Shipping Cargo: Do Banks Verify It?

Imy Clarke - On behalf of Alchemy Recruitment, June 30, 2015

It’s natural to assume that banks verify whether the cargo covered in the lading bill is actually loaded onto the ship since shippers dealing with documentary credit understand the importance of the term ‘shipped on board’. Yet, this is not the case.

It’s natural to assume that banks verify whether the cargo covered in the lading bill is actually loaded onto the ship since shippers dealing with documentary credit understand the importance of the term ‘shipped on board’. Yet, this is not the case.

The bank has no responsibility for whether this cargo is actually shipped on the vessel, merely whether the documents required by the Letter of Credit are submitted correctly. UCP 600 – Article 5 – Documents v. Goods, Services or Performance, clearly states: ‘Banks deal with documents and not with goods, services or performance to which the documents may relate’.

The bill of lading should only be submitted once the shipping line has verified that cargo has cleared customs and been physically loaded onto the vessel in the port stated in the bill. As far as the bank is concerned, this bill is totally authentic – they do not physically see the cargo and so cannot verify the loading.

The only time banks will make a rejection is if there is a variance between the bill of lading and any other documents such as the commercial invoice.

If there is doubt over the shipper and whether cargo will be shipped, an independent surveyor can be employed to be present while the cargo is packed and loaded onto the vessel. A surveyor can also track the cargo into port to verify arrival. These services are also typically provided by a freight forwarder service.

Banks have no responsibility for the shipping of cargo – that remains with the shipping lines and the parties delivering and receiving freight. 

Posted in categories: Policies, Shipping
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