WHO HAS it in for transhipment, and why? This is the twin-barrelled question that at least two ship operators have asked FTW.
With transhipping now being such a very slick, and often in-line (own ship to own ship), operation, said one, why are a lot of banks demanding on letters of credit (loc) that goods are not transhipped? He suggests that this attitude is now outdated, and that banks haven't kept up with the times.
But that's not the case, said Henry Golding, senior manager in specialised trade services at First National Bank.
All locs - since 1933 - have been subject to the UCP (Uniform Customs and Practices for Documentary Credits) international standard format issued by the International Chamber of Commerce, the latest being the UCP 500. UCP 500 is as up-to-date as you can get, said Golding, one of the South African advisory voices to the Chamber on this subject. This latest revision was done in 1993. And - in its own explanation of changes from UCP 400 to UCP 500 - the Chamber has recognised the recent changes in vessel management technology, the new concept of the logistics chain, and the increasing need for transhipment on long-haul world trades.
In its comparison of the old-and-new UCPs, it says: Sub-Article 23(b) incorporates a rule on transhipment.
Depending on the mode of transport used, transhipment and its consequences differ. Thus, the definition of transhipment in a port-to-port bill of lading needed clarification based on comments received from the shipping companies and maritime associations. Accordingly, this sub-Article defines transhipment for the purposes of this Article.
Now check this sub-Article 23(b), and you will find it says: For the purpose of this Article, transhipment means unloading and reloading from one vessel to another vessel during the course of ocean carriage from the port of loading to the port of discharge stipulated in the Credit.
You should then carry-on and read sub-Article 23(c), which tells you: Unless transhipment is prohibited by the terms of the Credit, banks will accept a bill of lading which indicates that the goods will be transhipped, provided that the entire ocean carriage is covered by one and the same bill of lading. All pretty simple up to now, according to Golding: If all terms and conditions are met, we'll accept it.
But he suggests that you should then look at sub-Article 23(d), because it says: Even if the Credit prohibits transhipment, banks will accept a bill of lading which: i. indicates that transhipment will take place as long as the relevant cargo is shipped in Container(s), Trailer(s) and/or LASH barge(s) as evidenced by the bill of lading, provided that the entire ocean carriage is covered by one and the same bill of lading. (See how important that is?) ii. incorporates clauses stating that the carrier reserves the right to tranship. (For further references see Article 26).
Why - if transhipment now seems to be a completely acceptable practice to the Chamber, and its wise words in UCP 500 - do so many buyers of goods (who use the loc as their credit mechanism for payments) demand that transhipment be prohibited? Is it because they are all still worried about damage or pilferage in this extra handling of the cargo en-route? Not really, according to Karl Kisteman, head of Standard General's marine underwriting department, and a senior member of AMUSA (Association of Marine Underwriters of SA).
It is more, he added, just a case of most buyers sticking by their traditional loc conditions.
More of a problem comes up for us when these people with their traditional locs demand cover for war on land - and we can't give this, he said. And the buyer would need to change this demand. On the transhipment side of things, and looking at an SA exporter, Kisteman suggests that it's all in the contract between this SA seller and his foreign buyer.
The seller must arrange an insurance as per the buyer's requirements - every dot-and-comma of it, he said. Nobody - banks or anybody - can alter these.
It's therefore up to the SA seller to get the buyer to change the terms of the loc. So, for our ship operators who feel their hard-laid plans for transhipment are being thwarted by outdated bank or insurance institutions, think again. It's up to you to persuade your shipper clients to get their customers to change their loc conditions, or look at sub-Article 23(d) of UCP 500.
