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A B/L is made out covering goods consigned to the order of John Jones.

Is it necessary for the bank to endorse it as most railway


agents say that they have to have bank's endorsement before they surrender goods?
Answer. - The railway agent has no right to dem& the endorsement of a bank, unless the goods covered by the B/L are stated to be
deliverable to its order & the carriers would be liable for damages arising from the detention of the goods because such a dem& was not
complied with.
Endorsements. Right Of Accepting Bank To Require Endorsement Of Draft Before Payment
Bank A sent a dem& draft made payable to their own order & not endorsed by them to bank B for collection. Bank B presented to
drawees who accepted draft payable at bank C, to whom it was duly presented & accepted, but was refused by them when sent in on
deposit & marked "not endorsed." Bank B claims that drawees when they accepted the draft took the responsibility of its not being
endorsed & that bank C could not refuse payment, having already accepted it. Bank C claims it was only an order to pay when endorsed
& in order, the same as a cheque, & that their acceptance stamp only signified that they held funds. Which bank is correct?
Answer. - Bank C is right; they would not be justified in paying without endorsement, & their certification could not be taken to mean
more than that they would pay the item when it was completed by endorsement.
Bill For Collection - Should Be Endorsed By Banks Sending Same For Collection
A bill is sent for collection bearing on the face the stamp of the bank which sent it. The stamp shows the name of the bank, the branch,
etc. The item is not made payable to the sending bank, & is not endorsed by it.
Has the bank receiving this bill for collection any right to object?
Answer. - One of the responsibilities assumed by the collecting bank is (the return of the money, should the prior endorsement prove to
be forged or unauthorized. On this ground they might properly ask that the bill should be endorsed to them by the bank sending it for
collection, so that their recourse might be clear.
Collections - A Case Of Negligence On Part Of Collecting Bank
A bank on presenting a draft for acceptance is tendered a post-dated cheque for the amount. This it holds, together with the unaccepted
draft, until maturity, when the cheque is dishonoured. The bank having failed to notify the drawer & endorsers of the draft that it had not
been accepted, does it lose its right of recourse against said drawer or endorsers?
Answer. - We think the position is that the collecting bank has allowed all the parties on the bill to be discharged, & that it has no
recourse except to make the best it can out of the dishonoured cheque.
Cancellation Of Acceptance
We receive a time draft for collection, the draft is accepted in the morning & in the afternoon the drawee comes to the bank, & asks to be
permitted to erase his acceptance, saying his bookkeeper had forgotten a credit entry which he had just found out, & consequently does
not owe the amount. The draft is protestable if not accepted.
Answer. - The accepting bank should never allow an acceptor to cancel his acceptance.
B/L To The Order Of A Bank - Goods Delivered By The Carrier To Someone Other Than The Bank Without The Latter's
Authority
A bank cashes a draft accompanied by a B/L drawn to the order of the bank. If the carrier should deliver the goods to someone other
than the bank, can he be held accountable by the bank?
Answer. - Assuming that by a B/L drawn to the order of the bank is meant a B/L in which the bank is named as consignee, the carrier
could be held accountable. R. S. C. chap. 118 (B/L Act), enacts as follows:
"Every consignee of goods named in a B/L & "every endorsee of a B/L to whom the property in "the goods therein mentioned passes
upon or by reason of "such consignment or endorsement, shall have transferred to "& vested in him all rights of action, & be subject to
"the same liabilities in respect of the goods as if the con-"tract contained in the B/L had been made to "himself."
Draft - " No Protest For Non-Acceptance." Return Of Bill Dishonoured On Day Following Maturity
A draft sent by Bank A to Bank B for collection with instructions - "No protest for non-acceptancen attached, was returned by Bank B to
Bank A on the first business day after the maturity of the bill unprotested. Can the drawer of the bill decline to take it up on his being
requested to do so by Bank A? If not, can Bank A hold Bank B liable for the amount? Under section 99, Bills of Exchange Act, is not the
return of the bill unpaid a good notice of dishonour?
The bill in question bore only the endorsement of the drawer, he having made it payable to his own order.
Answer. - As the return within the proper time of the dishonoured bill was in point of fact notice of dishonour, we do not think Bank A
can refuse to take it back, & if they notify their customer within the proper time of the dishonour, either by a formal notice to that effect
or by sending him the dishonoured bill, he is liable.
The rights of the parties are not affected by the fact that there is no endorsement other than that of the drawer. If Bank A's customer had
been an endorser & not the drawer, he would in turn have the same right to pass on the bill to the drawer.
Canadian Draft On London Made Payable To Resident Of Foreign Country, & Cashed By A Foreign Bank For A Person Who
Forges The Payee's Endorsement - Rights & Obligations Of Parties
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A Canadian bank sells a sterling draft on London to a customer. It is made payable to a person in a foreign country. The draft is cashed
by a foreign bank for a person who forges the payee's endorsement, which bank in turn collects the amount through its London agent
from the drawee in London.
Under these circumstances, has the purchaser of the draft any right of action against the bank which drew it? We presume not, but if so,
what remedy has the owner of the draft?
Answer. - The purchaser has, as U assume, no right of action against the bank which drew the draft; he could only have such a right
upon the bill as a dishonoured bill, which he could not have unless it were in his possession.
The only other parties who might be liable are:
(1) The foregn bank,
(2) The London bank to which the bill was sent by it, & (3) The bank on which the bill was drawn.
The true owner of the draft, who might be either the purchaser or the payee (this depending on facts not stated in the question), would
probably have a claim on the foreign bank which cashed it on the forged endorsement, but his rights would be governed by the law of
the country in which the transaction of cashing the draft took place. If this were like the English law, his claim on the foreign bank
would be clear. He would also have a claim on the London bank which received the amount of the draft from the drawee bank, but their
liability might be affected by the nature of their relations with the foreign bank. His claims on both of these arise from their having
received & converted his property, & not out of any provision of law relating to bills.
The remaining question, namely, the owner's rights against the bank on which the bill was drawn, has not, so far as we are aware, been
judicially decided. The question is very important & interesting, & we give the reasoning on both sides of it.
Section 49 of the Act in very clear terms declares that where a signature on a bill is forged, the forged signature is wholly inoperative, &
no right to retain the bill or to give a discharge therefor or to enforce payment thereof against any party thereto can be acquired through
or under that signature, unless the party against whom it is sought to retain or enforce payment of the bill is precluded from setting up
the forgery. If effect were given to these words in their unqualified form, we would say without hesitation that a person claiming to be
the holder of a bill through a forged endorsement, even though he acquired the bill as a subsequent holder for value & without any
notice of the forgery, could not discharge the acceptor by presenting the bill on the day of its maturity at the proper place & receiving
payment from the acceptor & delivering the bill up to him. It must be borne in mind, however, that section 49 commences with the
words "subject to the provisions of this Act."
"Holder in due course" is defined by section 56 to be a holder who has taken a bill complete & regular on the face of it, under
conditions, of which one is, that he took the bill in good faith & for value, & that at the time the bill was negotiated to him he had no
notice of any defect in the title of the person who negotiated it.
By section 2, sub-sec. (g), the expression "holder" is defined to mean "the payee or endorsee of a bill who is in possession of it, or the
bearer thereof." Section 74 declares that the rights & powers of the holder of a bill are, among other things, (b) where he is the holder in
due course he holds the bill free from any defect of title of prior parties; & (d) where his title is defective, if he obtains payment of the
bill, the person who pays him in due course gets a valid discharge for the bill.
Section 133 declares that the endorser of a bill by endorsing it (b) is precluded from denying to a holder in due course the genuineness &
regularity in all respects of the drawer's signature & all previous endorsements; 133 (c) is precluded from denying to his immediate or a
subsequent endorser that the bill was, at the time of his endorsement, a valid & subsisting bill, & that he had then a good title thereto.
Section 139 provides that a bill is discharged by payment in due course by or on behalf of the drawee or acceptor, & that "payment in
due course" means "payment made at or after the maturity of the bill to the holder thereof in good faith & without notice that his title to
the bill is defective."
The arguments against the right of the drawee or accep-tor to claim a discharge by payment to a person, a holder under a prior forged
endorsement, are of course based upon section 49, which declares that a forged signature is wholly inoperative, & no right to retain the
bill or to give a discharge therefor, or to enforce payment thereof, can be acquired through or under that signature.
The arguments in favour of the right of the drawee or acceptor to claim a discharge by such payment are the following:
1. The statement in section 49 referred to is expressly declared to be "subject to the provisions of this Act." The statement that no right to
give a discharge can be acquired is also qualified by the words "unless the party against whom it is sought to retain or enforce payment
of the bill is precluded from setting up the forgery or want of authority."
2. Under section 133 (b) the first endorser after the forged endorsement is precluded from denying to his endorsee the genuineness of the
forged endorsement, & is also precluded from denying that he then had a good title.
The definition of "holder" by section 2 would include this endorsee & he would become a holder in due course within the meaning of
section 133 (b), at all events with respect to the endorsers subsequent to the forged endorsement. He could bring an action on the bill
itself against the prior endorsers. In order to hold the endorsers he would have to duly present the bill for payment, & if payment were
refused he would have to protest the bill for non-payment, or the endorsers would be discharged. He therefore has the right to present the
bill for payment, & to protest it. If he presented it for payment & it was paid, he could not of course protest it for non-payment. The
effect, therefore, of payment would be to discharge the liability of the prior endorsers.
Section 139 expressly declares that a bill is "discharged by payment in due course," & that "payment in due course "means" payment to
the holder in good faith & without notice that his title is defective." The holder mentioned in section 139 is the holder defined by section
2, namely, "the endorsee of the bill who is in possession of it." It would be a remarkable result if payment under such circumstances
would discharge the prior endorsers, & would not discharge the drawee or acceptor who actually pays. The reference to good faith in
section 139 refers to the good faith in making the payment & not to good faith of the holder. A way in which the various provisions of
the statute relating to this question can be reconciled is to confine the statement in section 49, that" no right to retain the bill or give
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discharge therefor can be acquired through or under the forged signature," to the case of a party claiming to be the holder through the
forged signature only. If he claims to be the holder through a genuine endorsement subsequent to the forgery, the other provisions of the
Act mentioned would appear to give the right to present for payment & receive payment & give discharge to the drawee acceptor.
As above stated, we are not aware of any judicial decision on this very important question, but we think it probable that when it comes
up for decision, the decision will be on the lines indicated.
Note. - This answer was given on the assumption that the foreign law as to forged endorsements is the same as English law. It was held
in Embericos v. Anglo-Austrian Bank (1905) 1 K. B. 677, that the validity of an endorsement in a foreign country is governed by the law
of that country, & it is usually the law in Continental Europe that a payment of a bill id good faith & without negligence is valid even
though the endorsement be forged. The Embericos case arose out of the drawing by a Roumanian bank of a cheque on a London bank
payable to the order of A. A endorsed the cheque in Roumania specially to B of London. The cheque was stolen by A's clerk who forged
B's signature, & it was cashed in good faith & without gross negligence by a bank in Vienna. At the time of such payment the
endorsements were apparently regular & in order, which is all that is required under Austrian law. The Vienna bank endorsed the cheque
to C in London, who presented it to the bank on which it was drawn & received payment. In an action by A against C for conversion,
Walton, J., gave judgment for the defendant on the ground that the Vienna bank had secured a good title to the cheque under Austrian
law which the English courts were bound to recognize, & had assigned that title to C. On appeal, this judgment was affirmed.
Draft with B/L Attached, Cashed by a Bank. Has the Acceptor any Recourse Against the Bank if the B/L should Prove to be
Forged, or if the goods are not as Ordered?
A bank has cashed a draft with hill of lading attachad, the goods being shipped to order of the bank. Has the drawee any recourse against
the bank if the goods are not as ordered or in the event of shipping bill being a forgery? Does the bank in any way guarantee its genuineness?
Answer. - We think the bank assumes no responsibility to the drawee in such a case. He has been instructed by the drawee to pay so
much money, which he has done. Even if it be said that the instructions were conditional on the doc.s attached being surrendered, this
would involve nothing further than that the bank should surrender the doc.s received from the drawer, whatever they may be. We think,
however, that if the bank should negotiate the draft to another bank, it might be held responsible to the latter for the genuineness of the
doc.s.
A draft is received for collection from a western bank with a B/L "to order" attached, instructions being "surrender B/L on payment."
Drawee asks for permit to examine goods: can collecting bank grant it?
Answer. - We do not think the bank ought to interfere in such a point without the approval of the parties interested.
Draft Accompanied By B/L For Payment - Surrender Of B/L To Drawee To Enable Him To Examine Goods
A bank holds a bill for collection, with B/L & certified invoice attached to be surrendered on payment only, the goods being in bond. Is
the bank justified in surrendering any of the doc.s for the purpose of enabling the drawees to examine the goods, & what risk would it
run by so doing?
Answer. - The bank would be responsible to the owners of the bill for any injury or loss caused by its action. What this might be would
depend altogether on the circumstances, but the bank by acting against its instructions, clearly takes on itself gratuitously whatever
responsibility there may be.
Accepted Bill Of Exchange With B/L Attached - Goods Not Equal To Sample
A bank holds a bill of exchange accepted by the drawee, to which is attached a B/L for wheat to the order of the bank. Before the bill
matures the drawee finds that the wheat is not up to the sample & refuses payment. Is the acceptor's obligation on the bill affected by the
defect in the security?
Answer. - Unless the acceptor could raise such a case against the bank, as would entitle him to repudiate his acceptance in toto on the
ground of fraud or misrepresentation, we think that he is liable for the full amount of the bill. Any remedy he has would be against the
person responsible to him for the defect in quality of the wheat.
Note. - With further reference to the above question the draft in question has stamped across it "doc.s attached to be surrendered only on
payment of draft," & written on it by the manager of the bank which holds it, the words: "B/L attached, 500 bushels wheat, car No.
1,524." These additions to the draft were on it when it was presented for acceptance & the B/L described was attached. The acceptor
claims that the words written & stamped on the draft by the bank entitle him to look to the bank for delivery of the wheat described in
the B/L, & that the bank is in no better position to enforce payment of the draft than the drawer. Is this so, & is the bank in any way
responsible?
Answer. - We think not. Even if the phrases mentioned were to be taken as representations held out by the bank to induce the drawee to
accept, they would be fulfilled by the surrender on payment of the bill, of the B/L actually attached at the time it was accepted.
B/L Endorsement
I. What
When the L/C U opened in ICBC stated that all shipping doc. are in favor of ICBC, ICBC has to endorse the originals before U
can collect goods. Come to ICBC with the originals of Ur shipping doc.s for ICBC to endorse so that U can proceed to take
charge of the goods.
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II. Why
To endorse Ur B/L so that U can collect goods from the shipping company & start production or sales early.
III. When
When U receive shipping doc.s are in favor of ICBC.
IV. How
Submit the following doc.ations to ICBC:
1. Application Form signed by legal representative/authorized person of the company & stamped with company seal. 2.
Original/photocopy of the B/L or airway bill against the import L/C.
3. Copy or photocopy of commercial invoice against import L/C.
4. Other doc.ations stipulated by ICBC.
V. Reminders
1. Once applied, Ur company cannot reject regardless of any discrepancy in the dispatched doc.s. Ur company has to pay or
accept.
2. Ur company must be rated by ICBC with an approved credit line.
3. Ur company must pay the security deposit stated in ICBC rules& provide guarantee on the difference b/w the L/C amount &
security deposit.
Straight B/L
In a straight B/L---non-negotiable B/L---the title to the goods is conferred directly to a party named in the letter of
credit (the importer usually), as such the title to the goods is not transferable to another party by endorsement. In other
words, the B/L is not negotiable.
The letter of credit calls for a straight B/L usually by using such words as "consigned to [the named party]" or "issued
in the name of [the named party]". The named party can obtain the goods directly from the carrier at destination.
Therefore, unless the cash payment has been received by the exporter or the buyer's integrity is unquestionable.
Order B/L
In an order B/L---negotiable B/L---the title to the goods is conferred to the order of shipper or to the order of a named
party in the letter of credit (the issuing bank usually).
The purpose of an order B/L is to protect the interest of the shipper or the named party to the title to the goods.
The title to the goods is transferable to another party by endorsement, usually on the reverse (back) of the B/L (B/L) by
the title holder of the B/L. If the endorsement of B/L is required in the letter of credit (L/C), all the originals must be
endorsed.
The letter of credit may calls for an order B/L that is:
(1) To order blank endorsed or To order of shipper & blank endorsed,
(2) To order of shipper & endorsed to order of [the named party], or
(3) To order of [the named party (other than the shipper)].
To order blank endorsed or To order of shipper & blank endorsed
Unless provided otherwise, a consignment that is "to order" means to order of shipper. The "blank endorsed" means
without specifying to whom the B/L (B/L) is transferred. In such instance, whoever bears the B/L after endorsement
holds the title to the goods.
If the sample letter of credit requires a B/L that is "to order blank endorsed", as such enter the words "To Order" in
the Consignee field in the B/L & other doc.s/forms.
In a "to order blank endorsed" B/L (B/L), technically speaking whoever bears the B/L after its issuance holds the
title to the goods.
If the sample letter of credit requires a B/L that is "to order of shipper & blank endorsed", as such enter the words "To
Order of UVW Exports" in the Consignee field, since the shipper in such L/C is UVW Exports.
In both the above sample cases, the B/L must bear blank endorsement of the shipper as follows:
UVW Exports (plus the authorized signature)
&, entering the words "To Order" or "To Order of UVW Exports" in either of the above cases is correct, but to avoid
rejection of doc.s, always follow the wordings stipulated in the letter of credit as a precaution.
To order of shipper & endorsed
to order of [the named party]
This letter of credit (L/C) requirement resembles the "to order of shipper & blank endorsed", except that the words "To
Order of [the named party]" must be indicated over the shipper's endorsement.
If the sample letter of credit requires a B/L that is "to order of shipper & endorsed to order of The Moon Bank", as such
enter the words "To Order of UVW Exports" in the Consignee field in the B/L & the endorsement as follows:
To Order of The Moon Bank
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UVW Exports (plus the authorized signature)


To order of [the named party (other than the shipper)]
The named party under this letter of credit (L/C) requirement most often is the issuing bank. The L/C does not call for an
endorsement, thus the exporter does not have to endorse the B/L.
The sample letter of credit requires a B/L "to order of The Sun Bank, Sunlight City, Import Country", as such enter the
words "To Order of The Sun Bank, Sunlight City, Import Country" in the Consignee field in the B/L & other
doc.s/forms.
10/20/2007 cristi& - If the b/l is issued to order blank endorsed instead of to the order of the issuing bank, the issuing
bank may have the following advantages:
Not liable to take any action in connection with the goods to which the b/l relates.
Not liable to any party (carrier, agent, port authorities...) for any liabilities (unpaid freight, demurrage, quay rent ...) in respect of
the goods to which the b/l relates.
No endorsement is made either to the applicant to enable him to take delivery of the goods or to the shipper in case the doc.s are
discrepant & rejected.
In despite of such above mentioned advantages, for the purpose of being able to control the goods until the applicant has fulfilled
his obligations under the contract for opening LC, the issuing bank would like the b/l to be made out to its order rather than the
one to order blank endorsed.
"To Order" Endorsements on B/L 31 August 2007
When a Letter of Credit asks for B/L with a phrase such as "B/L made out To Order & Blank Endorsed" this means that the
Consignee Box on the B/L has to literally state the words "To Order". Charles Williams of Thomas Cooper & Stibbard points out
that because the B/L is a doc. of title, the holder or a named consignee endorsing the reverse side of the bill can negotiate a B/L
made out "To Order". This is recognised by mercantile law. This means that property or security interests in the goods, which the
B/L represents, can be transferred by a simple endorsement rather than by a formal assignment.
Although no reference to a "To Order" statement is made in Article 20 of UCP 600, in the International St&ard Banking Practice,
Article 102 it does state that "If a B/L is issued to order or to order of the shipper, it must be endorsed by the shipper. An
endorsement indicating that it is made for or on behalf of the shipper is acceptable."
To endorse a B/L, the holder of the B/L (usually the Beneficiary of the Letter of Credit) has to sign on the back of the B/L. It is a
good idea to ensure that the person endorsing the back of the B/L is the same signatory signing all the other doc.s in the
presentation (although, of course, this does not apply to third party doc.s, such as Certificates of Origin & Insurance Certificates).
Although a signature is accepted by both Shipping companies & banks as an endorsement, it is good practice to always state after
the signature the phrase "For & On Behalf of .. (name of Beneficiary)."
If the shipment is going to Africa, the Middle East & some countries in South America & the Far East (always check with the
applicant on this matter), it may be necessary to also put a company stamp on the back of the B/L, but it is important that the mark
made by the stamp is in accordance with the wording on the Letter of Credit. Many years ago I was told by a bank that doc.s
presented for a shipment to China were discrepant because we had stamped an endorsement on the back of the B/L with the
company stamp. This company stamp spelt out the word LIMITED in full, whilst the Letter of Credit had used the abbreviation
LTD. The bank insisted this was a discrepancy because LIMITED & LTD were different words!
B/L endorsement
When B/L is made out to the order of a named bank, any endorsement made by a third party including shipper st&s void. This is
because the goods is in that stage in the bank's h& as owner of goods. Endorsement by the shipper can be valid where consignee
is stated TO ORDER ot TO THE ORDER OF THE SHIPPER. Only consignee (when is indicated TO ORDER OF XYZ) is
legally entitled to endorse the B/L, that is, it has the full right to TRANSFER THE PROPERTY OF GOODS. Can other party do
that? Obviously not. This endorsement does not apply where consignee is a named party (i.e. without 'TO ORDER OF' being in
this case non-negotiable BL )
Doc.ation used in international trade performs a number of separate functions & these can be divided into the following
categories: instruction; financial; identification; authorisation. In this section we will be dealing with those doc.s which are used
in international trading activity, with the exception of customs doc.s which are discussed in the CUSTOMS sections.
B/L
Consideration of the B/L as a doc. relating to the contract of carriage b/w shipper & ship owner, the responsibilities & liabilities of
each party, has been set out in Conventions (Hague-Visby Rules & Carriage of Goods by Sea Act 1971). The purpose of this
section is to consider the commercial use of the B/L in relation to the transfer of title to goods & in relation to the payN 4 goods.
Function of the B/L: three essential elements to an ocean B/L issued by a shipping line & covering the carriage of goods by sea:
1. It is evidence that a contract of carriage exists b/w shipper (exporter) & ship owner.
2. It is a receipt for goods, showing prima facie that they have been received into the charge of a carrier.
3. It is a doc. of title which allows title to the goods to be transferred by endorsement & delivery of the B/L. (Note: transfer
of title to the goods is not synonymous with transfer of property. Whoever holds the B/L may take delivery of the goods,
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but property will pass when buyer & seller intend it should do so under a contract of sale, usually when payment is
effected.)
Taken together, these three elements show the importance of the B/L to commerce over the years. With the B/L showing that a
contract of carriage exists & that the goods have been received by the carrier, a buyer & his bank are assured that the despatch of
goods according to the contract of sale is under way. Equally an exporter, holding a B/L as title to the goods, may, by choosing
when to pass the bill to the buyer, control when the latter takes delivery of the goods. Thus the B/L becomes an essential element
in controlling payment procedures in international trade.
A number of different types of B/L are available to exporters, according to the type of service being used. Furthermore, a number
of different clausings are applicable to B/L & these are considered under "Clean bills & claused bills", following the details which
must be shown in the B/L.
Main details to be incorporated in the B/L
Most B/L make provision for the following details to be inserted as shown:
1. name & address of the shipper (i.e. the person entering into the contract of affreightment, most probably being the
exporter);
2. the name of the vessel;
3. description of cargo, including identifying marks, numbers & types of packages, contents, gross weights & volume;
4. port of shipment;
5. port of discharge;
6. details of freight, including whether it is to be "prepaid" (at port of despatch) or "payable at destination" (freight collect);
7. consignor's name & address which may be that of the buyer. Alternatively B/L may be made out to show "to order" in the
consignee box or "to the order of..." (see "Negotiation of B/L" below).
8. notify party's name & address - often an agent acting on behalf of the consignee at the port of destination. However, the
consignor's details may be entered in the "Notify party" box where "order" B/L are applicable (see "Negotiation of B/L"
below);
9. terms of sale;
10. the date on which the goods are received for shipment or shipped on board the named vessel;
11. number of original bills issued;
12. signature of shipping line or its appointed agent.
The shipper (exporter) or his agent should furnish the above details to the shipping line in writing (e.g. by fax) or on blank bills. It
is essential that the details are correct in relation to:
1. The actual goods being shipped;
2. The contract of sale; &
3. Any letter of credit or payment requirements.
Principal notations on B/L
Clean bills & claused bills.
A "clean" B/L is one in which no notation is shown on the doc. relating to cargo having been received by the line or shipped in
any other than good condition & correct quantity. Thus, st&ard printed B/L usually bear the wording "Shipped (or received for
shipment) in apparent good order & condition". If no clause to the contrary is entered, the bills are said to be clean. In the case
where the cargo is noted to be wet, damaged or otherwise in doubtful condition or quantity, B/L will be issued "claused" (or
"dirty"), showing the defect in the cargo. It follows that if goods are shipped under a claused bill, consignees may reject them or,
alternatively, banks may not accept such B/L for payment purposes.
On occasions, there are disputes over what constitutes a "claused" B/L as shipping lines employ certain st&ard clauses on certain
types of B/L. For example, many B/L covering either containerised or conventional cargo bear the clause "said to contain" within
the area of the doc. showing the quantity & nature of goods. Such a clause should not render a B/L "dirty", but in some instances
this & other non-contentious clauses may create doubts, particularly in the minds of banks. To assist with this problem, the
International Chamber of Commerce has issued a publication entitled "The Problem of Clean B/L" (No 283). Additionally, the
ICC publication "Uniform Customs & Practice for Doc.ary Letters of Credit" (UCP 500) is useful in this respect. Both of these
publications can be obtained from ICC.
Received bills & shipped bills
As has already been said above, a B/L constitutes a receipt for goods delivered into the charge of a shipping line. Thus the st&ard
wording on a printed B/L may state "Received for shipment..." & will be signed & dated by the line or its agents. Although this
shows that the goods have moved out of the exporter's charge into that of the carrier, it does not show that actual shipment has
taken place. More acceptable, therefore, to buyers & banks is the "Shipped" B/L which bears the st&ard wording "Shipped on
board ... [Vessel] on ... [date]". Thus the buyer or bank has evidence that the goods have indeed been despatched.
Clean shipped on board B/L. A contract of sale may stipulate, & a confirmed irrevocable letter of credit is almost certain to
stipulate, that an exporter must produce "clean shipped on board" B/L. Whether or not there is this stipulation, this type of B/L is
clearly the most useful as it is prima facie evidence that:
1. the goods are actually en route to the port of destination on a named vessel which sailed on a specified date; &
2. at the time of shipment the goods were in good condition.
Faced with such bills under a doc.ary letter of credit, a bank (which deals only with doc.s, not goods) presumes that the goods are
6

en route to the consignee in good order & that the exporter can be paid for them provided that all other conditions in the credit are
satisfied.
Stale B/L
B/L are said to be "stale" when they are presented late to a consignee, for example after the goods have arrived at the port of
destination & have been unloaded from the carrying vessel. Faced with the possibility of paying storage charges in quay rent, the
consignee may reject the B/L on the basis that they are "stale".
The problem of stale B/L has been reduced by a time-limit for presentation of B/L to a bank often being stipulated within a letter
of credit. Furthermore, the Uniform Customs & Practice for Doc.ary Credits states that doc.s may be rejected if presented to
banks more than 21 days after the date in the B/L (if no other presentation limit is specified within the credit). These two points
have gone a long way to reducing the problem of stale B/L.
Through B/L
B/L issued by shipping lines originally covered only port-to-port shipments of conventional cargo. The "through" B/L concept
allows door-to-door shipments to be covered by a B/L. This became necessary following the development of containerisation.
Thus, this type of bill may cover ocean shipment, plus inl& transport by other modes, with the ocean carrier subcontracting these
other elements. Further details of the contractual & liability aspects of this type of doc. can be found in the section covering the
Hague-Visby Rules.
Combined transport B/L
Similar to a through B/L, the combined transport B/L allows for the contract of carriage to be covered by a single doc. & a clearly
defined single set of conditions of carriage to include the use of road &/or rail shipment at either end of the sea leg. This doc. will,
when issued, extend the carrier's liability as set out in the combined transport B/L to the other transport modes. Freight forwarders
operating as non-vessel owning carriers (NVOCS) will most usually issue this type of doc..
Groupage & house B/L
The concept of groupage - combining a number of individual consignments into a complete container load for shipment - has been
developed over many years by freight forwarders operating services b/w two inl& points in different countries working in
conjunction with an overseas office or partner. An ocean B/L for a container load of groupage is issued by the shipping lines
showing the sending forwarder as the shipper & the receiving forwarder as the consignee. The forwarder thereafter issues his own
house bills to individual exporters. These house bills become the controlling doc. for the release of the cargo at destination &
enable the exporter, if required, to negotiate these with his customer in return for payment of the goods.
It is important to note that a "house" B/L does not have the same status as an ocean bill issued by a shipping line as it is not a doc.
of title, in the same sense of the word, as an ocean bill. However, it is capable of negotiation, & is often acceptable to banks for
letter of credit purposes when this has been stipulated in the credit at the time it is opened.
The negotiable FIATA multimodal transport bill
The FIATA B/L is a doc. designed to be used as a multimodal or combined transport doc. with negotiable status which has been
developed by the International Federation of Forwarding Agents' Associations (FIATA). This doc., subject to correct completion
according to ICC UCP 500 rules, is acceptable as a marine ocean B/L. Equally, the doc. can operate as a forwarder house bill with
a suitable endorsement or as a multimodal transport doc.. This makes it an ideal international transport doc. & therefore,
whenever possible, the FIATA B/L should be stipulated in letters of credit. In addition to the FIATA B/L, a number of other FIATA
exclusive doc.s are available from members of the British International Freight Association. These are dealt with later in this
section. The FIATA B/L is used worldwide under the same set of conditions, offering the customer a substantial degree of
protection.
A forwarder who trades under 2000 BIFA Conditions may agree with a customer that a FIATA B/L should be issued & in that case
the terms of the FIATA B/L will be substituted for those in the St&ard Trading Conditions.
Before issuing a FIATA B/L a freight forwarder must become a registered trading member of the British International Freight
Association as this is a condition of approval by FIATA. The BIFA registration scheme requires that a forwarder maintains
adequate liability insurance to meet its responsibilities under the bill.
FIATA require that a forwarder issuing a FIATA B/L must ensure that:
1. he has received the consignment & has sole right of disposal; &
2. the goods are in apparent good order & condition; &
3. details set out on the face of the B/L correspond with the instructions he has received; &
4. insurance arrangements have been clarified; &
5. the B/L clearly indicates whether one or more originals have been issued (the B/L contains a specific box for this which
must be completed).
The liability of the forwarder under the terms of the FIATA B/L is based on the UNCTAD/ ICC Rules for Multimodal Transport
Doc.s (ICC Publication 481).
Negotiation of B/L
The B/L is a negotiable doc. which allows title to goods to be transferred by endorsement & delivery. This facility gives one or
other parties to the transaction control over title to the goods & for this reason letters of credit often stipulate certain types of B/L
in order for this control to be exercised. Three basic types of endorsement are possible:
Endorsement by consignee
In this case the B/L is completed as below:
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Shipper box in B/L: Actual shipper (exporter)


Consignee box in B/L: Actual consignee (buyer)
Notify box in B/L: Consignee's agent at port of arrival.
Completion of the B/L in this manner allows either the consignee to present himself in person to the line to take delivery of the
goods or to endorse the B/L on the reverse side to allow his agent to do so & to deliver the goods to him. Thus the consignee
exercises control over who takes the goods in charge at the destination port.
"To order" B/L: B/L made out "to order" are completed as below:
Shipper box in B/L: Actual shipper (exporter)
Consignee box in B/L: "To order"
Notify box in B/L: Actual consignee (buyer)
In this instance, the shipper must stamp & sign the B/L in order for title to the goods to be transferred to the consignee. Thus the
B/L is useless to the consignee without this endorsement. This is a useful safeguard against bills being accidentally transmitted to
buyers directly. Clearly, should this happen the buyer would not be able to take delivery of the goods & the B/L would have to be
returned to the shipper for endorsement & presentation to the bank. B/L completed in this manner are also said to be "To order
blank endorsed".
To order of (bank): In this case, the B/L is completed as follows:
Shipper box in B/L Actual shipper (exporter)
Consignee box in B/L To the order of (bank)
Notify box in B/L True consignee (buyer)
The bank is the party which carries out the endorsement in this instance & which, therefore, exercises control over the goods.
Thus, if the bank wishes to ensure that the buyer has actually paid for the goods before he takes delivery, the bank may endorse
the B/L when payment is made.
Sea waybills
Sea waybills offer a non-negotiable alternative to the B/L. Generally speaking, they embody the Hague-Visby Rules. With a few
exceptions they are not negotiable & are, therefore, not usable as a means of transferring title to goods. They are useful for
companies that trade internationally with themselves b/w geographical areas where payment for exports is not a problem. A
freight forwarder might use them to control groupage cargo. The sea waybill can thus be sent forward with the goods allowing the
consignee to take immediate delivery. The legal protection offered to the shipper under a sea waybill is thought by some to be
inferior to that offered under a B/L. However, being a relative new innovation, there has been insufficient time to test them in law.
B/L is a doc. issued by a transportation carrier (such as a motor, rail, or air carrier) to a shipper acknowledging that the carrier has
received the shipment of goods. The B/L also acknowledges that the goods have been placed on board a particular vessel [or truck
or other conveyance] for delivery to a specific destination. The B/L states the terms in which the goods are to be carried. The B/L
serves as the contract b/w the shipper & the carrier. It stipulates where, when, & by whom goods are to be delivered & freight
charges paid, & may transfer ownership of the goods.
Straight B/L
If labeled non-negotiable or "straight," the transportation carrier must deliver the B/L only to the consigneenamed in the B/L.
Thus, the B/L serves as both as a receipt of the goods & an agreement to transport the goods to a specific destination & consignee
in return for payment of transportation charges. A straight B/L "short form" may be prepared in several formats. Each of these
formats provides the required information for the movement of goods by motor carrier (truck), rail, rail & water, or other
combined modes of transportation. Although shippers generally use the simplified short form, carriers file a B/L "long form" with
the appropriate authorities. The long form has numerous terms & conditions printed on the reverse side. The short form generally
has no such terms printed on the reverse side but, by reference, the terms are still binding on the shipper.
"To Order" B/L
A B/L "to order" is made out to the order of the shipper, & endorsed by the shipper either in blank or to a named consignee. The
purpose of this type of B/L is to protectthe shipper against the consignee obtaining possession of the goods before the consignee
has paid or accepted the draft. For example, a steamship company will not deliver goods covered by a "to order" bill until
ownership is proved by presenting the original endorsed B/L.
Problems exist in connection with "to order" B/L for Latin American countries, where delivery of incoming cargo is the function
of the customsauthorities & is not entrusted to steamship lines or their agents. The laws of a few Latin American countries
prohibit "to order" B/L, & in some other Latin American countries, these bills are not accorded the same protection as in other
parts of the world, notably in Europe & the U.S.
In shipping parlance, a distinction is made b/w a B/L made out to the order of the shipper & a bill made out to the order of the
consignee. The latter bill does not give the shipper as much protection as a bill drawn to its own order. As a rule, when a B/L is to
the order of a consignee, the consignee can get the goods from a steamship line by posting a bondwithout presenting the B/L.
NegotiableB/L
When a B/L "to order" is endorsed in blank (signed on the reverse), it becomes negotiable & the carrier will deliver the goods to
the party that presents it. While all original B/L (full set) are negotiable, one alone is sufficient to obtain the goods. On the other
h&, if bills are drawn to order of the consignee, only their endorsementmakes it negotiable. If they are drawn to order of the
shipper, then the shipper must endorse it before it can be transferred &, therefore, before the goods it represents can be conveyed
8

to a third party. The endorsement itself can be made to a specific third person or firm, a bank, or in blank.
While one endorsed copy is sufficient, the full set of originals should be endorsed. Along with the original endorsed B/L, the
remaining copies generally are kept by the shipper & carrier for their records.
Where collection & payment is through banking channels, as under a letter of creditor doc.ary collection, negotiable B/L are
required (except for air shipments). The exportermust endorse the B/L & deliver it to the bank in order to receive payment.
For customs purposes, the holder of an endorsed B/L is considered the owner of all the goods specified on the B/L, & the B/L
itself is regarded as the best evidenceof the right to make entry. Some countries require legalization of the B/L by their consul at
the place or port of shipment to give official proof of the B/L's accuracy regarding:
The origin of the merch&ise
The quantity
The value &
The mode of shipment of the goods.
Ocean B/L
An ocean B/L is a contract b/w an exporter & an international carrier used when transporting goods overseas by ship. It serves as
the receipt for goods delivered to a steamship vessel & specifies the conditions & terms of carriage, & the character, weights,
measurements, & destinations of the goods shipped. It also specifies the person or company to whom the goods are consigned or
who is to be notified of their arrival.Ocean B/L are issued as straight B/L or "to order" B/L.
An ocean B/L does not convey titleto the goods until it is properly endorsed. It is created by the shipper & must be based on the
dock receipt, which the steamship line issues when it receives the cargo. The dock receipt is then exchanged for the B/L. Usually,
three (3) B/L are signed, although the various shippers may ask for more unsigned (& therefore not negotiable) copies for
different purposes.
The ocean B/L are of two classes: (1) "received for shipment" & (2) "shipped" or "on board." A "received for shipment" bill is
issued for a named steamer in which space has been previously reserved & the goods are in the possession of the steamship
company. An "on board" bill is issued only after the goods have been loaded on the vessel. Banks often stipulate "on board" B/L
when issuing a letter of credit.
The ocean B/L may be used as a negotiable doc. & as the basis of a draft drawn to order of the shipper. Drafts or bills of exchange
to which are attached a shipper's invoice, ocean B/L, & an insurance policy are commonly used in making foreign-trade financial
settlement. A number of copies of the B/L may be necessary, of which at least two are negotiable if settlement is by draft. The
shipper is usually required to prepay all freight charges before the steamship company surrenders the B/L.
While the steamship companies generally require prepayment, some foreign forwarders accept goods for shipment "freight
collect," paying the freight for the manufacturer or exporter.
Original B/L
In most cases, three (3) original B/L are issued, known as the "set" or "full set." The carrier marksthe total number originals on
each bill issued. When negotiating the originals, the bank will require the full set, although one properly endorsed B/L is sufficient
to obtain the goods. If delivery is made against one of the B/L, the others are automatically rendered void.
Full Set B/L
When more than one negotiable B/L is issued, the total number issued is marked on each individual doc.. Banks generally insist
on receiving the total number of bills issued, or the "full set." The Steamship Company & shipper generally keep extra copies.
Foul vs. Clean B/L
A B/L is called "clean" when it does not bear any superimposed clause or annotation expressly declaring the goods or packaging
damaged or defective. In contrast, a B/L is called foul when it shows by marginal notes, rider, or otherwise that all or part of the
shipment to which it refers are in bad condition or damaged. A foul B/L creates difficulty with banks when intended as collateral.
Through B/L
A through B/L covers shipment on one (straight or to order) bill from point of shipment to point of destination, & involves
transportation by more than one carrier. It also refers to a B/L issued by a steamer from port of shipment to either an out port or to
a point inl& in the country of destination, including any transshipment.
Air Waybill
An air waybill is a B/L that covers both domestic & international flights transporting goods to a specified destination. It
establishes the terms b/w a shipper & an air transportation company for the transport of goods. Included in the doc. are the
conditions, limitations of liability, shipping instructions, description of commodity, & applicable transportation charges. In
addition, the air waybill is a non-negotiable doc. that serves as a receipt for the shipper, indicating that the carrier has accepted the
goods listed & obligates itself to carry the consignment to the airport of destination according to specified conditions.
The B/L (also sea-load light, English: B/L (B/L)) a voucher/a proof is over the ocean freight contract final b/w Befrachter
(shipper, discharger) & freighter (as a rule the shipping company). It concerns thereby more exactly a proof over:
1. the conclusion of the ocean freight contract b/w shippers & shipping company
2. the receipt of the commodity by the shipping company
3. the obligation of the shipping company to h& the commodity to that out which submits 1 B/L copy
4. the property at the commodity (there it around a negotiable instrument in such a way specified &/or a tradable, negotiable
commodity value paper acts).
9

B/L: doc. supplied to the exporter by the shipping company that is transporting the goods to their foreign destination, listing, item
by item, the goods being shipped. It serves three basic purpose:
1. To acknowledge receipt by the carrier of the exporter's goods.
2. To indicate the carrier's contractual obligation to transport the goods to their destination in exchange for payment.
3. To record transfer of title (or ownership) from the seller to the buyer when payment for the goods takes place. Airlines use what
is called an Air Waybill.
2 basic types of B/L
* Straight bill & the order bill.
1. A straight B/L is a non-negotiable doc., made out to a specifically named consignee, from which the steamship company
acknowledges receipt of the freight & agrees to move it to its destination.
Unlike an order bill, the straight bill does not have to be surrendered to the carrier in order for the importer to obtain possession of
the goods.
2. An Order B/L is a doc. that is made out to the order of of the foreign importer or its bank, or the order of the export firm, its
bank, or another designated party.
Title to goods being shipped is given by possession of the B/L that bears the exporter's endorsement. Often, this endorsement is
in blank, thus giving ownership of the goods to the person possessing the bill, & therefore making the bill highly negotiable.
The order B/L is h&ed over only when the foreign importer has paid for the goods or made acceptable credit arrangements.
Customs regulations of most countries specify the number of copies, either negotiable or non-negotiable, of the B/L that must be
supplied for customs purposes.
Some Latin American countries prohibit or otherwise discourage the use of order B/L. Therefore the export firm should first
check as to the type of bill that is acceptable in the country to which it is planning to ship its goods.
For each shipment, two or three negotiable or signed B/L are usually issued, plus as many more non-negotiable copies as may be
required. The latter are clearly marked non-negotiable.
Where these bills have to be presented in duplicate or triplicate at the Customs of the foreign country, it is usual to supply one
negotiable copy with each set of doc.s, plus as many non-negotiable copies of the B/L as are required.
The foreign importer will require a negotiable B/L & related doc.s to clear the goods through Customs. Therefore, the exporter,
or its bank, should either forward them on the same ship that carries the goods or send them in advance by airmail.
If the necessary papers for clearance are not available or arrive late, severe penalties or excessive storage charges may be
incurred.
B/L may possibly be lost in transit, it is customary to send two complete sets of doc.s, each with a negotiable B/L, in successive
mail to the foreign importer or to the bank or agent which is to hold this doc. for collection.
The third negotiable B/L is usually kept by the exporter or its bank in case of emergency.
If the exporter wishes to have its bank collect payment from the foreign importer, then it should h& over all the negotiable
copies of the B/L to its bank so that it has complete control of the export shipment.
* Order bills usually carry instructions to the shipping company to notify the consignee (the foreign importer) as soon as the
goods arrive at the port of discharge. Another feature of a B/L is that it may be a direct one or a through one.
1. A direct B/L relates to shipments which are loaded by a shipping company at one port & unloaded at another - in other words,
it relates to a direct shipment from one port to another by the same carrier.
2. A through B/L, on the other h&, relates to a shipment from one port to another by more than one shipping line.
The goods are taken by the initial carrier from the port of shipment to a port of transshipment where they are then transferred to a
vessel of another shipping line for on-carriage to the port of final destination.
AGENTS & BROKERS BEWARE
A set of all three original B/L is h&ed in to the agent by the receiver. The bills are to order of the shipper or a bank &
the to order party has NOT endorsed them. Can the agent release the cargo to the receiver?
The answer is no. B/L that are to order of the shipper or a bank, must have a written endorsement from the to order party to
show that they have endorsed the bills over to the receiver. Without the appropriate endorsement the receiver is not the valid
B/L holder. Physical possession of the full set of three B/L does not make the party in possession the valid holder & therefore
entitled to delivery of the cargo. He could have stolen them or found them in the street. In a recent case reported to ITIC, the full
set of original B/L was stolen from a motorcycle courier who was delivering them to a bank. The thief was the Notify Party
who presented them to the shipagent, took delivery of the cargo & disappeared. Even though the agent had recovered the full set
of three original B/L, the consignee on the B/L was To order of the Bank of Commerce, & none of the B/L had been endorsed
by the Bank of Commerce. The ocean carrier was therefore liable to the bank, & obtained reimbursement of his claim from the
agent, who had delivered goods against an improperly endorsed B/L. In this case, the agent should have contacted the Bank of
Commerce.
Is it necessary for the shipper to endorse a B/L which is not to order of the shipper but which shows the actual consignee
in the consignee box?
10

No where a B/L is consigned to a named party & is not to order, it is not negotiable. Therefore, the fact that the consignee has
been given possession of the B/L by the shipper should be evidence, in itself, that the ownership of the cargo has transferred to the
receiver.
Faxed, photocopied or scanned B/L are not original B/L. They are also not evidence that the receiver has the original bills
in his possession
Can a consignee endorse a to order B/L over to another party?
Yes but only if the bill has been endorsed by the to order party (i.e. the shipper or a bank) to the consignee can the consignee
then endorse it on to somebody else.
Some of the other B/L questions received by ITIC involve the delivery of cargo:
A cargo receiver tells U that he cannot deliver the original B/L to U in time to collect the cargo. He asks if U will release
against a faxed or scanned copy of the original B/L sent by e-mail? Should U do this?
No faxed, photocopied or scanned B/L are not original B/L. They are also not evidence that the receiver has the original bills in
his possession. He may have received a fax or photocopy of the original bill from the shipper. In one case, an agent in the US was
persuaded by a regular customer to release a container of furniture from Sweden. The customer was a regular importer of
Sc&inavian furniture, with at least two containers a month. He had always previously produced the original B/L prior to release.
On this occasion, the importer showed the agent a photocopy of the original B/L, which he said had been lost by the courier
company. The importer was a desperate man, in serious financial difficulties, & had used his previous good relationship with the
agent to get his h&s on goods he had not paid for. Unfortunately, the importer subsequently went bankrupt leaving the agent to
explain why he had released goods against a photocopy B/L. What should the agent have done? Well the golden rule is that
principals (not agents) should make the decision on whether to deliver cargo without first taking the original B/L. The principal
would no doubt have checked with the shipper, who would have revealed the lie that the original B/L had been lost by a courier
firm.
The dating of B/L is also a thorny subject, & one which often presents problems to agents who come under commercial
pressure from good customers
U are the agent at the discharge port. The load port agent authorises U to release the cargo. Should U release the cargo?
No unless there is a blanket authorisation in the principals agency manual, the agent should get the principals specific written
authority to release the cargo against such an instruction from the load port agent. The load port agent must also confirm whether
or not they have obtained the full set of original B/L. This is particularly the case where tramp principals are concerned. We have
seen cases where an instruction to release cargo from a load port agent was forged by the shipper in order to escape the payment
of freight; the original B/L were still with the load port agent awaiting the freight payment. We have also seen instances where the
instruction to release was forged by the consignee in order to escape paying for the goods. The dating of B/L is also a thorny
subject, & one which often presents problems to agents who come under commercial pressure from good customers.
90% of the cargo which is covered by one B/L was loaded on March 31, & the remaining 10% was loaded on April 1. The
shippers letter of credit expires on March 31. What is the shipped on board date on the B/L?
The correct shipped on board date is always the date of last loading, which in this case is April 1. It may be felt that, as the
majority of the cargo was on board on March 31, the correct date is March 31 & the shipper would certainly want this to be the
case. However, in todays electronic world it is only too easy for aggrieved consignees &/or their banks to ascertain the exact date
& time that cargo has been loaded. If an export permit has expired, or a commodity price changed, or indeed the cargo is not up to
specification, the consignee may be looking for someone to recover his losses from. If he can prove that the pre-dating of the B/L
(even by one day) has caused him a loss, the consignee can claim that loss from the carrier, who would undoubtedly claim it from
the agent who issued the pre-dated B/L.
An extreme example of this type of claim went to the House of Lords a few years ago. The St&ard Chartered Bank succeeded in a
claim against Pakistan National Shipping Corporation & its London agent, Seaways Maritime, for damages resulting from the
pre-dating of a B/L by six weeks for a cargo of bitumen loaded in B&ar Abbas for Vietnam. The agent felt that he was safe from
personal liability, even though he was aware that the date of loading was incorrect, because he had simply followed the
instructions of PSNC. Mr Justice Cresswell took the view that the agent had no defence to the claim against him by the bank, &
found that the shipper, the carrier & the carriers agent should each bear one third of the blame. The cargo was valued at $2.94m.
Mr Justice Cresswell summed his views on the subject of issuing false B/L when he said: Ante dated & false B/L are a cancer in
international trade. An agents duty to his principal does not extend to assisting the principal or the principals customers to
commit fraud. This is simply above & beyond the call of duty.
A B/L with an on deck clause should be accepted by the letter of credit bank
Another problem for agents is the clausing of B/L:
Is a B/L which is claused on deck at shippers risk a clean B/L for letter of credit purposes?
Yes only a B/L which is claused to evidence cargo damage is a dirty B/L. A B/L with an on deck clause should be accepted by
the letter of credit bank, unless the letter of credit specifically requires a B/L which evidences under deck stowage.
As U can see, the issuance of B/L, & the release of cargo, is a complex matter. The golden rule for any shipagent is not to take
commercial decisions himself, but to check first with his principal, & to get his principals instructions IN WRITING. ITIC is also
11

always happy to provide assistance to its members.


Julia Mavropoulos is Claims Director for ITIM, managers of the International Transport Intermediaries Club. More information
on ITIC or claims issues can be found on www.ITIC-insure.com. Shipping Network welcomes suggestions for future legal articles
from members. Please contact the Editor, Carly Fields, with offered topics.
EDI - CUSTOMS & TRADE
Communication b/w the forwarder, their customer, & Customs is a crucial part of the clearance process. It involves a unique twoway contact to interpret the wishes of the shipper, while at the same time satisfying the legal requirements of Customs.
Increasingly, electronic data interchange (EDI) features in this communication chain, with data being downloaded from shippers'
computer systems to the forwarder, then being further manipulated, before finally passing to Customs.
Most shipment data is passed to Customs via local port/airport direct trader input (DTI) communities, for example, the MCP
operation at Felixstowe, or the ASM system at Heathrow, CNS at Southampton, etc.
These differences b/w the operating systems lead to complications & require different computer arrangements in each location to
cope with the varying needs. The resulting extra cost is, of course, paid by shippers using the service.
In order to become a member of a community, the forwarder has to obtain a "badge" identity, which incurs an annual fee. Each
shipment is then charged at a st&ard rate for use of the DTI community to arrange clearance.
One advantage of the community system is that it also provides an inventory control for all the goods at the location, &
consequently interrogations can be made to ascertain the latest status of the cargo. This data can then be made available to
shippers as part of the forwarder's tracking system.
Customs also makes use of community systems to broadcast messages to companies who are linked in, regarding changes in
requirements, meetings & so on.
CUSTOMS "The Future"
So what of the future for Customs & associated activities? Traditionally, goods being imported or exported have been cleared
at the port of departure or arrival. This seems bound to change as Customs are already actively encouraging shippers to arrange
clearance inl& at their own premises.
In order to support inl& clearance, investigations are also being made into paperless declarations with the minimum of
information at the port or airport, thereby allowing immediate movement to the customer's warehouse for clearance later.
Plans announced also include the greater use of customs warehousing to delay the payment of duty & VAT until the very last
moment, thereby improving cashflow & business planning. Customs procedure codes & the rules which govern them also seem
certain to be relaxed, & made more flexible.
Perhaps one of the major gains from the above proposals, however, will be to allow the customer to decide at the very last
possible moment the customs' regime to which the goods are to be declared. This will lead to more simple controls by shippers &
make customs reporting more easier.
Another gain if shippers elect to clear at their premises will come from the ability to make periodic declarations rather than
consignment by consignment. Data accumulation over the period being reported is now increasingly h&led via normal stock
control systems, allowing automatic reporting to Customs at the end of the period. Often this stock control process is undertaken
by a forwarder as part of the overall warehousing & distribution package.
While the overall trend is toward simplification at the point of arrival, the need to supply detailed information after shipment
remains a major activity for all traders. Many of the new regulations will also require the use of the community transit system to
achieve them, with consequent risks for proper discharge on arrival.
The need for community transit to be involved has inherent risks which the customer cannot expect a forwarder to h&le without
recompense. This is due to the high cost of the bank guarantee to establish the authorisation, & the increasing amount of fraud in
the system as a whole. Consequently, it seems likely that many customers will seek the guarantee of release immediately on
arrival, but then ask their forwarder to undertake the clearance at their premises on a periodic basis.
Shippers who do not wish to set up their own customs' arrangements are increasingly making use of forwarders' own customs
warehouses, or enhanced remote transit shed (ERTS) facilities. Customs warehousing at the forwarder's premises allows shippers
to take advantage of the delayed payments on imports, liable to duty & VAT, but leave the forwarder to h&le the Customs' work.
ERTS facilities allow the forwarder to deal with customs' activities in their own premises, & thereby avoid any potential problems
at the air or sea port while undergoing customs' clearance. Many forwarders already successfully operate the ERTS process.
Link all these changes to the greater role now being played by forwarders in the logistics chain & we can see some major
advantages appearing. Aspects such as overall supply chain management, "just in time" delivery concepts, & warehousing &
distribution controls, make for a challenging future. This is especially so for those shippers & forwarders who are at the forefront
of, & take full advantage of, the many changes now taking place within customs & the transport community as a whole.
CMR NOTE
The CMR note is an international consignment note which is specified under the Convention for the Contract of the International
Carriage of Goods by Road 1956 (the CMR Convention) which is embodied into UK law by the Carriage of Goods by Road Act
1965 (as amended by the Carriage by Air & Road Act 1979). Conventions deals with the substance of this law which governs the
responsibilities & liabilities of the parties to a contract for the carriage of goods by road internationally.
The CMR note is not a doc. of title & is non-negotiable. The CMR Convention applies to the international carriage of goods by
road even if a CMR note is not carried by the haulier. Unlike carriage by sea or air, there is no stipulation as to who should
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complete a CMR consignment note, but as the majority of the information in it is available only from the sender (i.e. the exporter
or consignor), it is logical that he should complete it. This task, however, is normally delegated to the freight forwarder or haulier.
Equally, as the function of the CMR note is to travel from the point of origin of the goods to the point of destination with all
intermediate carriers & any reserves being noted on it, it is logical that information on the sender should be completed in the
country of initial despatch.
The information to be shown on the CMR note is set out in Article 6 of the Convention & provides as follows.
1. The consignment note shall contain the following particulars:
a. the date of the consignment note & the place in which it is made out;
b. the name & address of the sender;
c. the name & address of the carrier;
d. the place & the delivery date of taking over the goods & the place designated for delivery;
e. the name & address of the consignee;
f. the description in common use of the nature of the goods & the method of packing, &, in the case of dangerous goods,
their generally recognised description;
g. the number of packages & their special marks & numbers;
h. the gross weight of the goods or their quantity otherwise expressed;
i. charges relating to the carriage (carriage charges, supplementary charges, customs duties & other charges incurred
from the making of the contract to the time of delivery);
j. the requisite instructions for customs & other formalities;
k. a statement that the carriage is subject, notwithst&ing any clause to the contrary, to the provisions of this Convention.
2. Where applicable, the consignment note shall also contain the following particulars:
a. a statement that transhipment is not allowed;
b. the charges which the sender undertakes to pay;
c. the amount of "cash on delivery" charges;
d. a declaration of the value of the goods & the amount representing special interest in delivery;
e. the sender's instructions to the carrier regarding insurance of the goods;
f. the agreed time-limit within which the carriage is to be carried out;
g. a list of the doc. h&ed to the carrier.
3. The parties may enter in the consignment note any other particulars which they deem useful.
It is important that CMR notes are completed correctly in the first instance. In the event of a claim by a sender against a haulier,
the information shown on the CMR note, including any reserves entered, can be very useful to either party, particularly if the
claim is resolved in court. Difficulty often results in resolving claims through the inadequate completion of CMR notes. The CMR
doc. is aligned to the UN (ECE) laUt key & can, therefore, be produced on aligned doc.ation systems.
THE CUSTOMS ENTRY & CUSTOMS PROCEDURE CODES
All imports & exports in the EU are declared via the single administrative doc. or SAD. These may often be made on the official
printed form, or via a plain paper version, either of which may be produced on a computer system, with Customs' prior approval.
The SAD is potentially an eight-part doc., but for almost all purposes only parts of the doc. are used. For example, on export only
copies 1 & 2 are required, unless the sender requires a copy, in which case copy 3 is also produced. If the SAD is used for
community transit purposes, copies 4 & 5 are required. Finally for import, copies 6 & 7 are for Customs & copy 8 is for the
person preparing the entry. Details on how to complete the SAD are to be found in the Customs Tariff - Volume 3, together with
codes & copies required for each purpose.
Increasing use of computers has meant that most forwarders use a direct link to the Customs' computer known as CHIEF
(Customs H&ling Import Export Freight). This means that often goods can be cleared with the actual papers being h&ed in later
to Customs. Of course, if special doc.s are required, or customs inspection is necessary, the computer holds clearance until the
relative steps have been taken.
"Paperless" declarations are currently being considered, & may arrive in the future. The difficulty is that EU law requires that a
formal paper declaration be made & while many controls are now routinely carried out by computer systems, there remains the
need to either produce, or be able to produce, a paper declaration.
CUSTOMS AT IMPORT
On, or just prior to, arrival, the airline or shipping company, etc. makes available to Customs & the port/airport authority details of
all the cargo arriving for clearance. This information is usually also available to the forwarder, who will have previously been
advised by the sending forwarder overseas. Confirmation from the carrier then confirms the actual arrival.
The importer will usually have been contacted in advance, & an agreement made as to how & by whom the clearance is to be
effected. This will include details of where the goods are to be delivered, whether special CPCs apply & the provisions of funds
for duty & VAT & any special doc.s required.
The most common doc.s & other needs required to allow import are:
original of the suppliers' invoice/s;
copy of any packing list/s;
original B/L or other transport doc.;
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details of any special customs procedures required;


form C 105 if duty is payable & the value exceeds 4,000;
doc.s to support reduced or preferential duty rates, e.g. certificate of origin;
instructions about any special procedures or h&ling required;
details of delivery address & any difficulty which may be encountered;
day & time delivery required;
funding for any duty & tax to be paid.
Calculating duty is a complex operation. Essentially, the duty calculation will consist of the invoice value, plus freight charges to
the EU frontier, plus insurance premium & any uplifts on such values as required by Customs. There are also special rules when
royalties or tools & dyes, etc. are provided or payable by the importer. Customs is basically looking to find a "fair market value"
for the goods when valued at the EU frontier. The rate of duty may then be taken from the tariff, allowing for any special
preferences, quotas or other reduced duty rates involved.
Calculating VAT is slightly different to duty in that VAT is payable on any actual money turned over in the transaction. Hence all
the factors allowed for in duty calculation apply with the exception of any "uplift", which is a fictitious amount to bring the value
up to a "fair market price". Additionally, the value for VAT is the value not at the EU frontier but at the place of first destination,
hence the value for duty (less the uplift) has to have costs to the first inl& delivery point, or other final destination if known at
time of importation, added before the VAT is calculated. Both calculations for duty & VAT are very difficult to generalise, &
readers are recommended to refer to the relevant Customs Public Notice & Customs tariff in force at the time of entry.The
forwarder then prepares an entry by computer, & submits this to Customs via the local community computer system. Checks are
made automatically to ensure that the cargo reported as arriving matches the detail declared on the SAD. This ensures that the
inventory controls are able to control both h&ling & release of cargo.
The Customs' computer then allocates the clearance required; it may be for example, that the goods are released immediately, or
that doc.s must be submitted before release, or finally that both doc.s & goods must be checked before release. The timescale for
each of these may vary from a few hours to a day or so, depending on what exactly is required.
Payments to Customs must be made using "guaranteed means". This requires either a banker's cheque, payable directly to
Customs, cash, or, more commonly, deferment. The deferment system requires a forwarder or importer to estimate the amount of
tax likely to be paid in any one month, then arrange for their bank to issue a guarantee to Customs for twice the estimated amount.
This is because amounts deferred are charged by direct debit on the fifteenth of the month following import, to the bank account
of the deferment holder.On release by the customs system, the goods may be collected &, providing funds for duty & VAT are
paid, delivery made.
Not all goods are cleared on arrival. Many will simply be transferred to the importer's own customs warehouse where they derive
the benefit of storing the goods, & only paying duty & VAT when the goods are finally removed from the warehouse.
Electronic clearance requests, & clearance doc.s, must be presented promptly, to ensure that the goods are not delayed, & thereby
avoid rent & demurrage costs.
CUSTOMS AT EXPORT
At export, doc.s & information must be generated by the exporter in order that an export entry may be presented to Customs in the
UK, & shipment details sent to the buyer at destination.
Like imports, a substantial number of export declarations are made via the CHIEF computer system. However, the percentage
declared manually is traditionally much higher on export than import. UK Customs is actively encouraging both forwarders &
exporters to reverse this trend & use computers far more. The most common doc.s required for export/export customs are:
copy commercial invoices to allow cargo identification & customs entry;
copy packing lists;
shipping instructions in order that the shipper's requirements are completed;
copy letter of credit, if applicable;
dangerous cargo or other special h&ling instructions;
certificates of origin or other preference certificates such as the EUR1;
instructions relating to insurance;
details of any previous customs controls on the goods being shipped.
A pre-advice will be sent to the consignee via the forwarder's representative at destination, but, at the same time, an export
declaration will be prepared on a SAD if the goods are manually declared, or on the computer.
Where no special customs controls apply, which require presentation to Customs at or before shipment, the goods may be
declared up to 14 days after shipment. This is achieved by providing Customs with basic information at the time of movement,
then finalising that declaration after despatch. Known as the simplified clearance procedure (SCP), it relies on the forwarder
gaining Customs' approval, & then allocating each shipment a unique number known as an export consignment identifier (ECI).
The ECI is made up of the forwarder's customs registration number (CRN) & a unique number for the shipment. This unique
number is recorded by Customs at shipment, then the forwarder "matches" the number with the full shipment data, up to 14 days
after despatch. This data is usually achieved by providing a schedule of the details, rather than a SAD for each consignment.
Export declarations are normally presented at the place of export, but may, with Customs' permission, be declared at the exporter's
premises, or any Customs-approved inl& depot.
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Proof of origin is often a major problem with exporting - the level of duty paid at destination may depend on where the goods
originated. For destinations where no special preference applies, this is usually achieved by a simple statement on the invoice.
However, where special arrangements for reduced rates of duty are available, they may dem& a separate proof of evidence in
either the form of a certificate of origin, EUR1 certificate, or other preference certificate.
Certificates of origin are obtained from a chamber of commerce; they are completed usually by the exporter or his forwarder, then
presented to the chamber of commerce for signature & stamping.
The EUR1 is issued by the exporter & then stamped by Customs at the point of shipment. Major shippers may alternatively apply
for a preauthenticated supply. The EUR1 is one of the most common forms of origin proof used by the EU, as agreements rely on
it as evidence of compliance with the agreement. Other preference certificates will include the Generalised System of Preference
origin certificate (GSP) & various statements on doc.s, especially where low-value shipments are involved. Most exporters use
information from Croner's Reference Book for Exporters, or their forwarder to ascertain which doc.s are required.
It is important to remember that customs & export shipment doc.s must be presented promptly. This will ensure that the goods are
not delayed, & thereby incur penal storage charges both at point of shipment &, perhaps more importantly, at destination.
Cargo release without bank's endorsement info.hktdc.com/shippers
In its Judgment dated March 29, 1996, the High Court in Hong Kong held an air forwarder under its house air waybills liable for the
consignor's claim of US$177,293.45 resulting from the cargo release to the notify party without the endorsement of the bank which
was named as the consignee.
In this action, the seller claimed against the air forwarder for the value of 12 consignments of watches. The seller was a supplier of
watches in Hong Kong. It had a buyer in Los Angeles, USA. The buyer purchased watches from the seller on C & I terms. The
business b/w the seller & the buyer commenced sometime in April 1993. There were subsequently about 29 shipments of watches
by the seller to the buyer, & all these 29 shipments were effected through the air forwarder & the 12 shipments, the subject matter of
this action, were the last 12 of the 29 shipments. Whenever there were goods to be shipped by the seller to the buyer, the seller
would ask the air forwarder to come to collect the goods. In respect of each shipment the seller had signed a shipper's instruction
form addressed to the air forwarder to ask the air forwarder to receive the goods for shipment. For each of the shipments, the air
forwarder issued an air waybill & gave the shipper's copy to the seller. Each of the air waybills named the seller as the consignor,
the Bank of America as the consignee & the buyer as the notified party.
As the sales by the seller to the buyer were on D/P basis, in each instance, the seller made out a commercial invoice, a custom
invoice, a packing list & a bill of exchange drawn on the buyer at sight for the amount of the invoice. The seller presented these
doc.s together with the shipper's copy of the air waybill & an insurance certificate to its bank, the Daiwa Bank, for onward
transmission to Bank of America, the banker of the buyer. In the ordinary course of events, the Bank of America would not release
the air waybill or the goods to the buyer without the buyer's acceptance & payment of the bill of exchange.
The 12 consignments were shipped b/w Nov 13, 1993 & Feb 1, 1994. All the shipments arrived at Los Angeles safely. However, all
the goods were released to the buyer by the air forwarder's Los Angeles agent without any consent or authorization from the Bank
of America, the consignee named on the air waybills. The seller had not been paid by the buyer or any one in respect of these goods.
There was no evidence that the seller was aware that these goods were released to the buyer until well after Feb 21, 1994 when the
seller wrote formally to the buyer to dem& payment of outst&ing bills threatening to ask the air forwarder to return the goods if the
bills should remain unpaid. The buyer did not accept the bill of exchange in respect of any of the shipments. The Bank of America
had subsequently returned the sets of doc.s it received to the seller.
The carriage of goods by air from Hong Kong to the US is governed by the unamended Warsaw Convention of 1929 & the
Guadalajara Convention 1961.
The air forwarder was directed by the shipper's instruction to deliver the goods to the consignee bank at Los Angeles specifically.
This was a matter of importance to the seller. The seller consigned the goods to the bank as part of the D/P arrangement in order to
make sure that the property in the goods & the right of disposal of the same would not pass to the buyer without payment of the
price by the buyer. The seller would not have left the goods with the air forwarder if someone else was entitled to direct the air
forwarder to deliver the goods to another person without payment of the price. Having received the goods in pursuance to the terms
of the shipper's instruction, the air forwarder would have to comply with the direction in the instruction. The Court held that there
was a special contract of carriage made b/w the seller & the air forwarder in respect of each of the 12 consignments, the seller had a
good cause of action against the air forwarder at common law whether it had property in the goods at the time of loss or not.
By sending the air waybill naming Bank of America as the consignee together with the bill of exchange for the price drawn on the
buyer to Bank of America, the seller had reserved the property in the goods. This was a situation which was governed by s 21(3) of
the Sale of Goods Ordinance (Cap 26) which provides:
(3) Where the seller of goods draws on the buyer for the price, & transmits the bill of exchange & B/L to the buyer together to
secure acceptance or payment of the bill of exchange, the buyer is bound to return the B/L if he does not honour the bill of
exchange, & if he wrongfully retains the B/L the property in the goods does not pass to him.
Although s 21(3) of the Sale of Goods Ordinance speaks of the B/L, the Court held that the same must also apply to cases when an
air waybill naming a bank as the consignee is used. Accordingly the Court held that the seller was still the owner of the goods at the
time of the delivery of the same by the air forwarder's agent to the buyer.
The Court did not think that there was anything in either the Warsaw Convention or the amended Warsaw Convention which limited
the right to sue to only the consignor or the consignee. Approaching the matter as a matter of principle & public policy, the Court
15

had no doubt that there was no justification to limit the right to sue only to the consignor or the consignee. No doubt the Warsaw
Convention has granted certain rights to the consignor & the consignee & have imposed certain obligations on the carrier. The
Warsaw Convention does not expressly say that these rights & obligations are exhaustive. A person was entitled to enforce against a
carrier his common law right as being a party to a special contract which was not a right granted by the Warsaw Convention at all. If
a person could enforce his 'non convention' common law right under a special contract against the carrier, the Court saw no reason
why a person should not be allowed to enforce his common law rights as the owner of the goods. The Court held that the seller had
a good cause of action against the air forwarder based on the seller's ownership of the goods & this would be so even if the seller
was not a party to the contract of carriage.
As the carriage was governed by the Warsaw Convention, the air forwarder would not be entitled to rely on any exemption clause or
any limitation of liability clause which gave the air forwarder wider protections than what are laid down in the Convention. This is
the result of art 23 of the Convention which provides:
Article 23
Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this schedule shall be
null & void, but the nullity of any such provision does not involve the nullity of the whole contract, which shall remain subject to
the provisions of this schedule.
Under the Warsaw Convention, the seller would have two years from the date of arrival of the goods at the destination to bring an
action (see art 29) & the seller had brought this action within the two-year period. Any provisions relied upon by the air forwarder
to provide for a shorter period to bring action would thus be void. In so far as the limitation of liability is concerned, under the
Warsaw Convention, the limitation provided would be 250 francs (equivalent to HK$135) per kg (see art 22(2) & Carriage by Air
(Overseas Territories) (Hong Kong dollar equivalents) Order 1984) which would appear to be higher than the limitation of $200 per
package relied upon by the air forwarder. However the seller contended that the air forwarder was not entitled to rely on any
limitation of liability at all because of art 25 of the Convention which says:
Article 25
(1) The carrier shall not be entitled to avail himself of the provisions of this schedule which exclude or limit his liability, if the
damage is caused by his wilful misconduct or by such default on his part as, in accordance with the law of the court seized of the
case, is considered to be equivalent to wilful misconduct.
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused as aforesaid by any
servant or agent of the carrier acting within the scope of his employment.
The seller contended that the loss in this case was caused by the willful misconduct of the air forwarder or its Los Angeles agent. In
Rustenburg Platinum Mines Ltd & Ors v South African Airways & Ors [1977] 1 Lloyd's Rep 564 at 569 Ackner J held that 'wilful
misconduct' went far beyond any negligence, even gross or culpable negligence, & involved a person doing or omitting to do that
which was not only negligent but which he knew & appreciated was wrong, & was done or omitted regardless of the consequences,
not caring what the result of his carelessness might be. In this case, the goods were simply delivered by the air forwarder's agent to
the buyer in blatant disregard of the contractual obligation imposed by the terms of the air waybill. The Court held that such conduct
on the part of the agent would amount to willful misconduct. What the agent did would simply amount to acting in concert with the
buyer to give away the goods to the buyer. Whether the agent had received any assurances from the buyer that it was entitled to
delivery of the goods without payment as the seller had agreed to grant it credit was immaterial. The Court did not consider that any
reasonable person in the position of the agent could simply act on such representation of the person who wanted to take delivery of
the goods. Accordingly the Court held that the air forwarder was not entitled to rely on any exemption or limitation of liability
under the Warsaw Convention. To this extent & for this reason, any exemption or limitation clause in the shipper's instruction would
be rendered null & void by art 23 & could not be relied on.
The seller admitted that it had brought proceedings in the US against the air forwarder's agent, the buyer & a number of other
persons for the recovery of the value of the 12 shipments. The cause of action there was conspiracy. However there was as yet no
trial of the action in the United States & the seller had not obtained any judgment not to say satisfaction of any judgment against
any one yet. In these circumstances the Court did not think the mere existence of the US proceedings on a related cause of action
would be a defence to the seller's claim in this case.
The seller claimed the total invoice value of the goods for the 12 consignments. The seller was entitled to judgment in the sum of
US$177,293.45. In exercise of its discretion the Court also held that the seller should be entitled to be paid interest at the rate of 8%
from the date of the writ.
Multi-modal transportation involves far more complicated liability regime than port-to-port or airport-to-airport carriage. Pure
international sea or air transport often affords better protection by international conventions. Conversely, multi-modal transport
entails a variety of operational risk elements on top when the cargo is in- transit warehouse & during overl& delivery.
Fortunately, these risks are controllable but not without deliberate efforts. Sun-Mobility is the popular risk managers of many
multi-modal operators providing professional assistance in liability insurance, contract advice, claims h&ling, & as a matter of
fact risk consultant for their staff around-the-clock.

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