Non-negotiable sea Bill of Lading

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abrarmr
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Joined: 08/07/2010
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Can someone please explain why a Non-negotiable sea Bill of Lading is not a document of title?

phill doran
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Joined: 02/10/2009
where there's abill, there's a way (bill)

Hello
Well in two areas really;
1. In its function and
2. In its name.

All transport documents serve two functions – evidence of the contract between the carrier and the shipper and secondly, as a receipt for the packages listed on the document. Other documents serve other purposes too – sometimes they evidence the salient terms and conditions of carriage etc, sometimes they act as insurance certificates. It all depends on which type of transport document it is.
But, only a ‘bill of lading’ attempts to act as a title document.
So, when a shipper calls for a ‘waybill’ they are accepting the document as evidence of the contract with the carrier, as a receipt for the goods and as a brief statement of terms and conditions etc – but they are specifically asking for the document NOT to function in this extra capacity which the bill of lading assumes – i.e. they are specifically asking for it NOT to be a document of title.
For example, if I ship to you and believe there is a risk you will not pay me, I could ask for a bill of lading – that way I know you cannot get the goods without producing at least one ‘original’ of the bill – and as I have them all, the only way you can get this document is by buying it from me.
However, if you had prepaid me – or if I trusted you to pay at some future point (or if I was sure I would be paid under some bank security like a credit) – then I would NOT want this barrier – this need for you to have the document I am holding – to stand in the way of you getting the cargo. Rather I would want it released to you on arrival – simply by you producing evidence that you are who you claim you are: so I call for a ‘waybill’.
On arrival, you evidence who you are, produce customs release (if required) and settle all outstanding payments with the carrier – and you get the goods: no original of anything need be produced.

Yes?
cheers

phill doran

 ...time flies like an arrow...fruit flies like a banana...

admin
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Joined: 05/06/2007
Why AWB is not doc of title

Air carriage is too fast !

Exaplanation:

In a (maritime) bill of lading, the buyer wants to resell the goods while they are still in transit, hence the bill of lading is made to represent the goods. Thus, the buyer can resell the goods by transferring the bill of lading. (The legal possessor of the bill of lading is entitled to possession of the goods. Legal possession of a negotiable bill is tantamount to ownership of the goods).  

A negotiable bill of lading may be either an order bill ("consigned to the order of XYZ") or bearer bill ("consgined to bearer"). A bearer bill can be negotiated by mere delivery. An order bill of lading is negotiated by delivery plus indorsement of the named consignee to the party to whom the bill is being negotiated.

For an Airway bill you do not need these fancy requirements, since the goods arrive quickly. Within a day or two you get the goods delivered, hence you do not need the legal constructs re "document of title".  

phill doran
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Joined: 02/10/2009
and it would appear that, like air carriage, I am too fast too

Hello Admin

I see I did not read the question properly – I read “waybill” rather than “non-negotiable” bill;

I shall punish myself and have only one biscuit with my tea...

However, having read the question properly; the mere fact that the bill of lading is drawn up in a ‘non-negotiable’ manner does not of itself mean that it is no longer a document of title (if any bill is ever truly such a document).
On certain trade routes (the USA for example) – and with certain carriers – a bill consigned directly to a named party need not be produced to obtain release – therefore it functions as a waybill (see my first, hasty, answer) however on just as many routes and with just as many carriers it does (need to be produced).
It is the fact that it needs to be produced to evidence the passage of title which makes it ‘work’. So, the non-negotiable statement is simply stating that it cannot be transferred by way of endorsement; it may still be intended to act as a document of title though.
So, (and by common practice - which is not necessarily universal - rather than by law) .
...if it is “negotiable”, it is a document of title and such title may be transferred by endorsement.   If it is “non-negotiable”, it remains a document of title but such title as it grants cannot be transferred.  If it is neither negotiable or a document of title, then it is a waybill.  

(sorry if I had the bull by the udders earlier)

phill doran

 ...time flies like an arrow...fruit flies like a banana...

admin
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Joined: 05/06/2007
Non-negotiable maritime bill of lading

Phill, I will join you for tea. 

It seems counterintuitive that a bill of lading, that cannot be negotiated would still be considered a document of title. After all, a document of title serves to represent the goods and transfer the goods while they are still in transit. 

However, even the law talks about non non-negotiable  documents of title:

UCC Article 7-504. Rights Acquired in the Absence of Due Negotiation;  Effect of Diversion;  Stoppage of Delivery.

(a) A transferee of a document of title, whether negotiable or nonnegotiable, to which the document has been delivered but not duly negotiated, acquires the title and rights that its transferor had or had actual authority to convey.

(b) In the case of a nonnegotiable document of title...

Phill, do I have to bring extra biscuits when coming for tea ? 

phill doran
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Joined: 02/10/2009
The two biscuit problem

Hello Admin,
Thanks for the company – you need only bring your own biscuits if, as a banker, you have been brought up to expect chocolate with everything.

The starting point is, of course, that no bill of lading is a document of title really – there’s the rub. Because this status derives from ‘customary’ usage rather than law, and given that we have multiple ‘customary’ practices and jurisdictions each handling the bill in any one of several ways, so we have no certainty of meaning or usage.

As I mentioned in passing, a seafreight (as opposed to airfreight or road freight) “bill of lading” from the USA is considered a document of title ONLY if consigned ‘to order’. So, if consigned to you by name, it is a waybill. If, however, it is consigned ‘to order’, it is seen as BOTH a document of title and a negotiable instrument (although, and of course, a bill of lading is not really a negotiable instrument either – but that’s what the second biscuit is for.)
Yet, the same document originating in (say) England, would be a document of title whether it was consigned to you directly or ‘to order’, but it would only be negotiable if consigned ‘to order’, it would be non-negotiable is consigned directly to you – and it would only be a ‘waybill’ if so named.
On top of this, you need to factor in that the carrier may impose their own restrictions – on what is essentially their private document – hence examples where shipping lines issue ‘waybills’ which still (above the signature in the bottom right hand corner) state that “one of which to be produced in exchange for the goods” – just like a document of title!

Still, we’ve only had 1000 years of continuous history to get this document right; perhaps we need to give it more time...

Now, if you are not going to eat that one, do you mind if I...?...ah, many thanks... 

phill doran

 ...time flies like an arrow...fruit flies like a banana...

admin
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Joined: 05/06/2007
Bill of ladings without borders

Bills of lading are considered documents of title (=representing the goods) under German law and under French law. Probably, there are differences in regards to being a holder in due course, defenses from the underlying transactions etc. For me fascinating is that there seems to be an international commercial consensus that is not being called "international law", however the consensus is reflected in national laws.

Just my 2cents.

(Very interesting what you had to say about English law !) 

Abrar
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Joined: 03/12/2009
B/L issues

All this talk of biscuits and tea is making me very peckish!

Just to add my tuppence worth, under English Law, and under case precedents ( Rafaela S) it is deemed that a  bill of lading (not sea waybills), regardless of its construction as regards negotiability (whether made out to order, or "straight" consigned) is "a bill of lading or any similar document of title" within the meaning of Article I (b) of the Hague-Visby Rules (assuming that the bill of lading in question is subject to the rules). The consensus following from this judgement was that the LJ's narrow focus on the rules deeming all bills of lading to be a "document of title" regardless of circumstances, or their construction was not reflective of industry practice.

In my view, the requirement for tender of the original B/L (functioning as a "document of title") to the carrier should only be necessary if the carrier is not able to determine the rightful consignee, i.e in cases where the B/L has been made out "to order", or "to order" of an entity, and sighting of the B/L would be required to evidence the final endorsee/consignee. 

Where the B/L has been straight consigned, it cannot be negotiated, and therefore, there is only one rightful consignee, details of which would already be in the carrier's log. Mere identification as to the consignee's identity (as with waybills), even without possession of the original B/Ls should suffice to enable release of the cargo.  

phill doran
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Joined: 02/10/2009
bills, bills, billls...

Hello there Arbar
In South Africa, we have the cunningly-named "Sea Transport Documents Act" which deals with, ahem, sea transport documents...
This states that if you walk into a carrier with a bill consigned directly to you, the carrier is still entitled to obtain an indemnity from you and waives such requirement at the carrier’s risk; and on demand for such indemnity, the consignee must comply or convince the court that possession of the bill (in their name) is proper title to the goods.

So, mere possession of the bill of lading is NOT seen as conclusive proof of title – and I agree with this. As we have previously mulled over in the letter-of-credit-forum Lounge and Entertainments Room on several occasions in the past, the bill is unstable and subject to different laws in different jurisdictions.

The reality is that carriers here will take the directly-consigned bill – and proof of customs clearance in the same name – alone, and not ask for the indemnity; but it illustrates the legal point of view, at least here.

...and then, of course, there's the matter of the forwarder's 'bill of lading'...how many biscuits can you buy with tuppence?

phill doran

 ...time flies like an arrow...fruit flies like a banana...

Sheilar T. Shaffer
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Joined: 04/15/2008
aging B/L and fading youth

Hi Phill, Abrar and all,

I hope the tea time is still open ?!

There are firm and universal belief that a B/L made out to "bearer" or "order" or "order of xxx" qualifies a document of title. But sometimes I wonder whether some B/L clause would change a B/L into something rather than a document of title.  For example, several years ago some bank refused to take such a B/L as security, which incorporated wording like " If required by the carrier, Bill of Lading duly endorsed must be surrendered 

in exchange for the Goods or delivery order". Their main reasoning was that it implied the carrier had option to decide whether delivery should require the production of an original. So the inferrence for this wording was that"if not required by the carrier,it can be released without surrender of the original bill of lading."  I'm not sure whether  such B/L clause has been tested in the court ;but   ICC Banking Commission seems not giving a firm answer for this (see TA675rev.)(of course, I personally have some doubt.)

Also note  International Convention on Contracts for the Carriage of Goods Wholly or Partly by Sea (2009) Article 47(delivery when a negotiable transport document is issued), if a holder does not claim the cargo within  a time period, the carrier may so advise the documentary shipper and request instructions as to the delivery; if  delivering the cargo upon instructions of the shipper, the carrier is discharged from its obligation to deliver goods under the contract of carriage to a holder , irrespective of whether the negotialbe transport document has been surrendered to it...  I think this is a big challeng to our perception of "document of title".

Best regards

Sheilar

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