Bill of lading problems and issues are truly best avoided at all costs. This is because, in general, resolution is highly complex and requires much time, effort and expertise. Further, resolution of problems with a bill of lading will generally cause significant delays and add considerable costs to your shipments.
The bill of lading is an important document because it is legally binding and used by many parties during the shipping process, regardless of the freight method. It is important to be aware of circumstances – potentially leading to problems and issues – you could encounter during import or export of goods. Read on for more.
Bill of lading problems, issues and complexities you want to avoid
What are bills of lading and how do they work
In trade, the original bill of lading (BoL or B/L) effectively represents the cargo itself. The bill of lading is the contract detailing the goods being shipped, and the terms and conditions agreed between shipper and consignee.
At its simplest, the shipper receives the bill from the carrier and transfers it to the consignee in return for payment for the goods. The consignee or transferee hands the bill of lading to the carrier as evidence of the right to collect the goods, or for cancellation.
The bill of lading contract can be in several forms. Negotiable bills can also be transferred between entities, along with conditions for payment, so that ownership of goods can be handed over whilst goods are in transit. Equally, a bank may have an interest in the cargo under a letter of credit, and hold 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. It is important to understand that a number of different types of parties can be involved in a bill of lading. This is another reason why care is required when handling this document.
More information on the specifics of a bill of lading
For a detailed but easy and friendly guide to the bill of lading.
Find out the various types of bills of ladings.
Bill of lading process flow that minimizes problems and trouble
What complexities arise from bill of lading problems
A lost bill of lading
The responsibility of a lost bill of lading falls on the buyer in the case of importing, and the seller when the cargo is being exported. Goods cannot be released without the original bill of lading. A letter of indemnity or bank guarantee is not sufficient documentation to release the goods. Anyone holding an original bill of lading can claim delivery of cargo.
Release of the cargo will be done in good faith that the holder is the correct receiver. The generation of documentation to replace a missing bill of lading is an involved process. Release of cargo to the party with replacement documentation requires extensive verification to ensure it is not a case of fraud.
Shippers, or alleged transferees of the original, may seek to press the Non Vessel Owning Common Carrier (NVOCC) for a duplicate. In addition to a duplicate bill of lading, further documentation may be required, such as:
- Shipper’s statement on Shipper letterhead
- Shipper’s authorization on Shipper letterhead
- Shipper’s letter of indemnity on Shipper letterhead
- Consignee letter of indemnity on Consignee letterhead
- Bank Guarantee on Bank letterhead
- Commercial Invoice and packing list
The shipper’s statement would describe the circumstances of loss. If the loss occurred during the use of an express mail service, a letter from them, detailing the loss, would be required.
This information assists in verifying the rightful owner of the goods, and letters of indemnity offer assurances that the goods can be released to the confirmed party by an irregular process. This reduces the financial risk in releasing goods without the original bill of lading.
There is no exception to the rule that delivery without production of bill of lading is at the NVOCC’s own risk. Unless ordered to do so by a court, they are not bound to deliver cargo to any person other than the lawful holder of the original bill.
We recommend communicating with all parties as soon as you become aware of a lost bill of lading. When a bill of lading is missing, the payments made as part of the shipping process can be affected. For example, if shippers have not received payment, they retain the right to dispose of the cargo provided they are in possession of the original bill.
How to handle a lost bill of lading
More than one customer demanding delivery
Imagine if two bills of lading were created and, as a result, there is the risk of two parties with apparently equally valid claims demanding delivery of the cargo.
In this situation it is likely that one set of bill of lading documents is unauthorized and generated in error. In these cases, however, the goods will be released on a ‘first come, first served’ basis. This is why great care must be taken when generating bills of lading.
If more than one party approaches at the same time, assistance will be sought. In these cases goods will likely be discharged to the port or warehouse and held under the master’s control until the issue is resolved.
What to do when presented with more than one bill of lading
Receiver cannot provide original bill of lading
There are innumerable circumstances that may lead to a request to release cargo without the original bill of lading being produced.
A sale contract may have collapsed and the seller may want to sell the goods 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 unauthorized party who does not hold the original, that person is effectively denying the legitimate holder his right to collect the goods. This is why, in the case of missing bills, so much supporting evidence from multiple parties is required to verify ownership.
If the receiving party 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 full indemnity before entertaining such request.
What happens when receiver cannot provide original bill of lading
Goods released to a wrong party
If correct working practices are followed, release of goods to a wrong party should not occur. Should it occur we recommend contacting the company that has received the goods, immediately followed by your insurer and the shipment’s owner. Cargo incorrectly released can very quickly go missing. It may be necessary to contact the police to ensure the matter is dealt with as a priority, or if you believe criminal activity may be involved.
What to do when goods released to the wrong party despite correct bill of lading
Always minimize potential risks
No matter how strong or important your commercial relationship may be, do not accept promises or bow to pressure. Cases of fraud often mention a good history of payment on delivery prior to an incident occurring.
The law will support you if you refuse to deliver or release cargo until a valid bill of lading has been produced. 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.
Minimize potential risks to avoid bills of lading problems
Need help with your bills of lading
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