LOSS PREVENTION

In 1996 the North of England P&I Association issued a simple questionnaire to reader of its loss prevention newsletter ‘Signals’. It asked for their experiences with regard to the issue of bills of lading and subsequent delivery of cargo against those bills of lading. The majority of answers were received from ship owners’ offices or from masters, with agents, operators, financiers and others also responding.

A number of specific problems set a recurring theme

•  Pressure on the master to issue clean bills of lading
•  Disagreement between ship’s and shore figures
•  Agent shipping bills of lading without reference to the mate’s receipts or in excess of their authority from the master
• Request to deliver the cargo without production of the original bill of lading

A general point also emerged which can be summarised by one member’s comment ‘I have noticed a distinct casualness by shippers, receiver and their agent at load discharge ports about the importance to the master of bills of lading. Conclusion: they are ignorant of its legal purpose.

Strong word, but possibly true. Although the bill of lading is a key document in a transaction where the cargo and freight together may be worth several millions of dollars, a master who is diligent or cautious in his handling of that document may often be seen by others as obstructive or awkward. If master are to stand their ground and justify their stance, then they may need to know not only what they have to do, but why they are doing it.

In most international sales transactions where the goods are to be carried by sea, the seller of the good promises to do two things.

•  Put the goods on board a ship
  
• Provide the commercial documents required by the contract, the central one usually being the bill of lading.
  
• The bill of lading says a lot of things to those who come into possession of it.
• It helps to identify the owner of the goods – in this respect it is a document of title.
• It identifies the party who can receive the goods – again as a document of title.
• It is a means of transferring title from one person to another.
• It provides information on
  
  - The description of goods
  -          The condition of goods
  -          The quantity of goods
  -          The loading port and date of shipmate
  -          The discharge port
  -          The name of the ship
  -          Whether freight has been paid
  -          The terms of carriage under which the cargo is being carried
  -          Delivery instructions (e.g. the notify party or consignee).
  
  In this respect the bill of lading is both a receipt for the good shipped and evidence of the contract of carriage.
  
  As the various functions of bills of lading are essential to international sale transaction, it is important that information given in each bill is meaningful and consistent in expression. Attempts to ensure this have given rise to agreed codes and convention and recognized practice.
  
  Agreed codes and conversations include
   
• UCP 500 (Uniform Customs and Practice for Documentary Credits)
• Hague Rules
• Hague – Visby Rules
• Hamburg Rules
• Incoterms.
  
  Recognised practices include widely accepted terminology for clausing (e.g. in respect of steel cargoes) and the use of widely understood abbreviations. These include FOB and GIF and (less frequently) EXW, FCA, FAS, CFR, CPT, CIP, DAF, DES, DEQ, DDU and DDP, all of which are Incoterms.
  
  It is important that the information in a bill of lading is correct. However, the master when issuing the bill of lading may (justifiably) wish to limit his responsibility for information which he is not in a position to check for accuracy. This has given rise to the use of commonly used words of description in bills of lading such as
  
  
•  ‘weight, measure quantity, condition, contents and value unknown’
• ‘shipper’s load and count’
• Apparent order and condition’
• ‘Said to be’.
   
  Sometimes attempts are made, or pressure put on the master, to hide information that will make the bill of lading less attractive to the buyer of the cargo. This gives rise to requests for the issue of clean bills of lading when, because of the condition of the cargo, the bills should be claused. These request (which should be refused) are often made with promises of letters of indemnity which say they will prospect the issuer of the bill of lading.
  
  A number of important questions need to be addressed.
  
  
• Must the master sign any bill of lading as presented?
• Who prepares the bill of lading?
• Who else has the right of signing the bill of lading on the master’s behalf?
• What is the authority of charterers or agents?
• What is the master to do when asked to deliver the cargo to a change of destination from that named in the bill of lading?
• Can the master deliver the cargo without production of the bill of lading?
• Can the master deliver to one person where more than one person demands delivery under the bill of lading?
• What are the difficulties with straight bills of lading and sea waybills?
   
  All these questions will be discussed in our subsequent articles.