Fcr the use of fcr in intl trade (eng) danny diep to

The use of

in international trade

Danny Diep To, LecturerMBA, BSc, BEcon,

[email protected]

(C) Copyright The use of FCR in international trade 1

(C) Copyright 2

1. The concept of FCR

The use of FCR in international trade

1. The concept of FCR


•FCR stands for FIATA Forwarder's Certificate of Receipt, is one of the operational documents of Freight Forwarding.

•FCR has been proposed to use for international Freight Forwarders within FIATA organization since 1955.



•FCR is itself a Certificate of shipping instructions issued by Forwarder confirmed that he has received the goods as stated in FCR with external status in good condition from Shipper and he has been keeping them to make an irrevocable shipment to the nominated Consignee or hold that shipment at Consignee’s disposal.


•Shipping Instructions (FIATA Forwarding Instructions-FFI) is an agreement between Shipper and Consignee that can be only cancelled or modified if original FCR returned and provided that Forwarder could still implement that cancellation or modification.

•FCR originally used when Supplier sells the goods under Ex Works (EXW) terms and must prove that they have fulfilled the obligations to Buyer by presentation of FCR.



• In the case of Letter of Credit (L/C) payment method, Seller under these conditions can present a FCR issued by Forwarder together with other shipping documents to get payment that Buyer placed at Seller’s disposal under L/C stipulations.


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2. Function of FCR


2. Function of FCR


•FCR has no function of a document of title of goods, nor is one Transport Contract for goods described on the front of this document.

•FCR is simply one receipt, issued to Shipper to support L/C payment. However, FCR may also be evidence of a Bailment/ Handling Contract.


(1) Cargo Receipt from Forwarder

(2) Document of title of goods

(3) Evidence of Transport Contract

Function of FCR


•Since the goods will be delivered to the straight Consignee mentioned in FCR and delivery of goods to Consignee shall not depend on the presentation of FCR to Forwarder or his Agent, so that FCR is a non-negotiable document.

•There is one common misconception about the status of the FCR is that they will be issued "order" (To order) of Consignee or opening bank.


•FCR is not a transport document because of not determine the actual delivery, it is just the receipt of goods of Forwarder only. FCR will be accepted by bank if so stipulated in the L/C.



•According to UCP 600, the documents is not considered as Transport Documents and Transport Contracts in accordance with Articles 19 to 25, including:

-Delivery Order (D/O),

-Mate's Receipt (M/R)

and Forwarder’s documents such as:

-Certificate of Receipt (FIATA FCR),

-Certificate of Transport (FIATA FCT),

-Warehouse Receipt (FIATA FWR).



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3. Terms and Conditions of FCR


3. Terms and Conditions of FCR


•General Business Conditions (or Standard Terms and Conditions) of Freight Forwarding industry of issuing country are printed on backside of FCR.

•Document can only be used for Forwarders complying with these terms and conditions in Freight Forwarding business activities.


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4. Liabilities of Forwarder


4. Liabilities of Forwarder


•For FCR, Forwarder confirmed that he owns the goods with an irrevocable shipping instructions to Consignee or put them in Consignee’s disposal.

•When FCR issued, Forwarder assumed delivery responsibility at destination through his nominated delivery Agent, but under the role of Forwarder, rather than the Carrier.


•Under US law, sanctions aspects of the service is very important and therefore, Forwarder in the majority of cases is considered "indirect Carrier". For sea transport, they are considered as Non-Vessel Common Carrier (NVOCC).

•Forwarder is also often recommended to purchase Forwarder’s Liability Insurance for FCR.

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5. The main contents of FCR


5. The main contents of FCR


a. Shipper’s name or Forwarder’s name

b. Consignee’s name and address

c. Marks and numbers

d. Number of packages, packing method

e. Description of goods

f. Gross weight

g. Measurement

h. Date and place of issuance

i. Instructions for freight and charges

j. Other notations

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6. Issuing of FCR


6. Issuing of FCR


•Right after Forwarder received the goods, Forwarder at Port of Loading can immediately issue and release FCR to Shipper. Forwarder needs to take some important notes of the main points are as follows:

1) Forwarder or his Agent (branch, neutral Forwarder) received the goods as described in FCR and the goods are in the custody of Forwarder.


2) The external status of goods are in good condition.

3) Details showing on document are clearly consistent with the shipping instructions that received by Forwarder.

4) The conditions of other transport documents (Bill of Lading-B/L, etc.) not contrary to the obligations that Forwarder must comply under FCR.


FCR

FCR

FCR

EXW FCA/FOB(LCL)

6.1 Process of issuing of FCR for LCL export cargo under FOB/FCA in form of Buyer’s Consolidation performed by Forwarder including key steps:


1) Receive the export cargo information from Seller;2) Verify the accuracy of information: Buyer’s name, Order numbers (P/O numbers), categories, types, quantities, ready shipping date, Port of Discharge...);3) Receive the Shipping Instructions and other documents from Seller;4) Confirm and send Booking/ Shipping Note to Seller;5) Seller complete Customs clearance and stuff the goods into CFS warehouse;



6) Liaise the Warehouse Section to get the accurate shipment details stuffed into warehouse (Cargo Receipt);

7) Issue the draft FCR to Seller for checking and original FCR after confirming the correctness of FCR;

8) Send Pre-Advice to Buyer about shipment details and export plan enabling Buyer to confirm shipment of goods;

9) Contact Shipping Line to book the container and send Container Release Order to Warehouse Section to pull the empty container to CFS warehouse;

10) Stuff the LCL shipments into consolidated container, finish the Customs liquidation and drop off the laden container to export CY waiting for loading to the ship;


(1)Receive information

(2) Verify information

(3) Receive Shipping

Instructions

(4) Send Shipping Note

(8) Send Pre-Advice to

Buyer

(7) Issue FCR

(6) Get shipment

details

(5) Stuff cargo into

warehouse

(9) Book Container

with S/Line

(10) Pack cargo into container

(11) Prepare Master SWB

(12) Check original

documents

(13) Send original

documents

FCR ISSUING PROCESS


11) Send the consolidated container details to Shipping Line to prepare Master Sea Waybill (or Surrendered MBL), marked Freight Collect and confirm the correctness.

12) Check the original documents handed over by Seller: Commercial Invoice; Packing List; C/O… If correct, make a set of photocopy documents for records.

13) Send the shipping documents to Agent at Port of Discharge by email or EDI: FCR, Master Sea Waybill (or Surrendered MBL), Commercial Invoice; Packing List; C/O... and send the original documents of Seller to Agent at Port of Discharge by express courier.


•Since delivery of goods to Consignee is not depend on the presentation of FCR, it is just to release one single original FCR, non-negotiable. Upon request additional copies, it must be noted in FCR "Copy, Non-Negotiable”” to avoid disputes.

•All FOB costs at Port of Loading port will be borne by Shipper. Shipment date is issuing date of FCR. A set of shipping documents must be presented within the permitted period of time as from issuing date of FCR.

•Shipper has to pay FCR fee, similarly as B/L fee or documentation fee.


6.2 FOB/FCA costs at Port of Loading for LCL export goods including:


-Export documents preparation fees (Customs declaration fee, C/O fee, Inspection fee, FCR fee ...);

-Truck loading cost at Seller’s warehouse/ factory and Trucking cost;

-Expenses for consolidated container in CFS (CFS charge);

-Export Tax / Duties;

-Other costs…


(1)ExportDocument

preparationfees

(3) CFS charges

(2) Loadingcosts

(4) Export Tax/ Duty

(5) Other charges

FOB/FCA charges

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7. The use of FCR in international trade


7. The use of FCR in international trade


•FCR allows Forwarder to issue a special document to Shipper for the purpose of official confirmation that Shipper has fulfilled all obligations for the goods and the goods finished the export procedure.

•According to Sales Contract, Seller delivers the goods to Buyer or the Carrier (or Bailee) whether appointed by Buyer or not) with the aim of transferring of goods to Buyer and without retaining the right to dispose of the goods, Buyer is deemed to have owned the unconditional goods under the contract.


•FCR is used in order to reduce the difficulties that often occur in international trade transactions. Forwarder can accomplish consolidating the goods from many different suppliers.

•Each individual suppliers may sell under Ex Works (EXW) terms and therefore they are entitled to receive the money as soon as he delivered the goods to Forwarder.


•Today, the trend is to use more and more popular FCR in international trade due to high economic efficiency of LCL consolidation form and custom usages FOB terms for export shipment of some exporting countries.

•Scope uses of FCR also been extended to other terms such as FOB/ FCA, is the most typical form of Buyer’s Consolidation from many different suppliers for individual sea export shipments (sometimes by air) consolidated into the CFS warehouse of Forwarder to pack into the export container.


BUYER’S CONSOLIDATION PROCESS

Supplier 1,2,3,4

CFS Warehouse

Origin Destination Buyer

Cargo Truck Cargo Truck

Container Truck Container TruckSea

Air


•With EXW terms, FCR is only apply to commodities exempted from Customs inspection, free tax/duty commodities and non-prohibited/ non-restricted commodities, while export clearance mostly will not encounter any difficulties to avoid the delicate situation: Seller delivered the goods, FCR issued, Banker disbursed for the goods, but the goods are still lying trapped in exporting countries, Buyer did not receive the goods.

•As for FOB/FCA terms, FCR was released shortly after export clearance done and the goods stuffed into CFS warehouse.


• In normal situations, Shipper will receive 1 FIATA B/L (FBL) to implement the document requirements stipulated in L/C.

•However, Forwarder is sometimes required to receive goods for consolidation (as well as being able to perform additional services such as packaging, labelling, marking...) and may be because he did not want to issue B/L (Received for shipment FBL) as NVOCC.



•Since Shipping Line in fact did not receive the goods in hands, therefore Forwarder should not issue FBL and Shipper will be delays in receiving of payment.

•FCR can overcome that inconvenience: it makes the guarantee for Buyer that Seller has delivered and can not get back the goods delivered.

•So, Buyer can make payment to Seller through the presentation of FCR or he requires banks to accept FCR for disbursement under the L/C.


•The use of FCR also avoid the hassle of switching FBL in triangle business under FOB/FCA terms with L/C payment method, is what both Forwarder and banks are reluctant to perform, in which the intermediate Buyer wanted to remain Supplier’s name and the ultimate Buyer anonymous that they do not know each other.


•Forwarder reluctant reissued 1 set of switched FBL when he received 1 set of initially original of FBL to cancel.

• Instead, the intermediate Buyer will hand over the FCR issued by Forwarder in exchange for FCT or FBL. Forwarder will issue FCT or FBL only when the goods are in his custody and did not have any other claims against such shipments.

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8. Important notes when using FCR


8. Important notes when using FCR


•When issuing FCR, Forwarder has ensured that the goods will not be delivered back to Shipper: this is one important factor to boost confidence for this document.

•Once FCR is transferred to Buyer upon presentation for payment, Seller has transferred the rights of contract to Buyer and Seller has no longer any right to stop or delay the transportation of goods.


•When FCR granted to Shipper, he can not be considered to have reserved the right to dispose of goods. One “To order” FBL will demonstrate reserve the right to dispose of it.

•FCR is one auto-release document to Consignee mentioned in FCR. The one who claims for delivery of goods must prove that he is the right Consignee mentioned in FCR.


•When the goods arrive at Port of Discharge, Forwarder’s Agent at that port shall immediately deliver the goods to the Applicant (Buyer).

• If Buyer has taken delivery of goods while Seller has not received payment for reasons such as: L/C expired, late presentation and discrepant documents... if Buyer did not want making payment due to L/C expired, they simply just request the bank to dishonor the drawing and then Seller will suffer the consequences.


•As it is common misunderstanding about the nature of FCR, Seller needs to pay attention to the correct application and know the limitations of FCR when asked to use this document.

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9. Conclusion


9. Conclusion


•FCR is a Forwarder’s document to confirm that Seller has delivered the goods to Forwarder for shipment to Consignee at a place of receipt in Port of Loading with the external status of goods in good condition, the goods are placed in irrevocable disposal of goods or as instructed by Consignee, the goods is not unencumbered or owned by any 3rd party and non-prohibited for export.


•FCR is non-negotiable and no function of a document of title of goods, a Transport Contract as FCT and FBL.

•Today, the trend is to use more and more popular FCR in international trade for LCL cargo transported by sea or shipments must stuff into warehouse before loading on the other means of transport.


•The advantages of FCR bring to the relating parties such as:

-Shipper can quickly get payment;

-Consignee can take delivery of goods upon arrival; --Forwarder can do consolidation or other handling services conveniently; or

-when issuing switched FBL, Forwarder can issue FCR under the right role of Forwarder; and

-FCR is one kind of documents to do Customs import clearance…


•However, it is advisable that the FCR user need to master how to use, quick preparation and accurate documents to present for the drawing on time to avoid the damage that can occur when the goods have been delivered to Consignee while Shipper has not received payment from the bank. /.

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References


References


• BIFAlink, What does FCR mean? (www.bifa.org) • TT Talk, Forwarder's Cargo Receipts - What role are Forwarders taking?

(www.ttclub.com)

• Ozgur Eker, What is FIATA FCR (Forwarder’s Certificate of Receipt)?(www.letterofcredit.biz)

• Lin Zhong, FIATA-Documents-and-Trade-Logistics-Standardization

(www.carecprogram.org) • PWC, Acceptance of forwarders’ cargo receipt in lieu of bill of lading in

export transactions, (www.pwc.in) • Hachem Jalouli, Forwarders’ Cargo Receipt (FCR) is not a Transport

Document, (www.besttradesolution.com)

• Pachino, Bill of Lading and Freight Forwarders Cargo Receipt, (http://letterofcreditforum.com)

• Reserve Bank Of India, Export of Goods and Services - Forwarder’s Cargo Receipt, (https://rbi.org.in)


• Oleg Alyoshin et al., 2010, Ukraine: Forwarders Certificate of Receipt: The Story of One Case, (www.mondaq.com)

• Jan H. Raymond, How Do FCR's and B/L's Differ, (http://raymond-international.com)

• YOW-Your Other Warehouse, 2013, Standard Document Checking Requirements, (https://homedepotlink.homedepot.com)

• Conex, FIATA Documents, (www.conexbe.be)

• APLL, Forwarder Certificate Of Receipt (FCR), (www.katag.net)

• Sherri Lane, 2012, Incoterms®2010; what you really need to know

(http://tradetechnologies.com)

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