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Master air waybill vs. house air waybill
ICC “Documentary Credits Insight”
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Master air waybill vs. house air waybill
ICC “Documentary Credits Insight”
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In response to a query in which a credit expressly requires “master airway bill (MAWB)” (a common typo in the market place for “air waybill”) consigned to ... ", ICC Opinion TA 621 (see “Queries and responses” in this issue) states that a house air waybill (HAWB) is acceptable based on ICC Opinion R 221.
The “Conclusion” part in Issue 3 of ICC Opinion R 221 states: “Indication of an HAWB No. or an MAWB No. is not to be considered as inconsistent with the requirement of having a carrier-type document.” However, whether this Opinion is consistent with the provisions of UCP 500 or UCP 600 is not the issue, because in ICC Opinion R 221, the credit does not expressly require an MAWB, as in the case in TA 621.
The “Analysis” part of TA 621 states: “The underlying letter of credit called for a ‘Master Air Waybill’. The intent behind such a condition is unknown, as are the expectations of the issuing bank in relation to its issuance or signing. There appears to have been no statement in the credit that would not permit the presentation of an air transport document that was signed by a freight forwarder subject to the content of article 27. Article 27 dose not stipulate who is to issue an air transport document, merely the requirements for its content.”
My comments are the following:
The CDCS examination workbook written by Wickremeratne/Rowe, The Complete Guide to Documentary Credits, explains the meaning of an “actual carrier”, a “contractual carrier” and a “forwarder's air waybill” under the “air waybill” section on page 6/41. On page 6/13, it also states: “The forwarder does not undertake responsibility for the goods during transport.” Hence, a CDCS banker should be able to see that an MAWB (issued by an actual carrier) is different from an HAWB (issued by a forwarder who gains profit by consolidation, putting together cargoes from different shippers under one MAWB to earn a more favourable bulk quantity freight rate and charges the shippers a higher freight rate, whilst it does not provide the aircraft for carriage). The CDCS banker should be able to realize that the intent of the applicant to expressly require an MAWB in the credit is to avoid the risk that the forwarder will not take responsibility for the goods during transit.
Thus, the requirement “master airway bill” in the credit does not mean that (i) it is an unclear instruction, (ii) its intent or expectation is unknown and (iii) signature by a forwarder is allowed, as the experts stated in their Opinions.
The HAWB in this case was signed by a forwarder in Country I as agent of the actual carrier, Carrier A. The document bore no logo of Carrier A, and the space at the top right-hand corner (where the actual carrier's logo is usually pre-printed) was left blank and stamped with the forwarder's name. On top of this stamp, it indicated the air waybill number as “HAWB 1234/5678”. It was obviously an HAWB issued by a forwarder in Country I against an MAWB issued by Carrier A.
Technically speaking, a true HAWB should be signed by a forwarder as the (contractual) carrier and not as an agent of the (actual) carrier. Only an MAWB can be signed by a forwarder as an agent of the (actual) carrier or by the (actual) carrier as a carrier. Strictly speaking, the MAWB signed by the forwarder in Country I did not meet the function of either an MAWB or an HAWB. It was, in fact, a hybrid AWB not covered by the UCP 500 or UCP 600.
It is common sense that an expressly stated requirement in a credit shall override the equivalent provisions in the UCP. This doctrine has been reflected in many ICC Opinions before and also in the last sentence of article 1 of UCP 500 and UCP 600. Hence, this MAWB requirement cannot be ignored during the examination of documents.
An MAWB is subject to IATA Rules, the international air conventions (Warsaw Convention, Hague amendment, Guadalajara Convention, etc.) and related protocols (Montreal Protocol, and Guatemala Protocol). These are the “Basel II” equivalents in the air carriage industry to regulate the performance of air carriers, and clear stipulations are provided to protect the interests of the consignor/shipper and the consignee. The applicant can sleep well with an MAWB.
An HAWB need not be subject to IATA Rules (unless the forwarder is also an IATA member), and certainly not subject to those “Basel II” conventions and protocols named above. So the shipper and the consignee have no protection in case the goods are damaged or lost in transit. They are not a party in the MAWB and hence cannot sue the actual air carrier. They can only sue the forwarder in the HAWB.
A forwarder can be an SME that may not have readily disposable cash to meet big claims, or it may be reluctant to sue the actual carrier on the consignee's behalf for obvious reasons. Cargoes may be withheld by the actual carrier on arrival due to freight being unpaid by the forwarder that has exceeded its credit limit extended by the actual carrier. From a risk management point of view, an MAWB is like a credit issued by Citibank, and an HAWB is like a credit issued by a non-bank.
To be practical and reasonable, if the credit does not expressly require an MAWB, an HAWB from a FIATA member (such as Schenkers, Penalpina and Crown Pacific) should be acceptable, as FIATA has strict supervision over the operations of its members, and a FIATA member has good financial strength, at least adequate to meet the claims.
Before the TA 621 decision is reversed (if it ever is), to avoid unpleasant surprises it is prudent to add in the credit wording such as “One original and X copies of Master air waybill issued and signed by an actual carrier. Signature or issuance by an agent or forwarder is not acceptable. This provision overrides UCP 600 sub-article 23(a)(i).”
With regard to sea transport, the Through Transport Club (TTC) does not allow its carrier members to act as forwarders. Therefore, some big ocean liners may open subsidiaries (perhaps located next door for the convenience of their customers) to act as forwarders in order to regain control of their customers, who could otherwise go to the forwarders, resulting in cargoes being carried by their competitors' ships. This is one means of earning more profit in a very competitive freight market. Because these ocean liners are household names, it should not be difficult for bankers to identity them. These HBLs should be acceptable in practice, but they are still not as good as an MBL.
T. O. Lee (experts@tolee.com) (FAE, MCIArb, MITD) is a member of the UCP 600 Consulting Group, a Fellow of the Academy of Experts (L/C) UK, a columnist in Lloyd's “Maritime Asia/Intermodal Asia” magazine and a member of the UN International Multimodal Transport Association in Geneva. Further information is available at www.tolee.com.
This document is the 3nd batch of T.O. Lee's comments on ICC Document 470/TA.621.
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