The last part of the bill of lading is generally the area where the Freight charges are reflected..

Barring a few countries like Brazil, most of the other countries do not insist on the freight charges being shown on the bill of lading..

The only field that is generally filled in this area is the Freight Payable at which could either be the Port of Load (Prepaid) or Port of Discharge or Final Destination (Collect) or any other port (Elsewhere).. In the case of Freight paid at a destination different from either the Port of Load or Port of Discharge or Final Destination (ex : Shipment from Durban to Shanghai but freight paid in London), the port of discharge agents must check and receive confirmation from the other port that the freight amounts have been paid in full prior to releasing the cargo to the receiver..

The other important fields in this area are

• Place of Issue – is the place where the original bill of lading is signed and released (issued) to the shipper or his agent
• Date of Issue – is the date on which the original bill of lading is signed and released to the shipper or his agent.. This date in general would be on or after the containers or cargo is actually on board of the ship and should be the same date or later than the shipped on board date..
• Number of originals – is the number of original bills of lading that the client requires the line to release for that particular shipment.. Standard is 3 originals.. If one of the three originals are duly discharged then the other two are deemed null and void..

Then there is also the attachment sheet to the bill of lading.. This is used when the details shown in the description is too large to fit within the space provided on the original bill of lading stationery.. This attached sheet forms part of the bill of lading and should carry all the stamps and endorsements on the original bill of lading and should clearly show the bill of lading number and vessel and voyage information..

All information covered in the articles related to the parts of the bill of lading are general information and each shipping line have their own specifications and peculiarities with regards to their bill of lading stationery and the information required..

Part 3 of the parts of a bill of lading.. Here we shall cover the cargo particulars of the shipment..

In most bills of lading for containerised shipments, you will see the notation PARTICULARS FURNISHED BY SHIPPER – CARRIER NOT RESPONSIBLE..

Marks & Numbers – Marks & Numbers are important information in a shipment.. The shipper marks his packages with some information identifying the shipment so that the consignee can know what the shipment is.. The marks and numbers can have any of below :

• the consignees name and address
• the purchase order number
• the number of the package – 1 of 32 etc for easy identification

or of course have any logos etc of the shipper..

Marks & Numbers play a much more important role in a breakbulk shipment or an LCL/Groupage shipment rather than a full container shipment.. In these cases it is prudent for the shipper to mark the packages in such a way so that identification of the same is easy, as in a breakbulk or groupage shipment there are many packages belonging to many shippers..

In the case of shipping lines that carry only containers, they normally show this field as Marks & Numbers/Container Nos. so that the container numbers and seal numbers are recorded here with or without marks and numbers..

No. and kind of Packages : Here the number of packages that are packed in the container or loaded on the ship as breakbulk are recorded.. Example : 16 crates & 23 pallets or 16 cartons in 2 pallets etc..

Description of Packages & Goods : This area is used to describe exactly what cargo is being loaded in the container or onboard the ship.. In the case of containerised cargo, it is usually reflected as :

“22 packages STC (or) Said To Contain 15000 tubes of Toothpaste and 500 cartons of Cigarettes”

Below the description, generally other information like Nett Weight, Import Licence Number, L/C Number, Freight conditions etc are also mentioned..

For containerised cargo, it is VERY IMPORTANT that the shipping line shows the SAID TO CONTAIN clause on the bill of lading.. The reason for this is that the shipping line does not get involved in the packaging of the container and as such does not know what and how many are packed in the container by the shipper.. The shipping line goes by what is declared by the shipper and the bill of lading is issued as such.. In a lot of cases, this is further covered by a stamp SHIPPERS, LOAD, STOW AND COUNT that is endorsed by the shipping line on the bill of lading..

Gross Weight : This is the weight of the cargo that is packed in the container or loaded on board.. This is generally only the weight of the cargo + the weight of the packaging and does not include the tare weight of the container..

Measurement : This is the volumetric calculation of the cargo that is packed in the container.. The total volume of the cargo in the container is shown here.. How the calculation of the volume is made can be read in the article http://shippinginsouthafrica.wordpress.com/2009/02/20/how-to-calculate-cbm-freight-ton/..

Part 2 of the parts of a bill of lading – in case you missed Part 1 – click HERE to view it.. In this article we will cover the details relating to the voyage..

Pre-Carriage by : Assume that there is an inland point which is connected to the mainland port by means of a feeder (connecting) vessel, the name of that vessel is shown here.. Example – Maputo to Durban.. In some cases if the pre-carriage is by land or rail means that can also be mentioned here, however this is is very very rarely displayed here..

Place of Receipt : This is the place where the cargo is handed over by the shipper or his agent to the carrier (shipping line).. This is very important in terms of the contract of carriage between the shipper and the shipping line.. If this area is filled, it is assumed that the carrier has done the movement from here to the Port of Loading and if there any incidents, damages etc to the container or cargo between the Place of Receipt and Port of Loading, the liability will be that of the carrier.. So the shipping line must be careful not to show anything in the Place of Receipt if they are not actually doing the movement..

Port of Loading : This is the place from which the container or cargo is loaded by the carrier onto the nominated Ocean Vessel..

Ocean Vessel/Voyage : This is the name of the vessel and the voyage number that carries the container or cargo from the (mainland) Port of Loading (example Durban) to the Port of Discharge (example Mumbai).. Remember that the combination of vessel and voyage will be unique and never repeated (well almost never)..

Port of Discharge : This is the place at which the container or cargo is discharged by the carrier from the nominated Ocean Vessel..

Place of Delivery : This is the final destination of the container or cargo.. If this area is filled (example : ICD Bengaluru), it means that the carrier has undertaken to move the container or cargo from the Port of Discharge to the Place of Delivery.. Again as in the case of Place of Receipt, the shipping line must be careful when showing anything in this field as then, it will be liable to deliver the container or cargo in good order and condition to this place of delivery.. If there is a Place of Delivery shown in the B/L, generally the carrier does not allow the client (merchant) to take delivery of the container or cargo at the Port of Discharge and move it to the Place of Delivery, reason being that if anything happens to the container or cargo enroute to the Place of Delivery, the carrier may still be held liable..

There are different part to a bill of lading that needs to be filled up.. We will discuss the relevance of each part..

In this article we will discuss the address and reference details.. Please bear in mind that this “generic” information and does not refer to any line in particular as each line have their own format and setup..

Shipper – is the name and address details of the shipper who is shipping the cargo.. This may or may not be the actual owner or manufacturer of the cargo, but could also be a trader or freight forwarder depending on the type of bill of lading that is issued..

Consignee – is the name and address details of the consignee who is receiving the cargo or is the actual buyer.. This may or may not be the actual owner or recipient of the cargo as it could be a bank or trader or forwarder depending on the type of bill of lading that is issue.. However, being named as the consignee on the bill of lading also comes with the risk and responsibility of being held accountable for many issues such as non-clearance of cargoes, late clearance, claims etc..

Notify – is the name and address details of the person who generally should be notified of the arrival of the cargo.. Depending on the bill of lading that is issued this could be the actual buyer or receiver of the goods, clearing and forwarding agent or the trader.. Generally the notice of cargo arrival is to be sent to this notify party..

Bill of Lading Number – is the unique number provided to the shipment covered under a specific bill of lading.. This is allocated by the shipping line and must be quoted by the client for any queries, sailing info, arrival info, claims etc..

Reference Numbers – this space can be used to update any reference numbers specific to the client or the freight forwarder which they will use to trace their shipments..

Carriers Agents – here the details of the agents at discharge port is usually recorded by the shipping line so that the destination agent of the client/forwarder can contact the shipping lines agents to query the status of the shipment or go for release etc..

Balance in the next article.. Stay tuned..

What are manifest correctors..?? In Article 2 (http://shippinginsouthafrica.wordpress.com/2008/10/13/article-2-the-documents/) i wrote about what a manifest is, so you should have a clear understanding of it by now..

Once the manifest is updated in the shipping lines system and the bill of lading has been released, the documentation is deemed to be complete.. However, at times there are requests from the clients to make some changes to the details that have been submitted..

The only way that these changes can be effected after the bill of lading has been issued is by way of a corrector..

Lets assume the client is changing the description of the cargo.. A typical manifest corrector would then show as below :

• Bill of Lading No. : SISA1234567
• Container No (s) : SISU6754321
• Port of Load : Durban
• Port of Discharge : Mombasa

Cargo description now reads : 140 packages anabolic steroids (this is what the bill of lading and manifest currently shows)

Cargo description should read : 23 cartons containing 150 cans muscle enhancing drugs (this should have been the right description)

The manifest corrector generally also makes reference to whether the original bill of lading has been amended or not.. In some cases it is possible that after the submission and filing of the manifest, the client returned the full set of incorrect OBL’s and got a new set of OBL’s with the right description..

This manifest corrector is then sent to the shipping lines agents at the port of discharge who in turn will submit this to the customs and port authorities as required by their regulations.. There are also cases where customs authorities belonging to certain countries might not allow any amendments to be done to certain cargo descriptions etc as it might affect the customs duty valuation already made based on a certain commodity..

All shipping lines charge a fee at their discretion depending on the corrector itself..

Most of you who are involved in the import shipping process might have at one stage or the other come across the term States Warehouse..

Sometimes there are cases where the consignees are for one reason or the other unable to clear or take delivery of the cargo that they have imported.. In such cases, at the end of the standard 3 free days given by the port, the shipping line will move the containers to a custom bonded depot generally referred to as “overstay depot” (refer to my article on Import Overstay Process)..

As per the current SARS regulation, any cargo that remains uncleared for more than 28 days is required to be moved to the States Warehouse by the shipping line.. The States Warehouse is a Govt. entity under the purview of Customs/SARS (South African Revenue Services)..

The shipping line has to do this at their own cost and risk as there is no one else to bear this cost.. Generally the uncleared container(s) is moved to the SWH and the containers are unpacked and the cargo is stored at the SWH while the shipping line takes control of the empty container.. At the same time, the shipping line generally will place a lien on the cargo..

The cargo remains in the SWH for long as, there is no contact from the consignee or importer, or at the discretion of Customs/SWH authorities who decide how long to keep the cargo open..

If finally the consignee is ready to clear the cargo, then he has to pay all the costs to the shipping line and the SWH and take release of the cargo..

However, if after a period of time (at SWH discretion) the cargo is still not cleared, the SWH includes the cargo in the list for cargo to be auctioned..

Once the cargo has been auctioned, SWH will check if the proceeds will cover firstly their costs for the unpacking, storage and auction etc.. If there is any excess amount left over from the proceeds after covering the SWH cost, the shipping line might be paid the costs that they have incurred towards moving the container(s) to the SWH, the local landside costs like THC, Cartage, Storage, Railage (and in some cases the full ocean freight) etc..

And so ends the story of the cargo that was uncleared and abandoned by the consignee..

This is a topic of great importance and is my favourite activity in the whole realm of shipping operations..

What is Stowage planning – simply put – it is the act of allocating space to containers on board of a container ship in the order of the discharge ports..

Tools required :

1. the scheduled list of ports that the ship will be calling at, in the order of rotation
2. a summary of the number of containers – size/type/weight of containers per port that are planned to be loaded on the ship
3. a summary of the number of hazardous, reefer and oog containers per port that are planned to be loaded on the ship
4. list and summary of containers that are on board after discharge of the containers at your port.. for the purposes of this article, we will consider this port to be Durban..

Definitions :

Profile – is the cross sectional view of the entire ship covering both the deck and under-deck of the ship..

Bayplan – is the complete cross sectional view of the entire ship covering both the deck and under-deck of the ship, but displayed or printed per bay

Bay – each container vessel is split into compartments which are termed as Bay and depending on the size of the ship it will proceed from 01 to 40 (for example) where Bay 01 is the bay towards the Bow (the front) of the ship and Bay 40 is the Stern (the back) of the ship.. Odd numbered bays (1,3,5 etc) means that it is a 20’ stow and Even numbered bay (2,4,6 etc) means that it is a 40’ stow..

Confused..?? Look at the below picture.. I have used Bay 09/11 (10) and Bay 13/15 (14) as an example here.. What you are seeing here is the cross section of the ship both on deck and under deck.. Each of the small square blocks represents a 20’ unit space..

Row is the position where the container is placed across the width of the ship.. If you refer to the above diagram, the Row numbers are circled in Red.. It starts with 01 in the centre and progresses outwards with odd numbers on the right and even numbers on the left..

Tier denotes at which level the container is placed – basically how high the container is stacked on board.. In the above diagram, the Tier numbers are circled in Blue..

Hatch Covers (the dark intermittent lines in the above picture) are the covers that separate the deck from the under-deck.. The area above the line is called the deck (which is generally visible to us when we look at the ship) and the area below the line is called under-deck (which is not visible to us from outside the ship)..

The planning is mainly done on a document called a “profile” which can be viewed here.. The profile provides the full cross section of a ship at one glance.. The enlarged version of this will be the actual bay itself.. Currently, the stowage planning is mostly done via computers..

Although the computers do most of the work, the basis on which they work is the tried and tested methods that have been followed for many years around..

• the list of containers that are to be loaded on board are segregated by destination..
• space is allocated to each of the containers
  •  
    • firstly in the order of destination – the farthest destination at the bottom and the next port of call right on top
    • secondly in the order of weight – the heaviest boxes at the bottom and lightest at the top

For reasons of lashing and securing containers, a 40’ container can sit on top of two 20’s, but two 20’s cannot sit on top of 40’ (unless it is under deck and surrounded by other containers or within cell guides)..

In the above profile i have used various alphabets and colors..

1. Ffor Felixstowe
2. A for Antwerp
3. Ae for Antwerp Empty
4. H for Hamburg
5. Lfor Le Havre
6. R for Rotterdam
7. X to indicate that its a 40’ contr..

The rotation for this vsl is Felixstowe, Antwerp, Le Havre, Hamburg and Rotterdam.. So as you can see, Felixstowe containers are stacked right on top of other containers as this will be the first port of call after Durban.. And Rotterdam will be the last port of call hence it is right at the bottom of the heap.. In this fashion the entire ship is filled with the containers that are to be loaded at each load port while also taking into account the containers that are ALREADY present on board from the previous ports..

If you notice, there is a container in stow position 130612 (Bay 13, Row 06, Tier 12 – for further info on how to read the bay plan, please read my other article http://shippinginsouthafrica.wordpress.com/2009/03/31/identifying-a-stow-position/).. Let’s assume that this container was wrongly stowed or a restow was requested at a later stage to now discharge this in Felixstowe..

In order to reach this container, all containers above it on deck (8 containers to Antwerp and 4 contrs to Le Havre) must be “restowed” (taken off the ship and landed on the wharf side and put back on board once this box is taken out).. Then the hatch cover has to be opened to reach this one container.. As you can imagine, this involves considerable cost and wastage of time for the ship..

So to avoid these costs and wastage of time, it is highly imperative that the right destination, right weight, and haz info if any is accurately passed onto the ship..

Each of the bays have deck stress or tier weight which is the maximum allowed weight that each of the tier/row can carry as per the design of the ship.. For example if there are about 4 containers in a tier each weighing 26 tons, it may not be possible to accommodate all 4 in one tier as this might affect stability due to the heavy nature of the cargo.. However, if there are 5 tiers of empty containers as shown in Bay 15, it might be possible to load.. These calculations will be performed by the computer itself and it will show up as errors..

Some of the most commonly used software for ships planning are CASP and Bulko.. These use the BAPLIE file format structured by UNEDIFACT..

Hey all, see below interesting article reg the Maersk Alabama piracy incident (quoted from http://gcaptain.com/maritime/blog/maersk-alabama-piracy-incident-2/).. Just before that apparently the Africa Star (which calls South Africa) escaped being caught.. First it was the Malacca Straits, now its the Horn of Africa.. Hmmm..

The Maersk Alabama Piracy Incident – A collection of facts

April 13th, 2009 · Comments (0) – by mike -

April 8, 2009

• The US flagged cargo ship, Maersk Alabama was attacked about 300 miles off the coast of Somali by pirates at around 05.00 UTC on April 8, 2009 and presumed hijacked.
• The vessel has a crew of 20 US nationals and is owned and operated by Maersk Line, Limited in the US.  Maersk Alabama is home-ported in Norfolk, VA.  The vessel was en route to Mombasa, Kenya with a shipment of food aid, amongst other cargo, at the time of the attack.
• Capt Richard Phillips, of Underhill, Vt, was taken hostage before his crew was able to regain control of the ship. The American crew was able to overpower and capture one of the four pirates, but released the pirate in a failed attempt to trade the hostage for the Captain. The four Somali pirates escape with Captain Phillips aboard the vessels 28 ft encapsulated lifeboat.
• The ship’s crew was able to disable the vessel when the pirates got aboard. The Somali pirates never gained control of the ship.
• First mate Shane Murphy, a 2001 graduate of the Massachusetts Maritime Academy, assumed the role as Captain of the Maersk Alabama when Phillips is taken.  Shane Murphy is son of the famous Mass Maritime professor, Joe Murphy, author of the popular maritime license study guides known in the industry as “The Murphy Books“.
• The Maersk Alabama’s crewmembers were trained to deal with pirate attacks.
• The guided missile destroyer, USS Bainbridge (DDG-96), which was a few hundred miles away the time of the attack was dispatched to the scene as the US Department of Defense declared the safe return of Captain Phillips of primary importance.

April 9, 2009

• Navy destroyer USS Bainbridge (DDG 96) arrived on the scene to assist, with the help of the FBI, in negotiations for Phillips’ release. The destroyer was in constant communications with both the pirates and Phillips as it shadowed the lifeboat.
• At one point, Phillips jumped out of the life boat in an attempt to escape the pirates, but was recaptured by the pirates. The USS Bainbridge, which had a visual of the incident, reported that Phillips appeared to be unharmed after his escape attempt.
• The Maersk Alabama and its crew resumed their journey to the Port of Mombasa, Kenya with armed security detail on board.
• Both the guided-missile frigate USS Halyburton (FFG-40) and the amphibious assault ship USS Boxer (LHD-4) were dispatched to assist with the situation.

April 10, 2009

• The kidnappers call for additional reinforcements from Somali pirates on the mainland in order to help with negotiations, but the other pirates were unsuccessful in reaching the drifting lifeboat.
• USS Bainbridge, which had been communicating with the four pirates via radio, used smaller boats to make deliveries of food and water to the lifeboat.
• The USS Halyburton arrived on the scene and was later followed USS Boxer.
• President Obama authorized the use of appropriate military action could be used to rescue Richard Phillips if his life was in “imminent danger”.

April 11, 2009

• President Obama gives a follow-up order giving more specific authorization that included allowing a Navy commander to order sharp shooters to take out the pirates if the situation became dire.
• The pirates grew increasingly agitated and at one point even fired upon one of the smaller boats that was approaching the lifeboat, forcing it to turn back – The US did not fire back.
• The Maersk Alabama and its crew arrived at the port of Mombasa on Saturday evening where they remained aboard the vessel pending further investigation.
• At one point, one the the kidnappers who was stabbed in the hand during the initial altercation with the crew, asked to come aboard the USS Bainbridge to assist with negotiations.

April 12, 2009

• As seas grew rougher, the USS Bainbridge offered to tow the life boat to calmer water.  The kidnappers agreed.
• Negotiations with the 3 remaining pirates aboard the life boat grew heated.  One of the kidnappers pointed an AK-47 to the back of Phillips while the other two were positioned by the open hatch of the lifeboat. It was at this point that a Navy commander gave orders for a team of sharp shooters, positioned on the fantail of the USS Bainbridge about 75 feet from the lifeboat, to take action against the kidnappers, in fear that Phillips was about to be shot. The 3 pirates on the lifeboat were shot and killed.  The fourth remained custody of the US Navy.
• Following the rescue, Phillips was initially taken aboard the USS Bainbridge (DDG 96). Phillips was subsequently flown to USS Boxer (LHD-4) where he was able to contact his family, received a routine medical evaluation and rest comfortably.
• The crew on board the Maersk Alabama celebrated news of their Captains rescue back in Kenya.

April 13, 2009

• President Barack Obama promises that the U.S. would seek to halt the increasing threat of piracy off the Horn of Africa.
• Somali pirates vowed retaliation for the deaths of three colleagues killed by the U.S. Navy snipers in the rescue.
• More than 200 mariners from countries other than the US are still being held captive by Somali Pirates and the threat of piracy still looms.

If you have any more facts surrounding the Maersk Alabama piracy incident or want to give your opinion the outcome, please feel free to leave them in the comments below.

We deal with a lot of abbreviations on a daily basis, but not all of us know what it is and what it means.. Here are some of the practical and common day to day abbreviations used.. This is by no means complete, but so far it just covers the terms that we use on a daily basis in terms of containerised operations..

If you wish to contribute any more abbreviations please do so in the comments section and i will update in the page.. 

• ANF – Arrival Notification – usually sent by the lines to the consignee and/or notify parties on the bill of lading to advise the arrival details of the cargo
• B/L – Bill of Lading – a document that evidences the contract of carriage and acts as receipt for the goods received
• BAF – Bunker Adjustment Factor is a surcharge to cover oil price fluctuation
• CAF – Currency Adjustment Factor is a surcharge to cover the currency fluctuations – charged still on some of the routes
• COO – Certificate Of Origin – issued by the local Chamber Of Commerce for all shipments exported out of South Africa
• CTO – Container Terminal Order – document used to move containers in and out of port – specific to South Africa
• DO – Delivery Order – document used to get release of an import cargo
• DRO – Delivery Release Order – document used to get release of an import cargo from an overstay depot
• ETA – Estimated Time of Arrival of a ship at the port
• ETB – Estimated Time of Berthing of a ship at the port
• ETC – Estimated Time of Completion of a ships work at the port
• ETD – Estimated Time of Departure of a ship from the port
• FAK – Freight All Kinds – freight charged on the basis of the container irrespective of the type of cargo loaded in the container
• FCL – Full Container Load – denotes the container has cargo that is shipped by one shipper for delivery to one consignee – for further details refer to http://shippinginsouthafrica.wordpress.com/2009/03/02/container-service-types/ which is an article in this blog
• FEU – Forty Equivalent Units – denotes a standard container that is 40’ in length
• HBL – House Bill of Lading – issued by the Freight Forwarder or NVOCC Operator to his shippers covering cargo that is shipped on their behalf
• IMO Class – the classification number of hazardous cargoes as prescribed by the IMO – for further in-depth info on the IMO class – refer to http://shippinginsouthafrica.wordpress.com/2008/11/04/article-6-hazardous-cargo/ which is an article in this blog
• IMO – International Maritime Organisation – the body that has been set up by the United Nations to co-ordinate international maritime procedures and practices
• INCO Term – various terms defined by the International Chamber of Commerce which is widely accepted and used by various entities for their trade.. For further details refer to http://shippinginsouthafrica.wordpress.com/2008/11/15/article-7-inco-terms/ which is an article in this blog
• L/C – Letter of Credit – a credit document issued between banks, shippers and consignees
• LCL – Less than Container Load – denotes the container has cargo that is shipped by many shippers for delivery to many consignees – for further details refer to http://shippinginsouthafrica.wordpress.com/2009/03/02/container-service-types/ which is an article in this blog
• M.V – Motor Vessel – you will normally see this in front of the name of the ship in certain documents
• MBL – Master Bill of Lading – issued by the line to the Freight Forwarder who might have issued his HBL in lieu of this MBL
• MT – Metric Ton – a unit for measuring weight
• NVOCC Operator – Non Vessel Operating Container Carrier – a carrier who issues house bills of lading for carriage of goods on vessels that he neither owns nor operates
• OBL – Original Bill of Lading
• POD – Port Of Discharge
• POL – Port Of Loading
• SOB – Shipped On Board date indicates the date on which the container was loaded on board the subject ship
• SOC – Shippers Owned Container – a container that is owned by the shipper as opposed to containers that are generally owned by the shipping lines
• TEU – Twenty Equivalent Units – denotes a standard container that is 20’ in length.. Space and capacity of a container ship is calculated basis the number of 20’ containers that a ship can carry unless it is specially designed to carry more 40’ units
• THC – Terminal Handling Charges – this is charged by the respective port or terminal where the ships are loaded and off-loaded
• UN No. – a number or ID given to each of the hazardous substance or hazardous group by the United Nations so to identify the haz substance being transported

This article is to provide in simple terms an explanation of how letter of credit works..

In the beginning there is a seller and buyer who want to conclude a business transaction.. Now they might or might not know each other or might or might not trust each other in terms of finiancial obligations..

Because of the time it takes for cargoes shipped from foreign ports to reach their destination, importers have to find a way of guaranteeing payment to exporters before the goods are received.. The answer is a letter of credit – an instruction by the importer’s bank to an overseas bank to pay the exporting company in advance.. The banks naturally charge interest for this service..

The buyer sets a list of terms and conditions under which he would like to buy and ship the cargo from the seller.. This list generally has

• description of the goods he wants to buy from the seller
• quantity of the goods
• technical description if any
• documentary requirements (bills of lading, commercial invoice, packing list etc etc)
• details of the consignee (generally the issuing bank will be shown as the consignee and they will have control of the cargo until such time they receive the money from the buyer)
• details of who must be notified of the arrival of the shipment
• latest date of shipment
• sometimes the buyer also nominates the shipping line that is to be used
• which shipping ports are to be used
• what mode of transport is to be used

This L/C is then issued by the buyers bank (known as issuing bank) and is generally sent to the seller and his bank (known as the nominated bank)..

The seller than proceeds to prepare his goods and documents based on the L/C.. Once the shipment has been accomplished, the seller will take the copies of all the documents as per the instructions on the L/C to his bank.. His bank checks the veracity and correctness of the submitted documents against the L/C specifications..

Once the bank is satisfied that the docs and shipment are in accordance with the L/C, they pay the seller the money that is due to him as per the price agreed between him and the buyer..

The nominated bank, then sends all the docs to the issuing bank who cross verify the same and once they are satisfied with the conditions, they reimburse the receiving bank the money that they paid to the seller..

The issuing bank then advises the buyer that the shipment has been effected and that they are in possession of all the docs.. The buyer then arranges to pay the issuing bank the money that has been reimbursed by them to the receiving bank..

Upon receipt of these funds, the issuing bank then endorses the bill of lading so that the cargo can be released to the buyer..

So begins and ends the process of a Letter of Credit..

(This was already published in my International Shipping blog, but reproduced here for the South African readers who have not yet visited that blog..)