When a documentary credit states that costs additional to freight are not acceptable, a bill of lading, for example, is not to indicate that costs additional to freight have been or will be incurred.
An indication of costs additional to freight may be made by express reference to additional costs or by the use of trade terms which refer to costs associated with the loading or unloading of goods, such as, but not limited to, Free In (FI), Free Out (FO), Free In and Out (FIO) and Free In and Out Stowed (FIOS).
Reference in a bill of lading, for example, to costs which may be levied as a result of a delay in unloading the goods, or after the goods have been unloaded (demurrage costs) or costs covering the late return of containers (detention costs) is not an indication of costs additional to freight.
The above is enshrined in UCP 600 sub-article 26 (c) and ISBP 745 Paragraphs E26 and E27 (where bills of lading are the transport document).
On occasion, a documentary credit may modify the application of the sub-article 26 (c) by stating that additional charges are not acceptable, apart from those relating to unloading costs.
Such an example was raised in ICC Opinion TA.815rev wherein a credit stated although charges additional to the freight would not be acceptable, unloading costs would be.
The bill of lading that was presented included the wording ‘Free Out'. The issuing bank interpreted this as an indication of an additional cost and, therefore, a discrepancy. The confirming bank did not agree. In their opinion, the wording related to unloading costs that was acceptable by the credit.
It was stated in the analysis to the Opinion that ‘Free Out' indicates that charges for offloading of goods at the port of destination are not included in the freight and that, furthermore, ‘Free Out' is not an Incoterm and may have different meanings in different countries. Costs for unloading may differ from port to port but may also depend on specific requirements for certain goods.
The Opinion went on to state that in accordance with UCP 600 sub-article 14 (d), a document examiner would need to make a decision on whether or not the wording ‘Free Out' conflicted with the condition that only reference to unloading costs would be allowed on the transport document.
A conclusion was reached that the wording was not in conflict with the credit and that this was supported by ISBP.