How Important is an Original Bill of Lading?
Most of the freight we deal with on a daily basis is transported by boat – and for this you will need an original Bill of Lading. It is one of the more vital documents needed for ocean transport.
In a way, one can say that the Bill of Lading is symbolic of the goods themselves. The reason for this is that the right to claim title to the cargo may in some cases be transferred to another person by way of an endorsement on the Bill of Lading before the goods have even reached their destination.
Under normal circumstances, a Bill of Lading will be drawn up by the shipping line. They will issue it to the person who contracts them to transport the goods as soon as the cargo has been received and loaded onto the ship.
Among other things, the Bill of Lading will have the name of the buyer to whom the cargo has to be released. This can be either the consignee, a freight forwarder or a transport company that will take the cargo to its next destination.
Rights of the Holder of a Bill of Lading
The Bill of Lading gives the holder the right to claim possession of the freight at the port of destination. The holder has to present it to the shipping line – provided it is also named as the consignee on the document. Once the shipper has receiver the original Bill of Lading from the shipping line, they must arrange for it to be sent to whoever has to receive the cargo.
It is important to notice that the shipping line will not release the goods unless the consignee can present one or more copies of the original Bill of Lading. This may seem unreasonable to some but it’s important to remember that when agreeing to transport the goods, the shipping line contracts with the shipper and not with the consignee.
Three original Bills of Lading are usually issued. Each one of these can be presented in exchange for the cargo. However, we sometimes are asked what will happen if someone uses one of the others to claim the cargo. But this should never happen, as once one Bill of Lading has been surrendered to the shipping line, the other two originals automatically become void.
The shipping line can expose itself to liability if it released cargo without producing an original Bill of Lading. If the shipping line delivers the cargo to a party without an original Bill of Lading and later another party lays claim to it, the shipping line will be liable to the holder of the original bill for the full value of the cargo.
In practice it commonly happens that the shipping line will insist that the consignee provide a letter of indemnity and/or security for the value of the cargo as cover in the event that the line is exposed to any claims. Unfortunately it sometimes happens that unscrupulous shippers take advantage of this situation. There have even been situations where blackmail occurred when the right consignee wasn’t in possession of the original Bill of Lading. On the other hand, it has also happened that a less than honest shipper gave the three original Bills of Lading to three different parties, getting paid by all three. Although only one will be legally entitled to delivery of the goods – the one who is first to present his original to the line – it can be difficult getting the money back, especially when a shipper is overseas and difficult to prosecute.
This can all be very frustrating, not to mention costly. If there is an issue between a shipper and consignee, an urgent court application can be brought for an order directing the shipping lines involved to release the cargo in the absence of the original Bills of Lading. Shipping lines will often be more comfortable with releasing cargo on the strength of a court order, as they are then assured that no other party can later claim the value of the cargo from them. Such applications will usually only be granted provided evidence of entitlement to the goods is put up, along with a plausible reason as to why the applicant does not have the original Bill of Lading. Furthermore, this type of resolution is not without the stress and high cost of demurrage, storage and legal costs which escalate on a day-to-day basis.
As freight forwarders, we can take care of all the legal and practical aspects of your freight, such as ensuring that the original Bill of Lading will be presented to the right people at the right time. Call us today to put your mind at ease and take the worry out of import and export.