this question to my readers.. What do you think is the right answer..??
Please feel free to comment below..
The incoterms clearly define the legal responsibilities of the parties involved, so yes the incoterms will always have a place here. However, the incoterms specified are incomplete. To use FCA properly you need to define a named place where the responsibility for the goods passes from the seller to the buyer. If no named place is specified, then it can be assumed that this is at the sellers premises, but this is somewhat ambiguous, so you should always state a named place. All responsibility for the goods lie with the buyer once the goods are loaded on the buyers chosen form of transport (except for export customs clearance and documentation, which is the sellers responsibility as the exporter/shipper) Therefore, the freight forwarder is working for the buyer, which means that you COULD ask them to hold the shipment but quite seriously, why would you? The transaction is complete for the seller once the goods are loaded (at named place) at which point they can bill you, so if you stop the shipment you will have goods belonging to you stranded without any means to re-export without further help within the origin country. Of course if you have changed your mind on the purchase and can arrange return of the goods to the supplier (on their terms), then it should be possible to hold the shipment and return the goods. All logistical charges for this would be the responsibility of the buyer.
The download for the document: “Guide to Issuing a Bill of Lading” does not work. Please check.
Thanks
Han Rutten
Hi Han, pls drop me a screenshot on info@shippingandfreightresource.com.. It seems to be working so far.. Thanks..
The freight forwarder as an agent of his principal acts exclusively for the benefit and advantage of the principal. The freight forwarder executes the instructions of his principal and is responsible only to the principal.
Incoterms are not relevant here.
It means that the reader’s opinion about scenario 1 and 2 is correct.
It is true that Incoterms do not define the responsibilities and obligations of third parties other than the buyer and the seller. Can we understand that the freight forwarder, whether nominated or appointed by the buyer or the seller, should not be involved in the rules of Incoterms, but only follow the common practices of booking made either by the buyer or the seller? In this case, if the shipment is stopped as described in scenario 1, the seller would not have grounds to sue the freight forwarder for violating the booking regulations and stopping the shipment without the seller’s prior consent.
Incoterms rules do not define the responsibilities and obligations of third parties other than the buyers and sellers. Hence under the Incoterms rules FCA or any other Incoterms the buyer or the seller cannot give instructions to the carrier but the buyer and seller need to abide by the freight contract with the carrier.
Scenario 1
If a freight forwarder on behalf of the buyer has contracted with the carrier and the loaded container has reached the named point, it will be construed that the seller has met his obligations under FCA the buyer has no option but to honour his obligation. However, if the forwarder was not acting as an agent for the carrier, the buyer’s instructions might be followed by the forwarder as per their agreement but not under FCA.
The forwarder should act in agreement with the party/consignee that nominated him and share update with the supplier.
Under FCA it is the duty of the buyer to nominate the carrier. The seller must then ensure that the goods are delivered to nominate the carrier. It is not the duty of the seller to collect any container from any depot for the loading of the goods therein. Under A2 the seller must deliver the goods to the carrier or other person nominated by the buyer at the named point, if any, at the named place, or procure the goods so delivered. Delivery is completed under A2 goes on to state under point 3a) if the named place is the seller’s premises that the seller must load on to the transport arranged by the buyer.
Thus it is the buyer who will appoint the forwarding agent and also arrange the carrier. The seller is not involved in the appointment of the forwarding agent nor the carrier. All that the seller must do is to notify the buyer that the goods are available for collection by the forwarding agent. This is under obligation A10. Any instructions to the forwarding agent is to be from the buyer, but the seller can assist the buyer at the buyer’s cost with obtaining transport documents.
Good case. I am not a legal expert but I would say that in both scenarios, the supplier has fulfilled his part of the deal under FCA terms. In both cases, the cargo was delivered to the carrier and that is what the term FCA requires the supplier to do. The question now is if the L/C was made up accordingly. The point here is that the supplier should be eligible for payment upon reaching that milestone (delivered to carrier) and not against an issued Bill of Lading.
Jochen Gutschmid – You are 100% right.