Response to the On Board Notation (OBN) Issue

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19 October 2007

To: The Chair and Members
Canadian Working Party (CWP) on the
ICC Commission on Banking Technique and Practice

Dear All,
Inspired by your feedbacks, as a non-banker consultant, taking care of a balanced view, not solely from a banker's perspectives, I have two points to make on the OBN issue:

If a DC is unclear in its instructions, the applicant bears 50% of the responsibility and the rest 50% is by the issuing bank according ISBP 681 paragraph 2.
I would like to share a famous Chinese words of wisdom with you: "If the water in a pond is absolutely clear and clean , there would be no fish. Why? There would be no nutrition or food for the fishes. For the same reason, referring to international shipping practice, that can be verified from Chris of FIATA, it is impossible to clear cut this problem into 100% sea transport or 100% multimodal transport (covering two modes). The complexities are:

Please bear in mind that the UNCTAD/ICC multimodal transport rules also covers one mode transport besides two or more modes.

In China trade, goods manufactured in Guangdong province (very near Hong Kong) will be shipped to Hong Kong for export to USA. The goods may be transported to Hong Kong by land (by trucks or trains) or by sea (by barges or feeder boats). Then what is the nature of this short-haul pre-carriage, part of sea transport (if by barges or feeder boats) or multimodal transport (if by trucks or trains, sometimes you cannot tell on its face) ? It is difficult to determine.

From my experience in resolving international DC disputes, this is not yet the end of the story. What about goods transported from Thailand to Singapore by mid size cargo ship for carriage to USA by big ocean vessel or from Denmark through Holland to the Far East. The pre-carriage is quite far, crossing the Atlantic. Is it a sea pre-carriage or transhipment? What about from Switzerland by train to France for sea carriage to Far East? Is it sea pre-carriage or multimodal transport?

There are other more complexes situations but I think it is appropriate to stop right here as they are more technical and beyond the domain of UCP.

So we cannot oversimplify this complex problem by mechanically cutting the pizza into two halves. You will find a lot of cheese strings still linking the cut pieces. So how to handle the cheese linkage? That is our problem. If there is no cheese, the pizza is not a pizza any more.
From my experience, there are many ways to deal with this problem.

No. 1 It is impossible to train all the traders to do their job perfectly.

No. 2 The other alternative to ask our banker friends to understand more the basics about sea transport and then they should be able to determine discrepancies confidently and efficiently. They can also do their job better as stipulated in Paragraph 2 of ISBP 681.

No. 3 Ask ICC to revise UCP 600 transport provisions. This is mission impossible I guess.

No. 4 Look for outsourcing services as many DC operations in the world are now out sourced to a third party?

Best regards

T. O.

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