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Charter Party Bill of Lading in Letters of Credit Transactions











What is Congenbill Bill of Lading?
What are the differences between bill of lading and charter party bill of lading in terms of UCP 600 latest letter of credit rules? 
Definition and Usage of Charter Party Bill of Lading :

As a general rule most of the goods that is subject to international trade are being transported by sea shipments in today's global economy. We also know that overwhelming majority of the sea transportation is carried out by liner services via containerized cargo loads. Additionally we have learned that liner services produce bill of loading or non negotiable sea waybill as transport documents for port to port sea transportations they have handled. Container transportation or liner services in other words may not be suitable for some occasions such as bulk oil and commodity trades and heavylift/out of gauge movements. The physical characteristics and size or quantity of the cargo to be lifted may negate completely the prospect of finding space on any available liner service; alternatively use of such a service may be an impractical or unappealing proposition for a variety of financial reasons. On these occasions where liner services would not be a sound solution shippers may choose to hire a vessel as an alternative. Hiring a vessel is called "Charter Party" in maritime terminology. Transport document issued by the hiring party of the vessel, or charterer as we call them, is called "Charter Party Bill of Lading"..  

Important Note : Banks do not like to encounter Charter Party Bills of Lading in letter of credit transactions. But why? Because charter party bills of lading are subject to charter party agreements between (charterer) and the owner of the ship (vessel). As a result the owners of the vessel often have the right to lay claim to the cargo aboard the ship (in case of a dispute with the chartrer), for this reason banks generally refuse to accept such B/Ls as collateral for loans, or for payment under a letter of credit. Read more: http://www.businessdictionary.com/definition/charterparty-bill-of-lading-B-L.html

Charter Party Bill of Lading in Letters of Credit Transactions :
Charter party bill of lading is covered under article 22 of UCP 600.

a. A bill of lading, however named, containing an indication that it is subject to a charter party (charter party bill of lading), must appear to:
i. be signed by:
- the master or a named agent for or on behalf of the master, or
- the owner or a named agent for or on behalf of the owner, or
- the charterer or a named agent for or on behalf of the charterer.
Any signature by the master, owner, charterer or agent must be identified as that of the master, owner, charterer or agent.
Any signature by an agent must indicate whether the agent has signed for or on behalf of the master, owner or charterer.
An agent signing for or on behalf of the owner or charterer must indicate the name of the owner or charterer.
ii. indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit
iii. indicate shipment from the port of loading to the port of discharge stated in the credit. The port of discharge may also be shown as a range of ports or a geographical area, as stated in the credit.
iv. be the sole original charter party bill of lading or, if issued in more than one original, be the full set as indicated on the charter party bill of lading.
b. A bank will not examine charter party contracts, even if they are required to be presented by the terms of the credit. (source : UCP 600)

Special Hints on Charter Party Bill of Lading from ISBP 2007 :

  • If a credit requires presentation of a charter party bill of lading or if a credit allows presentation of a charter party bill of lading and a charter party bill of lading is presented UCP 600 article 22 is applicable.
  • A transport document containing any indication that it is subject to a charter party is a charter party bill of lading under UCP 600 article 22.
  • If a credit does not state a notify party, the respective field on the charter party bill of lading may be left blank or completed in any manner.
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What is charter party bill of lading? How can we use a charter party bill of lading in a letter of credit transaction? 
On this page I will try to explain you "Charter Party Bills of Lading" and their application in letters of credit transactions. Banks mention charter party bill of lading simply as "Charter Party Bill of Lading", only in most cases. 



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