RELEASE OF CARGO AND NVOC’s BILLS OF LADING – LINER AGENTS BEWARE!

It was always a fundamental assumption that only one set of bills of lading for each cargo should be in circulation.  However, this concept pre-dates the advent of Non-Vessel Owning Carriers (NVOC’s).  Ship agents in the liner trades often have to deal with cargo for which there are two sets of bills of lading.  The ocean carrier will issue one set of bills of lading which set out his obligations.  The merchant will not, however, see the carrier’s bill as he will receive a bill of lading showing the NVOC as carrier and to his customer this will be the bill of lading.

The services provided by NVOCs are an established and important part of international trade.  There are no problems automatically raised by the issuance of both ship’s and NVOC’s bills of lading so long as those involved remember the different functions of each document.  Liner agents will frequently act as agents for both the ocean carrier and the NVOC.  This dual role can lead to confusion if staff are not given proper training and guidance.

It is not unusual for the agent at the discharge port to be presented with  a NVOC bill of lading by a consignee who is demanding delivery of his goods.  The consignee will have paid for his goods through the banking channel and has in his hand a bill of lading which he believes entitles him to delivery of the goods.  The agent who acts for the ocean carrier must, however, always receive the original ocean bill of lading (or the necessary authority from his principal to release without it), before he can release the goods.  The consignee may have an NVOC bill of lading which is stamped “freight prepaid”, but this only means that freight has been paid to the NVOC.  The ocean bill of lading may still be in the hands of the ocean carrier’s agent at the loadport waiting for the NVOC to pay the freight.  If the ocean carrier’s agent at the port of discharge releases against the NVOC bill of lading, he will find himself liable to the ocean carrier for the freight unpaid by the NVOC.

In a case handled by the Club, a British NVOC made regular bookings with a line from Antwerp to Durban.  The NVOC would collect freight from the shipper and in exchange would hand over an NVOC bill of lading stamped “freight prepaid”.  The NVOC then asked the line’s Antwerp agent to arrange release of the cargo at Durban against the NVOC bill of lading.  The system of the line’s Antwerp agent authorising the Durban agent to release against the NVOC bills of lading went on for months.  In the meantime all the original line’s bills of lading were still with the Antwerp agent waiting for the NVOC to pay the freight, which finally totalled tens of thousands of dollars.  The NVOC never paid and the ocean carrier claimed the outstanding freight from his agents at Antwerp and Durban, who had set up this system without consulting the ocean carrier and with no consideration of the ocean carrier’s rights.

The NVOC is not always the source of the problem and is often the victim of mistakes by the ocean carrier’s agents.  The Club has recently had a number of claims reported to it which involve NVOC bills of lading, and incorrect or incomplete information being entered onto the agent’s computer system.

In one recent case, a UK liner agent received the original ocean carrier’s bill of lading, duly endorsed, from a U.S. based NVOC, with an instruction to deliver a container of electrical goods against production of the NVOC’s bill of lading.  An employee of the agent made an entry on the computer simply recording the fact that the original ocean bill of lading had been lodged.  Another employee, relying on this entry, released the cargo without requiring production of the NVOC’s bill of lading.  In this case it was the NVOC who had not been paid freight.

Another recent case involved a North American agent who failed to note on his computer system an instruction from an NVOC to hold a cargo.  The cargo was released and the agent received a claim from the NVOC for losses caused by his failure to comply with this instruction.  The claim included not only the freight, which the NVOC had not received, but also an indemnity against the unpaid shipper’s claim for the full value of the cargo.

Ship agents rely on information entered onto computers when releasing cargo.  Great care must be taken both in training staff to use the computer, and ensuring that they understand the consequences of entering incorrect or incomplete information on the computer system.