FCR in Ukraine

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 FCR FIATA. FCR is the oldest form of forwarding documents adopted by FIATA in 1955. FCR FIATA is a non-negotiable instrument that is documented by a forwarder undertaking the consignment under irrevocable shipping instructions. 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. Thus, the forwarder 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 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 FCR if it is provided by the letter of credit. Under availability of the FCR should be understood 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 activity is stipulated by the Civil Code of Ukraine (articles 929 – 935), the Commercial Code of Ukraine (article 316), the Law of Ukraine “On Forwarding Activity” of July 1, 2004. The draft of the Rules of forwarding activity was submitted to the Cabinet of Ministers of Ukraine. There are some statements concerning FCR and some other forms of the 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 to ascertain by the laws of Ukraine. The Cabinet of Ministers was entrusted only to organize the application of unified forms and documentation, used in 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 the dispute arises, only some forwarders respect the FCR and obligations arising thereof. 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 the written agreement with the forwarder, the latter almost always accepts the instructions of the principal. Meanwhile, this position contradicts to one of the key purposes of the FCR saying that the goods accepted by the forwarding company under FCR become beyond 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.

Arthur Nitsevych
Partner, International Law offices, CNI
nitsevych@interlegal.com.ua
www.interlegal.com.ua