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, he is effectively denying the legitimate holder the security the original bills represent, by virtue of preventing that entity from themselves surrendering the bill and collecting the goods from the carrier.

Action steps

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 correct indemnity before entertaining any such request. A sound indemnity must include at least:

• Backing by a first class bank, insurance company or mutual association;
• Adequate undertaking value (usually not less than 200% of the CIF value of goods);
• Indemnity for all claims and costs in association with issuing a duplicate bill;
• Validity for at least as long as the minimum period for legal actions under contract in the relevant jurisdictions (not just the time-bar period stated in the conditions of carriage);
• An effective law and jurisdiction clause to enforce the indemnity.

There are also some further practical comments to make and matters to be considered.

As discussed in the article on lost documents, it is always prudent to check with the exporter/shipper (where known) that payment has been made and that it is therefore in order to release the goods from that perspective.

Under no circumstances accept a 'guarantee' signed by the importer alone; it is critical to take robust steps to protect the legal position and secure a full bank guarantee or letter of indemnity.

"It is critical to take robust steps to protect the legal position and secure a full bank guarantee or letter of indemnity"

Implement explicit and adequate training for staff, together with a full escalation process whereby only a designated senior member of staff has the authority to approve requests for irregular releases.

Naturally, ensure you collect any charges due to you or others (freight, duty/ tax, shippers' disbursements, demurrage etc.) before releasing goods. Conversely, 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.

We hope that you will have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested...

We look forward to hearing from you.

Peregrine Storrs-Fox
Risk Management Director, TT Club