Master Air Waybill

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First Comment in LC Views:
T. O. Lee's Comments on ICC Document No. 470/TA.621
10 September 2007
This is not the first time that the officers of the ICC Banking Commission determine transport and cargo insurance issues solely based on their assumption as bankers without consultation with the ICC Transport and Insurance Commissions.
The Maersk bill of lading dilemma (the carrier may have the option to release the cargoes without presentation of an original bill of lading) is a good example, resulting subsequent withdrawal of a public statement made by the ICC Banking Commission in the ICC website. If they keep on doing this, the authoritative image of ICC established by Bernard Wheble and Charles del Busto will be tarnished.
They did the same thing many years ago and regarded that the insured value must be accurate to two places after decimal if the credit asks for "insurance amount 110% of invoice value". This is going against the market practice and the intention of the parties. They would not reverse their decision until about three years (by R 468 Query 2 where the DC asks for insurance amount 110% invoice value) after my articles were published in the L/C media such as the Documentary Credits Insight, L/C Monitor, www.tolee.com and the like. I have also heard that some participants to my workshop call them "Mr. Yo Yo". Of course they are not referring to the world famous cello maestro.
In ICC Document No. 470/TA.621 the officers of the ICC Banking Commission opine that:

Wordings like "HAWB (house air waybill) No. XXXXX" in an air waybill is acceptable even if the credit expressly requires a "master air waybill" (MAWB).
The intent of this condition (requiring presentation of a master air waybill in a credit) is unclear.
Under Article 27 of UCP 500, as far as the air waybill is signed by a "carrier", it is acceptable. UCP 500 does not care whether the carrier is an actual carrier or a contracting carrier.
This "MAWB condition" does not prohibit signature by a freight forwarder.
The above statements are based on ICC Opinion No. R 221 (where the credit does not expressly require a MAWB).
From the above statements, it appears that either the officers of the ICC Banking Commission are confused over the difference between a MAWB and a HAWB or they simply wish to build convenience for the bankers in document examination at the expense of the beneficiaries.
A MAWB is issued by an actual carrier who provides the aircraft for air transport. The actual carrier shoulders great responsibility as a "common carrier" under the air transport legislations. It is also governed by the IATA Rules, the international air conventions (e.g. the Warsaw Convention, the Hague Amendment, the Guadalajara Convention and the like) and the related protocols (e.g. Montreal Protocol, Guatemala Protocol and the like).
A HAWB is normally issued by a freight forwarder as a contracting carrier that does not provide the aircraft for air carriage. Hence it may not need to shoulder the heavy responsibility as a "common carrier" as required under the air transport legislations. It may not be an IATA member. In other words, it may not be subject to the IATA Rules, the international air conventions and the related protocols.
In the market place, a freight forwarder receives LCL (less than container load) cargoes from the cargo owners/sellers and charges them a higher LCL airfreight rate. Then it tries to load the LCL cargoes from several sellers into one full container load (FCL) and pays to the actual carrier a lower FCL airfreight rate. This is known as consolidation and is one of the key businesses of a freight forwarder. They do the same with cargoes shipped by bills of lading.
The actual carrier issues one MAWB to cover all the consolidated cargoes, naming the freight forwarder as the shipper. The freight forwarder then issues several HAWBs against this MAWB naming the sellers as shippers in the HAWBs. That means the sellers in the HAWBs are not parties to the MAWB.
The freight forwarder will claim the cargoes from the actual carrier upon arrival against the MAWB. Then the freight forwarder will "stripe" (clear the contents of) the FCL containers upon arrival and then places the cargoes in separate and distinct heaps waiting for the buyers to claim the goods from the freight forwarder against presentation of HAWBs where the buyers or their banks are named as consignees.
This works fine if there is no damages or loss during the air transport.
A small freight forwarder has no branches overseas and has to rely on other freight forwarders acting as its agents in various airports. I often hear small freight forwarders complaining to me during the transport workshops that some of these overseas agents are not reliable. They may release the cargoes to their good customers without payment to the bank even if the shipment is under D/P or letter of credit. If the small freight forwarder has finance difficulties or is double-crossed by an overseas agent, the seller or the buyer may not be able to claim on the freight forwarder successfully. So in case the seller or buyer wishes to claim on the actual carrier, it is not possible as they are not a party to the MAWB.
Hence some prudent buyers will put on their credits an expressly stated condition "MAWB required or HAWB not acceptable" in order to sleep well and eat well.
The express statement "MAWB required" shall override the provisions of UCP 500/600 as stated in article 1 of both UCP 500 and UCP 600. I am very surprised to see that the officers of the ICC Banking Commission will accept a HAWB even if the credit expressly requires a MAWB. This is against commercial sense. Such decisions detached from the market practice would further tarnish the authoritative image of ICC worldwide. I am very sorry to see this to happen. Hopefully such decisions would be reversed after the ICC Banking Commission meetings in October 2007 in Paris. I hope this time we need not wait for another three years.

Second Comment in LC Views:
Inspired by the insightful inputs from all enthusiastic L/C specialists, I have the following comments to add:
This "official opinion" of the ICC Banking Commission was already "debated" vigorously in the ICC Banking Commission meetings in Singapore in 24-25 April this year, with strong objections from specialists like Don Smith, myself and others, yet ICC Banking Commission officers still insist on their illogical "official opinions" without any change although the ICC Banking Commission agreed to give further thoughts on the feedbacks from Don, myself and others. This is the part that horrifies me.
I now understand why Bernard Wheble and Charles del Busto never made mistakes like this even though they are bankers and do not understand the transport practice. The secret is that they are aware of their "Achilles heel" and they invite specialists to work behind the curtain to help them decide on issues related to transport. Mr. Wheble's "man behind the curtain" is Mr. John Richardson from P&O, who is an authoritative author for many maritime transport publications from Lloyd's of London Press. Guess who is the man behind the curtain for Charles del Busto? You should know him.
Hence they are very intelligent bankers. That is why they never made such mistakes like their successors to tarnish the authoritative image of ICC.
Charles del Busto gave me about 2 dozens of hand signed original recommendation letters when I first started my consultancy business in 1992 in Hong Kong to thank me for my support. In one of the ICC Banking Commission meetings, a heavy weigh officer of the ICC Banking Commission said to me over the coffee break when we were not surrounded by others:
"T. O. I am a banker, an idiot and will examine documents solely form the perspective of a banker". Hence no wonder why the officers of the ICC Banking Commission still refuse to change any wordings in their "official opinions".

This document is the 2nd batch of T.O. Lee's comments on ICC Document 470/TA.621.

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