DCN December Edition 2019

MARITIME LAW
Bills of lading and complexities
Lost bills of lading have the potential to cause significant exposures
if handled incorrectly, writes Mike Yarwood
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.
POTENTIAL EXPOSURES
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?
PRESSURE POINTS
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
Mike Yarwood, claims executive, TT Club
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 wadvisors 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.
TT Club
52 December 2019
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