Problems in Presentation Bill of Lading

Unique characteristic of the bill of lading, which requires delivery of the goods only against presentation of the bill of lading, has been causing serious practical problems. The speeding up of transport through containerization and similar devices has coincided with banking delays and a universal slowing up of postal services, with the result that in an increasing number of cases the cargo will reach its destination before the documentation.

This is particularly true of the carriage of bulk cargoes, such as oil or gas, on the short sea routes. In such an event the carrier is placed in somewhat of a dilemma. If the carrier insists on presentation of the bill, a number of problems will arise. As the carrier will be unaware of the identity of the current holder of the bill, or the reason for the delay in the bill’s arrival, the carrier will be unable to make any assessment of the time at which it will ultimately be available.

On many occasions there may be no place available to store the cargo, pending the arrival of the bill, except on board ship. In such an event a charterer may face liability for demurrage or damages for detention, while the shipowner may run the risk of losing the next charter should it contain a cancelling clause. Similarly, in the liner trade the carrier will be worried about his schedule. Again there are the obvious risks to the cargo owner should the goods be perishable or subject to fluctuating market prices.

Alternatively, if the carrier is reasonably sure of the identity of the receiver, he may risk delivering the goods without presentation of the bill of lading. In such a case, as we have seen earlier, he acts at his peril since such action amounts to willful misconduct and a deliberate breach of his contractual obligations. Should he deliver to the wrong party, even though in good faith, he may lose the entire protection afforded by the contract of carriage together with, where relevant, the Hague exceptions and limitations of liability.

Moreover, the carrier may also lose the protection of the liability insurance provided by his P&I (Protection and Indemnity) Club. A third possibility is for the carrier to require an indemnity before agreeing to deliver without presentation of the bill of lading. Normally a bank indemnity would be demanded, but occasionally a charter-party may require the shipowner to deliver against personal guarantees only, but clearly an indemnity is only as good as the financial standing of the guarantor.

The problem is that bank indemnities tend to be expensive since they invariably require more than adequate cover both in time and amount. None of the three methods outlined provides an ideal solution to the problem raised by the absence of the bills at the material time. Over recent years various proposals have been advanced to deal with the problem and have met with varying degrees of success.

One obvious solution is for the sales contract or bill of lading to make express provision for the eventuality as, for example, the standard GAFTA 100 form in the grain trade. This provides that ‘In the event of the shipping documents not being available on arrival of the vessel at destination, sellers may provide other documents or an indemnity entitling Buyers to obtain delivery of the goods and payment shall be made by Buyers in exchange for same.’

Presentation of the Bill of Lading (B/L) to a Bank

Alternatively, procedures can be adopted to speed up the transmission of the current forms of documentation. Thus the documents can be produced at the destination of the cargo or at a point close to the consignee, where the relevant information can be supplied by telex or photographic telefax. Again, arrangements can be made for the presentation of the bill to a bank or other agent of the carrier at a convenient place other than the discharging port.

Much has also been done to speed up the production of documents by the development of uniform layouts such as the data aligned formats designed by the International Chamber of Shipping, SITPRO and other similar bodies. By the use of such uniform formats the entire documentation required can be produced with economy, accuracy and speed.

The ship master document contains all the information while, by the use of blocking mechanisms, the various copies produced will provide only the relevant material required. The elimination of the need for transcription considerably reduces the opportunities for mistakes.