Delivery of Cargo without Bills of Lading (Circular 02/11/92)

Our Ref: 92/11/2

November 1992

To: Members

It is the Club's experience that the most consistent large risk faced by ship agents arises from the delivery of cargo without the bill of lading. Both TIM and CISBA wrote cautionary articles on this subject in their former newsletters, and a further article has been prepared for the next issue of The Intermediary (ITIC's newsletter) which will be sent out in December.

In the past few weeks ITIC has received three new large claims for delivery of cargo without the bills of lading. It is therefore timely to remind ship agent Members of the substantial risks they face and to ask them carefully to check their systems and procedures for the issuance of delivery orders, bearing in mind the requirements of the Club's Rules, and to ensure that their staff are fully aware of the risk and of their obligations in preventing such claims. To assist them we are attaching a re-print of a set of guidelines for staff on the issuance of delivery orders, first issued in July 1988. As always, the Managers will be happy to provide Members with more specific advice if required.

ITIM Co. Limited, Managers
International Transport Intermediaries Club Ltd.

Recommended ITIC Guidelines for Staff Involved with the Release of Cargoes

November 1992

One "working" copy of the ship's cargo and freight manifest is to be kept by the release desk. A duplicate, but suitably "censored" copy will be sent to the depot(s). The copy kept by the release desk should be used to record:

(a) Any corrections to the manifest issued by the carrier or his agent at the loading port. This should help to prevent cargoes being released without payment of the correct amount of freight and charges and should also help to ensure that delivery orders are completed accurately;

Copies of the delivery orders are to be retained on file together with the bills of lading to which they relate. This file should preferably be kept in a ship/voyage/bill of lading number order.

A copy of the delivery order is to be sent forward to the terminal/depot concerned. A telex or facsimile giving the details of the delivery order can be sent to assist in the completion of formalities, but this should never be used by the depot as a substitute for the original document.

Reefer containers are not routinely delivered to cold stores without those cold stores having received clear instructions, in writing, not to deliver those containers to any receiver without the agents' express authority.

Persons issuing delivery orders or responsible for issuing other documents for the release of cargo should be provided with a check list. This list might cover the following points:

Is the bill of lading an original "shipped on board" bill and has it been signed by an authorised signatory?

Have any amendments been made to the bill of lading? If so, have they been authenticated by stamp and authorised signature? What are the effects of those amendments?

Are any freight and charges due? If so, have they been paid?

Have shippers requested the collection of their disbursements? If so, have they been collected?

Is this a "straight" or consigned bill of lading? Has the shipper endorsed the bill?

Is this a bill of lading consigned to the order of a bank? Has the bank as well as the party to whom the delivery order is being issued, endorsed the bill?

Do all endorsements appear authentic and are they unqualified?

Are you satisfied as to the identity of the receiver? Additional caution should be exercised when dealing with sea waybills. Although it is not obligatory for receivers to produce either a copy sea waybill or arrival notice when applying for a delivery order, it is desirable. If in doubt refer to your manager/ director.

Do you anticipate any additional charges beyond those covered by the bill of lading e.g. shed rent? If so, is it clear those charges are for account of the goods?

DO NOT delay issuing delivery orders if all formalities have been complied with. Failure to act promptly can give rise to claims for extra wharfage/ storage costs.

DO NOT issue delivery orders against bills of lading which have travelled care of the master in the ship's bag.

DO NOT issue part delivery orders for exact quantities of bulk cargoes which are susceptible to measurement errors or wastage.

DO NOT leave delivery orders out for collection, i.e. pinned to an office door overnight or "in the usual place".

DO NOT issue delivery orders against letters of indemnity or other guarantees. If this issue arises, always refer it to your manager/ director.

DO NOT succumb to pressure from customers - no matter how important you perceive them to be. Refer to your manager/ director.

IF IN DOUBT - REFER TO YOUR MANAGER/ DIRECTOR

LETTERS OF INDEMNITY AND GUARANTEES:

Where claims are made against Members arising from delivery of cargo against a letter of indemnity or guarantee, the Member may be required to demonstrate that:

• he had obtained or had made every reasonable effort to obtain, the express written authority of his principal to the delivery of the cargo, as well as his specific approval to the form, nature and backing of the indemnity offered;
• particular care had been taken to identify the true principal from whom the Member could receive authoritative instructions. In some cases this may be difficult, in which case advice should be sought from the Club;
• that systems and controls were in place to ensure that the particulars of the goods shown in the indemnity corresponded to those shown in the delivery order; he did not issue a delivery order against a letter of indemnity in the knowledge that the party
• offering the letter of indemnity was not entitled to receive delivery of the cargo under the Bill of Lading. [To have done so in these circumstances might amount to a fraud on the party entitled to delivery of the goods under the Bill of Lading or to a party, such as a financing bank, having rights over the bill or the goods. The guarantee obtained could then be unenforceable];
• the guarantee to deliver cargo without the Bills of Lading did not only cover the principal but also specifically covered the liabilities of the agent. [In many countries, the agent himself will have responsibility independent from that of his principal and this should be reflected in the wording of the guarantee. Similarly, the guarantee should not be limited to claims arising under contract but should also cover claims which may arise under the general law];
• if he was in possession of a copy of the Bill of Lading issued identifying the notify party, he had notified that party accordingly. [Alternatively, the agent should request this information from his principal or from the carrier if the carrier is not his principal];
• he had checked with the shipper, through his principal, that it was in order to give delivery of the goods to the party claim them;
• he had made particular provision for the safe keeping of indemnities and guarantees;
• he had taken all reasonable precautions to safeguard his position in the knowledge that his principal was almost certainly uninsured for any resultant claim;
• he had no reason to believe that his principal would not support him in the event of any claims arising from the acceptance of the guarantee or indemnity.

SECURITY ARRANGEMENTS:

Members should take into account the prevailing local conditions and should consider how best to protect both themselves and their principals against the loss of documents, accidental or otherwise, the misdelivery of goods and fraud. The following general recommendations are offered by Signum Services:

It is good practice for agents to have an up-to-date list of the authorised signatories of the carriers' agents at loading ports. Such a list would normally show the usual signature of an authorised signatory adjacent to his typed name. This list would also show the extent of each signatory's authority. If there is any doubt as to the genuineness of a signature, a director/manager of the agent's firm should be advised.

Similarly, terminals and depots should also be in possession of an up-to-date list of those persons within the agent's office who are authorised to sign delivery orders.

Delivery order forms should be in triplicate; the original for the receiver, a copy for the depot and a copy to retain on file. The wording of the form should facilitate accurate identification of the cargo being released.

As with blank and issued original Bills of Lading, blank and issued delivery orders should be kept under lock and key overnight and when the office may be empty, as at lunch times.

As with standard instructions, issues of security should be reviewed and revised periodically in order to take into account new problem areas and techniques for fraud, both locally and internationally.

IF IN DOUBT - CONSULT YOUR MANAGER/ DIRECTOR

THE STAFF OF ITIC ARE ALWAYS READY TO ASSIST WITH ADVICE

TEL: +44(0)207 338 0150
FAX: +44(0)207 338 0151