BIFA Good Practice Guides

A Guide to Due Diligence on Release of Bills of Lading and Freight

bifa.org Bills of Lading are the main documents used in the transport of goods by sea. It can be confusing to complete or give instructions on completion and to use bills of lading correctly. In this brief Guide, we focus on the main types of bill of lading, what information should be contained within them, the pitfalls Members may encounter and how to avoid them. The final area that is covered suggests prudent steps that are applicable to the physical release of cargo.

Types of Bill of Lading The Main types of Bills Title aside, there are upwards of 37 different types of Bill of Lading, many There are numerous types of bills of of Lading being variations on a common theme. lading however, for the purposes of In broad terms bills of lading fall into Below we cover the main four specific this guide we will give a brief overview two groups in terms of title - types. of the purpose of a bill of lading and the main differences between the four A negotiable Bill of Lading is a An Ocean Bill of Lading is issued most commonly issued types. It is document of title, which may be used by an actual carrier and covers the important to remember that bills may to transfer ownership of the goods sea transport from the port of loading either be issued by the carrier, a non- from one party to another. The original to the port of destination. In these vessel operator (NVO) or a consolidator consignee, by endorsing (signing) circumstances it does not cover inland which will lead to variations in format. the back of the bill, transfers title in movements. the goods to another party (the new

consignee). The new consignee may The Purpose of a Bill A Through Transport Bill of Lading transfer title another party and so on. of Lading may include inland transport, whether For a bill of lading to be negotiable it collection in the exporting country and/ A bill of lading fulfils three main must be “Clean” and drawn “to Order” or delivery in the importing country. purposes: - of the consignee. For it to include collection, it should

state the collection point in the “Place 1 It is evidence that a contract As a document of title, the bill is in of receipt” or “From” box. For it to exists between a shipper and a favour of the party to whom it has include delivery it should state the carrier (bills of lading should only been endorsed and the carrier should delivery point in the “Final destination” be issued once the goods have release the cargo to the party who box. been collected or received by the presents the correctly endorsed

carrier) original bill of lading to the carrier with Under a “Through transport bill of proof that they are the endorsee or It is a receipt issued by the lading” the carrier only accepts liability 2 authorised by them. It is essential that carrier to the shipper: the goods whilst the goods are on their vessel. the party receiving the endorsed bill are in the carrier’s possession In the event of a claim for loss or of lading has adequate procedures in damage, the claimant holds all parties The bill of lading may be a place to check the bill’s authenticity 3 responsible including those contracted document of title if made to and the holder’s authority as endorsee by the carrier and these parties may be order and show who has the or authorised agent prior to releasing difficult to identify. right to have possession of any cargo.

documents and/or freight. If it is A Combined Bill of Lading not negotiable it is known as a A non-negotiable Bill of Lading is (Multimodal) this type of bill of lading straight bill of lading. not a document of title and does not may also include inland collection permit ownership to be transferred and /or final delivery. However, under from one party to another as previously combined bill of lading, the carrier described. Where original bills of lading accepts liability for the entire journey. have been issued the release of the Therefore, in the event of a claim for cargo at destination can only be to the loss or damage the claimant need only named consignee upon receipt of at hold the carrier responsible. least one of the original bills issued.

A Guide to Due Diligence on Release of Bills of Lading and Freight bifa.org Page 1 of 4 A House or NVO Bill of Lading is 10. Place, date, and signature of either a diagonal cancellation not valid issued by a party who is not operating the carrier, shipping company, vessel for carriage extending over at least the vessel but takes on carrier operator or captain of the ship or two-thirds of the bill. responsibilities. authorised agent of any of these. 7. Never allow blank bills of lading to get into the hands of clients or Waybills are often used rather than Issuing an Export Bill other unauthorised personnel. bills of lading. These are sometimes of Lading 8. Ensure that the releasing agent referred to as sea or express waybills. named in the bill of lading is They are non-negotiable documents When issuing a bill of lading or giving properly instructed and receives a and should only be used where there instructions to the ocean carrier to copy of the bill in good time. is no intention to transfer title. The draft the bill of lading for approval, the carrier may release cargo to the named following must be considered in order 9. If you have no regular consignee without presentation of to prevent problems at a later stage: - correspondent of your own at the the bill of lading. A waybill fulfils the 1.  Never accept unwritten or unclear destination, it may be possible to following two functions, it is a receipt instructions in any circumstances use the ocean carrier’s agent. If you do this there is a risk that the for the goods and evidence of the 2. Always check and satisfy yourself cargo may be released on the basis contract of carriage. prior to moving shipments that of the ocean carrier’s (rather than letter of credit requirements may the NVO/NVOCC’s) bill. To avoid be met; if there are any doubts FIATA Bills of Lading this, the ocean carrier’s bill must check with your principal There are specific rules regulating be endorsed: “Release only against the issuance of FIATA bills of lading. 3. Do not issue or approve bills of presentation of (NVO/NVOCC’s Pre-numbered FIATA bills of lading lading containing details you know name) bill of lading number...” to be false, in particular: - may be issued by BIFA to Members 10. Take care when issuing bills to a and should only be used by the party i. incorrect date of shipment named consignee or requesting to whom they are issued and are not ii. incorrect name of vessel such bills to be issued as the transferable to any other parties. As iii. incorrect description of cargo shipper has the right to change an alternative, a print licence may also (including any description such the consignee at any time up to be purchased but strict rules regarding as clean when discrepancies or delivery. To order bills must be colours, watermarks and layout must damage have been noted) released to the entitled party. be adhered to. iv. incorrect port or voyage details 11. If the shipper wishes to stop the goods while they are in transit 4. Wait until the shipping line has they may be entitled to do so but Contents of a Bill of Lading confirmed that the cargo has they must return all the original Bills of lading should include the been loaded before issuing bills negotiable bills of lading. Always following information: - or asking for them to be issued seek advice in case of doubt. 1. Name, address and contact details and describe the voyage correctly The shipper should in such cases of shipper on the documents. Never issue provide written instructions and shipped on board bills of lading 2.  Name, address and contact details confirmation that they will accept until the ocean carrier has issued of carrier all associated costs. their shipped on board documents. 3. Name of vessel 5. Do not issue or ask that freight 4.  Loading and unloading port paid bills of lading be issued or place of receipt and/or final unless the freight has been paid. Wait until the shipping line has destination (“orders”) Always carefully check shipped confirmed that the cargo has 5. Name and address of the person on board bills of lading received been loaded before issuing or entity to be notified upon the by you against letters of credit for bills or asking for them to be goods’ arrival unacceptable endorsements and issued and describe the voyage 6. Nature and condition of the goods rectify problems immediately. correctly on the documents. (number of packages or pieces, 6.  Do not issue bills of lading or ask quantity or weight, identifying for them to be issued for non- marks) existent or promised cargo on the 7. Apparent condition of the cargo basis that your client “wants to 8. Terms and place of payment (if check that the bank will accept already paid, it will state “pre-paid” them” (or similar story). If you do and if not, it will read “collect”) have to issue such bills, make sure they are clearly marked with 9. Number of original copies submitted

A Guide to Due Diligence on Release of Bills of Lading and Freight bifa.org Page 2 of 4 12. If the receiving agent asks for Handling an Import Bill iii. Ensure this indemnifies you and authority to release the cargo to of Lading all that may seek to rely upon it and that it is underwritten by a a consignee who cannot present When handling import consignments, it first-class bank (see above 12. i) an original bill of lading, you must is important to remember the following obtain authority and an indemnity points: - iv. Under no circumstances should supported by a bank guarantee from you accept a “guarantee” 1. Bills of lading may be documents the shipper in writing before agreeing signed by the importer alone of title and as such should be the to the release. You must check and proof that the person applying for v. All such releases must be ensure that: - the goods is the rightful owner authorised by a Director i. Any indemnity covers all parties provided they have not been or senior manager of your that may seek to rely on it and stolen. company before delivery orders is underwritten by a first-class are issued. The manager 2. Carefully check the bill of lading bank as the effectiveness of any responsible must sign the file against the copy you have been indemnity is dependent on the or manifest approving release. sent by the carrier/NVOC/NVOCC, liquidity of the party providing it. Any indemnities/guarantees or your correspondent for: - If the issuer becomes insolvent must be kept safely you may be liable for improper i. Dates vi. Check the wording is agreed by release and will not be able to ii. Ship’s name your insurers (see above 12.vii) recover under the indemnity iii. Voyage details unless it is backed by a Bank 6. Ensure you collect any charges iv. Cargo description, number of who will pay if the issuer defaults due to you or others (freight, duty/ packages, weights, etc. tax, shippers’ disbursements, ii. Your principal has agreed the v. Container number(s) demurrage, etc.) before releasing wording and the level of security vi. Seal number(s) the goods. Do not allow argument iii. It is addressed both to you and about such costs to blind you to vii. Shipper and consignee/notify your principal the absence of original bills of party names etc. iv. It is valid for a specific, sufficient lading. viii. Endorsements (on front and period of time, to comply 7.  Do not issue delivery orders or back of bill) for authenticity with law if you wish to limit its release notes before the original or qualification. Be vigilant application in time bill of lading or bank guarantee about amendments to the bill v. It covers sufficient financial has been handed over to you and of lading and identity of the limits, thereby allowing for the checked for accuracy – they could receiver worst possible scenario; in the be misused or fall into the wrong event of a claim, with costs, it 3. Insist on receiving a full set of the hands. original bills issued may need to be double the value 8.  Do not allow the client to inspect vi. Ensure that the document is 4.  Do not accept faxed copies or the cargo for any reason, until not a forgery – a facsimile or photocopies as “evidence” that the he has produced the original photocopy may seem to be a customer has an original bill in his bill of lading, even if damage is legitimate document, but it is not possession. Insist on seeing the suspected or known. In cases of legally acceptable originals before authorising release difficulty check with the manager of the cargo. vii. The wording has been approved responsible. by your insurers. Insurers may 5. If an importer is unable to produce 9. Do not succumb to commercial not approve the acceptance the original bills of lading: pressure(s) to release the goods of indemnities and may insist i. Check with the shipper without appropriate documents. on the insured requiring the by fax or e-mail via your 10. Should goods be released in error, original bill of lading otherwise correspondent at origin, promptly advise your insurer and they may refuse cover for any whether it is in order to release your correspondent at point of consequences of accepting the goods, and origin. People who have obtained the indemnity. If you do not ii. Insist on receiving a guarantee, cargo fraudulently may disappear advise the insurers and take countersigned and stamped quickly. Urgent action is necessary the indemnity, cover may be by a reputable local bank, to correct the situation. Contact the declined under which the consignee police if the circumstances warrant Never accept promises – only valid undertakes to present the such action. documents – at any time and under any original bills once they have circumstances. been received, and

A Guide to Due Diligence on Release of Bills of Lading and Freight bifa.org Page 3 of 4 Release of Cargo a signature from the person collecting them and record the External factors may significantly This guide forms part of a details of their Identity card etc. influence the processes to be adopted series of Good Practice Guides when physically releasing cargo, two 5. Have adequate procedures in place on the subject of Due Diligence. of the most important being customs to ensure that blank documents The individual guides are: procedures and the ports own systems. can only be accessed by BIFA Good Practice Guides In addition to the previously mentioned authorised personnel and issued in Good Practice line with company policies - do not Guide to Due documentary procedures, companies A Guide to Due Diligence Regarding Credit Diligence should take care when releasing cargo allow other parties to hold blank Application Procedures regarding Credit either manually or electronically. collection orders Application G AGE OO ER D AV Procedures E X 6. If using the ports electronic C R E L O L

O E

P N Key points to consider are: - collection systems only use T contractors who are registered with 1. Ensure that all documents are BIFA Good Practice Guides accurately prepared and completed that port bifa.org

with full and accurate information 7.  Where applicable ensure that the A Guide to Due Diligence at an Individual to ensure efficient and effective contractor is aware of the checks Good Practice Shipment Basis Guide to Due customs clearance and release that need to be made prior to Diligence at 2. Do not deal with customs accepting a container: - an Individual Shipment Basis clearance if you are not well versed i. Container number in this area ii. Damage to the container bifa.org BIFA Good Practice Guides 3. It is essential to know who iii. Seal number you are releasing collection A Guide to Due Diligence 8. Internal procedures need to be in on Release of Bills of documents to, preferably using Lading and Freight Good Practice place to monitor collection and a regular contractor with whom Guide to Due final delivery Diligence on you have written mutually agreed Release of Bills procedures: - 9.  Ensure that any haulier agreements of Lading and that you have entered into either Freight i. If sending documents prohibit or limit the ability of the electronically check that the bifa.org master haulage contractor to sub- e-mail address is correct contract the work ii. If a contractor collects the 10. When organising haulage, it documents insist on seeing is important to ensure you are either an ID card or similar and/ competent to advise your customer or driving licence on the differing responsibilities and 4.  When manually providing liabilities between “Merchant” and documents to a contractor obtain “Line” haulage.

This Guide has been produced by the Association with a view to providing general industry guidance to members. However, it is not legal advice nor is it a substitute for legal advice. The Association is only in a position to provide general non-legal guidance as each member’s situation may be different and this may affect particular legal advice that may be given by suitably qualified lawyers to each member. The Association is not able to provide legal advice and if you wish to ensure that any specific action you intend to take while relying on this general guide is legally appropriate you are advised to consult a qualified lawyer experienced in the relevant legal field which may include forwarding, transport, logistics, international trade and commerce in advance of taking such action.

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