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Use of the FCR in Ukraine

by Arthur Nitsevych (International Law offices, CNI)

Technological progress results in development of the social relations. New forms of transport documentation appear in the field of forwarding. And even nowadays Ukraine adopts the world experience in application of the traditional forms.

The present article is dedicated to the FIATA FCR. The FCR is the oldest form of forwarding document, adopted by FIATA in 1955. The FIATA FCR is a non-negotiable instrument that is documented by a forwarder undertaking the consignment under irrevocable shipping instructions. The FCR is a “Forwarder’s Certificate of Receipt” proving that the goods are accepted by the forwarder in due packaging and in proper quantity specified in the document. The forwarder also confirms receiving the merchant’s irrevocable instructions.

What does it mean - “irrevocable instructions”? It is clear that irrevocability of the instructions is rather conditional. They may be cancelled, but only if the FCR has been returned to the forwarder that is to execute the client’s instructions on their cancellation and has no any antecedent instructions. Nevertheless, the forwarder issues the FCR to the exporter and quite often, the exporter’s bank plays the role of a holder as exporter may transfer it to draw out the money from a letter of credit. Banks accept FCRs if it is provided for by the letter of credit, and the ability to present an FCR should be understood as part of the contract implementation by the exporter.

The rules of the FCR usage in Ukraine are contained in Clause 2.1 of the Rules and Recommendations on Usage of FIATA Documentation and Forms, adopted by the protocol #5 dd. July 16, 2003 of the Governing board of the The Association of International Freight Forwarders of Ukraine (AIFFU). There is an Addendum #2 “Forwarding Contract Requirements in Connection with FIATA FCR Issue” to the abovementioned Rules and recommendations. AIFFU is a non-governmental organization. Its regulations are binding only to its members.

The legislative regulation of forwarding activities is stipulated by the Civil Code of Ukraine (articles 929 – 935), the Commercial Code of Ukraine (article 316), and the Law of Ukraine “On Forwarding Activity” of July 1, 2004. The draft of the Rules on Forwarding Activity was submitted to the Cabinet of Ministers of Ukraine. There are some statements concerning the FCR and some other forms of FIATA forwarding documentation in these Rules. Nevertheless, the aim of institutionalization of these forms of documentation shall not be achieved if the mentioned Rules are confirmed as Art. 9 of the Law “On Forwarding Activity” stipulates a rule according to which transporting and goods documents are ascertained by the laws of Ukraine. The Cabinet of Ministers was entrusted only to organize the application of unified forms and documentation used in the international practice of forwarding activity in Ukraine.

Coming from the above we must say that in spite of the multitude advantages of the FIATA documentation, it is rarely applied to in Ukraine.

We represented foreign financial institutions and importers in a number of disputes arising out of FCRs issued by Ukrainian freight forwarders. The practice shows that when disputes arise, only some forwarders respect the FCR and the obligations arising therefrom. Quite often, when the cargo disappeared, forwarders refused to recognize the FCR as a valid and binding document under Ukrainian law. They argued that the instructions of the FCR holder with regard to the cargo were not binding upon them since they had a written agreement with a principal (exporter or cargo owner) and only instructions of the principal had to be validly accepted.

In case of a conflict between the financier which holds the FCR and the principal having a written agreement with the forwarder, the forwarder almost always accepts the instructions of the principal. Meanwhile, this position contradicts one of the key purposes of the FCR, which is that the instructions are irrevocable and that the goods accepted by the forwarding company under an FCR are then beyond the control of the exporter (cargo owner).

Thus, the Ukrainian practice recognizes the FCR as a valid and binding tool. However, to get the result, one must be ready to come over many obstacles in the long run.

September 16, 2008

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