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UCP500 Brings High Rejection Rate of Bills of LadingSince the introduction of new letter of credit (L/C) or documentary credit rules, the UCP 500, on January 1 1994, over 90% of bill of lading (B/L) in USA and 60% in England have been rejected by the banks, according to reliable sources.
This is not a surprise at all if we try to look at the popular B/L formats being used in the market. So far we have seldom seen a properly designed one, meeting both the requirements of the bankers under the UCP 500 as well as looking after the interests of the shippers and the consignees fully. Part of the troubles also comes from the banks themselves. Let us take a close look at what has actually gone wrong.
Problematic Marine/Ocean Bills of Lading
Most L/C application forms traditionally specify the requirement of "marine/ocean" B/L as a pre- printed item, thereby opening a can of worms. "Marine/ocean" Bs/L are used historically to differentiate carriage of goods by sea/ocean from those inland waterway transport. Certain bankers even take "marine/ocean B/L" to mean those Bs/L issued by "shipping lines", the "liners", providing regular sailing schedule for specific routes, mostly being shipping conference members, rather than the "tramps".
Hence certain bankers do not feel comfortable unless they see the name "XYZ Line" appearing on the "heading" of the B/L under examination. Some of them may be satisfied with the magic word "XYZ Line" (which may be a mere trade name or logo) as the "name of the carrier" required under UCP 500, instead of the name of the legal entity used in the carrier's certificate of incorporation (which carries full legal implications).
With the rapid evolution in international transport, carriers nowadays do not necessarily carry the cargo all by sea transport. For example, for the voyage from Hong Kong to Chicago, the ship can sail across the Pacific Ocean, passes through the Panama Canal, enters the Atlantic Ocean and sails north-bound to the Gulf of St. Lawrence, and then goes through the Great Lakes to Chicago. There are many undesirable factors in this route: longer mileage, possible "traffic jams" and time spent in queuing in the Panama Canal, the high canal passage tolls and tariffs, and the risk of the inland waterway transport, being not navigable in Winter season. This means increase in operating cost and longer time to complete the contemplated voyage. As a result, this route renders the shipping line uncompetitive in the fight-for-survival freight market.
Accommodation of Land Bridge/O.C.P. Operations
Hence the shipping companies have to do ...
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