Further guidelines on the release of cargo

The below article was written in 2003. ITIC's Guidelines for the Release of Cargoes were updated in 2013.

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Can cargo be released without collecting an original bill of lading if the bill is non negotiable or “straight”?

It is established law that cargo cannot be released without production of a “bill of lading … or similar document of title”. (Section 1 (4) of the UK COGSA 1972). However, in some jurisdictions a non negotiable (or “straight”) bill of lading is not legally a document of title because it does not allow ownership of the goods covered by the bill of lading to be negotiated or transferred. This means in some jurisdictions that cargo can be released to the named consignee in a “straight” bill of lading without production of the original document. The ITIC Guidelines warn that the ship agent cannot assume that there is a right to release in these circumstances and that he should check his local law and always get his principal’s authority before so releasing.

In the past year there has been much publicity surrounding two cases involving non-negotiable bills of lading which make it imperative that agents always obtain written instructions from their principals before releasing cargo without taking the non negotiable bill of lading. The first case was decided by the Court of Appeal of Singapore (Voss v APL [2002] 2 Lloyd’s Rep 707). A Mercedes car was shipped by Voss from Germany to a buyer in South Korea. Non negotiable bills of lading were issued. The carrier delivered to the named consignee in South Korea, without collecting the original bill of lading, which had been retained by the shipper, Voss. The Korean buyer failed to pay, and Voss successfully sued the carrier, APL. The Singapore Appeal court found that APL should not have delivered without first obtaining the “straight” bill of lading.

The second case involved “The Rafaela S” and was heard in the English Court of Appeal. “The Rafaela S” did not involve the release of cargo – but whether a “straight” bill was a document of title and therefore a “bill of lading or similar document of title”. The Court of Appeal found that non negotiable bills of lading are documents of title and it therefore follows that they need to be produced in order for delivery to be effected.

The effect of local law on a carrier’s delivery obligations is itself a complex area. It is fairly well known that agents in the USA can deliver to the named consignee in a bill of lading marked “non negotiable” without the obligation to first collect that bill of lading. Indeed the US courts may find that the carrier has no right to refuse to deliver in these circumstances. The carrier in this case is in a very difficult position as he is at risk of claims from both the shipper and the receiver. In addition, if the law of the country where the goods are loaded for the USA does not allow the carrier to deliver cargo without collecting the non negotiable bill of lading, then the carrier can still find himself facing a valid claim in that jurisdiction for what is a legal release of cargo in the USA. He may then seek to recover from the agent who has released the cargo.

Releasing cargo without taking in exchange “straight” bills of lading has become extremely dangerous, and ship agents should not do so without their principal’s instruction in writing.

Can cargo be released to a party holding the full set of three Original bs/1 if the bs/1 are “to order” and not properly endorsed?

This question was asked by three different Members of ITIC. Physical possession of the full set of three bills of lading does not make the party in possession the proper holder and 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 bills of lading were stolen from a motorcycle courier who was delivering them to a bank. The thief was the “Notify Party” who presented them to the ship agent, took delivery of the cargo and disappeared. Even though the agent had recovered the full set of three original bills of lading, the consignee on the bill of lading was “To order of the Bank of Commerce”, and none of the bills of lading had been endorsed by the Bank of Commerce. The ocean carrier was therefore liable to the bank, and obtained reimbursement of his claim from the agent, who had delivered goods against an improperly endorsed bill of lading. In this case, the agent should have contacted the Bank of Commerce.

Copies of the ITIC Guidelines for the Release of Cargo 2003 can be found on the Club’s website: www.itic-insure.com