IN MARITIME trade, the original bill of lading effectively represents the cargo itself. At its simplest, the shipper receives the bill from the carrier, and transfers it to the consignee in return for payment for the goods.
‘Negotiable’ bills may be transferred between entities for payment, together with the right to receive the goods, while the goods are in transit.
The consignee or transferee hands the bill of lading to the carrier as evidence of the right to collect the goods and for cancellation.
Equally, a bank may have an interest in the cargo, under a letter of credit, holding the original bill of lading until the debt is satisfied. In this context, the bill of lading represents the bank’s security for that debt.
This also serves to illustrate the care required; release of goods without an original bill of lading can lead to financial liabilities to entities other than the direct contracting parties.
A lost bill
In the case of a lost bill, shippers or alleged transferees of the original may seek to press the NVOCC for a duplicate.
Anybody who is holding an original bill of lading acquired in good faith can claim delivery; where two sets of bills exist there is risk of two entities with apparently equally valid claims, demanding delivery of the cargo. Additionally, if the shipper has not been paid he retains the right to dispose of the cargo provided that person is in possession of the original bill.
As a matter of law, there is no exception to the simple working rule that delivery without production of bill of lading is at the NVOCC’s own risk. You are not bound to deliver cargo to any person other than the lawful holder of the original bill, unless a court so orders.
Where a bill is absent and the importer is demanding delivery, a recommended solution is to require a bank guarantee (or a company letter of indemnity countersigned by a bank) in your favour.
The whole question of the delivery of cargo without production of the corresponding original bill of lading, whether lost or otherwise, is fraught with potential exposures for the NVOCC or other issuer.
No matter how strong or important your commercial relationship may be, simply do not accept promises or bow to pressure.
The law will support you if you refuse to deliver until a valid bill of lading has been surrendered.
As the bill of lading is a document of title, a person presenting it to the carrier or its agent is ostensibly entitled to collect the goods and the carrier cannot refuse to deliver the goods to that person.
If someone claiming to be the receiver cannot produce the bill, what evidence is there that they are entitled to the goods?
There are innumerable circumstances which may lead to a request to release cargo without the production of the original bill(s).
A sale contract may have collapsed and the seller may want to sell to someone else.
The consignee may be facing cash flow issues or have a financial dispute with the shipper.
In extreme circumstances, the supposed receiver’s intention may be to steal the cargo and the sale proceeds, while the seller or the bank still retains the original documents.
As the original bills represent surety for the purchase price, if the carrier hands the goods over to an unauthorised party who does not hold the original, that person is effectively denying the legitimate holder his right to collect the goods.
If the receiving agent asks for authority to release the cargo to a consignee who cannot present an original bill of lading, it is recommended that you consult your legal or insurance advisors in order to obtain the full indemnity before entertaining any such request.
Helpful guidelines to remember
- Under no circumstances accept a ‘guarantee’ signed by the importer alone.
- Implement explicit and adequate training for staff, whereby only a designated senior manager has the authority to approve requests for irregular releases.
- Ensure you collect any charges due to you before releasing goods.
- Do not let any debate or argument about such costs blind you to the absence of the bill of lading.
- Do not succumb to any commercial pressure to release goods without the appropriate documents.
- Under no circumstances accept faxed or photocopied bills of lading or guarantees.
- Only act upon receipt of original documents.
* Mike Yarwood is claims executive at TT Club
This article appeared in the December 2019 edition of DCN Magazine