ISBP 745 Article D D5: Transhipment — When Permitted on the Transport Document

Introduction

Transhipment—the transfer of goods from one vessel to another during transit—is a common practice in international shipping. Under documentary credit practice, the treatment of transhipment on the transport document is governed by ISBP 745 Paragraph D5 and UCP 600 Article 20. Whether transhipment is permitted, prohibited, or silent in the credit determines how the transport document must be presented. This guide explains how D5 works, the transport document requirements for transhipment, and how to ensure your documents comply.

Failure Modes

1. Transhipment indicated when prohibited. The credit prohibits transhipment, but the bill of lading shows "transhipped at Singapore." The bank finds this a discrepancy.

2. Transhipment port not shown when permitted. The credit permits transhipment, but the bill of lading does not indicate the transhipment port. The bank cannot confirm the transhipment occurred as permitted.

3. Multiple transhipments when credit allows only one. The credit allows one transhipment, but the bill of lading indicates two transhipments. This exceeds the credit's permission.

4. Transhipment notation ambiguous. The bill of lading contains language that may or may not indicate transhipment (e.g., "via Singapore"). The bank may interpret this as a transhipment indication.

5. Transhipment on a document that prohibits it. The bill of lading itself states "no transhipment" but the goods are actually transhipped. The document contradicts the actual shipment.

Resolution Steps

1. Confirm the credit's transhipment clause. Determine whether the credit prohibits, permits, or is silent on transhipment. This determines how the transport document must be presented.

2. Instruct the carrier on transhipment rules. If the credit prohibits transhipment, confirm with the carrier that the goods will be shipped directly to the destination port without transhipment.

3. Verify the bill of lading for transhipment notations. Before submission, check the bill of lading for any transhipment notations. If the credit prohibits transhipment, ensure no such notations appear.

4. If transhipment is permitted, ensure the ports are correct. The bill of lading should show the original port of loading, the transhipment port (if applicable), and the port of discharge.

5. If transhipment is prohibited, request a direct bill of lading. The carrier should issue a bill of lading showing a direct route from the port of loading to the port of discharge.

6. Handle partial transhipment carefully. If some goods are transhipped and others are not, the bill of lading may indicate this. If the credit prohibits transhipment, this is a discrepancy.

7. Coordinate with the freight forwarder. If a freight forwarder is involved, confirm they understand the credit's transhipment rules and will issue a compliant transport document.

8. Address transhipment discrepancies immediately. If a transhipment discrepancy is identified, contact the carrier immediately to request a corrected document.

Conclusion

ISBP 745 D5 addresses transhipment on transport documents. The key is understanding the credit's transhipment clause: if transhipment is prohibited, the transport document must not indicate it; if permitted, the document may show the transhipment port. A pre-submission review—checking the bill of lading for transhipment notations against the credit—eliminates this discrepancy.

FAQ

Q1: What if the credit is silent on transhipment?
Under UCP 600 Article 20(a), if the credit does not prohibit transhipment, the bank may accept a bill of lading that indicates transhipment. The credit is treated as permitting transhipment.

Q2: Can the bank reject a bill of lading that shows transhipment when the credit is silent?
No. UCP 600 permits transhipment unless the credit expressly prohibits it. If the credit is silent, the bank cannot reject the bill of lading for indicating transhipment.

Q3: Does this rule apply to air shipments?
Yes. For air shipments, transhipment on the air waybill is treated similarly. If the credit prohibits transhipment, the air waybill must not indicate it.

Q4: What if the transhipment occurs but the bill of lading does not show it?
If the credit permits transhipment, the bill of lading may or may not show it. If the credit prohibits transhipment, the bill of lading must not show it. The bank examines the document, not the actual shipment.

Q5: Can the applicant waive a transhipment discrepancy?
Yes, under UCP 600 Article 16(b), the applicant may waive any discrepancy, including a transhipment notation on the transport document.

Source Notes

Source 1: "Update on Sea Cargo Manifest & Transhipment Regulation" — Maersk (2023). Context only: context on maritime transhipment regulations and transport documentation requirements.

Source 2: "UCP 600 – ultimate 2026 guide" — Trade Finance Global (2026). Context only: reference on UCP 600 transhipment rules and transport document requirements.

Source 3: "Understanding Ocean Bills of Lading: Key Details and How They Work" — Investopedia (2023). Context only: overview of bill of lading practices, including transhipment notations.