Negotiable bills of lading are very important to trade. The holder in due course is entitled to delivery of the cargo as described by the negotiable bill of lading. This right goes to title as well as quantity and description of the goods.
Gard P&I Club released a guidance focusing on the obligations of the vessel owner and Master with respect to the form and content of bills of lading, as well as the risks arising from inaccurate description and mis-delivery because unavailable originals or multiple sets of bills.
One other area of dispute and confusion between parties in a charter chain involves a request to switch new bills of lading for the original bills of lading.
There are many reasons for wanting to switch bills of lading, including:
- The original bill of lading quantity is to be split into smaller parcels, with each parcel documented by its own bill of lading. This is sometimes referred to “splitting bills of lading”.
- A series of original bills of lading are to be consolidated where different products are blended, with that new blended cargo documented by its own bill of lading.
- The original bill of lading may name a discharge port which is subsequently changed, as the goods have been sold or resold on the water, so a new set of bills of lading are requested naming the new discharge port.
- A commodities trader does not wish the name of the original supplier and shipper to appear on the bills of lading, and so a new set is requested naming the trader as the shipper. This protects the trader from being cut out of the sale opportunities in subsequent transactions by revealing the trader’s sources.
- The original bills of lading may not conform with the requirements for the bills of lading under the relevant letter of credit, in which case, if the deficiency is not waived by the issuing bank, the seller may request that new conforming bills of lading are issued by the carrier.
However there are some clear risks and dangers, such as finding a way around applicable sanctions or misrepresenting facts that may constitute fraud. For this reason, operators must exercise due diligence to understand the reason for a request to switch bills, and a trader or charterer should be prepared to fully explain its request.
