Lumley Marine & Logistics

An unfortunate situation that arises from time to time is the loss of the original bill(s) of lading and the subsequent problem that occurs in releasing cargo. That the bill of lading is said to have been lost is no excuse for delivering the shipment without production of the original document.

The reality is that one can never be 100% sure of what has happened to the original set of bill(s) of lading: are they indeed lost or has someone just overlooked the business of paying the seller? A distinction needs to be drawn in circumstances where a forwarder acts as the actual carrier, as opposed to when they are acting as a ‘pure’ forwarding agent. When acting as the carrier, they will have control over to whom the cargo is released, while when acting as an agent they will be in the unenviable position of trying to convince the carrier to release the cargo to an increasingly frustrated and unhappy consignee.

The difficulty is that if the carrier releases the cargo without firm evidence of the consignee’s right to take delivery, the carrier does so entirely at its peril. It is standard practice for carriers’ liability/P&I insurers to exclude liability in such circumstances so carriers will be extremely reluctant to release cargo without original bills of lading.

English law, and that of many other nations, provides that the carrier is not bound to deliver the cargo to any person other than the lawful holder of the relevant bill of lading - unless, in a given case, the court so orders. If the difficult situation arises where the bill is missing but the importer is desperate for the cargo, the recommended solution for the carrier is to require a bank guarantee (or a company letter of undertaking countersigned by a bank, which thus agrees to ‘join in’) in its favour. It is common for bank guarantees to be for between 100% and 200% of the value of the cargo and serve as a form of insurance for the carrier in the event that they are later accused of releasing the cargo to the incorrect party. Remember that the carrier is uninsured in the event that they release the cargo without the appropriate bill of lading.

It is sometimes said that an advertisement in the local press about the ‘loss’ or ‘nullification’ of the original bill is an adequate and simple remedy, and once that has been done the carrier is able to issue a replacement set without hesitation (or even release the goods without production of the ‘lost’ bill of lading).

DO NOT simply rely on this! Advertising per se never serves as a complete defence as regards liability for wrongful delivery. At best, it is evidence that the relevant parties did have an intention to cancel the original bills of lading. Rather, when the parties have agreed to deliver cargo against a proper letter of guarantee (in lieu of the original bill of lading), the most important thing is to communicate to the delivery agent this new arrangement for the release of the cargo. This is to avoid the agent meanwhile delivering the cargo to a third party who happened to have in its possession the void/ cancelled bill of lading.

Clearly, the whole question of the delivery of cargo without production of the corresponding original bill of lading is fraught with danger for both the actual carrier and forwarders acting as agents.

A new product launched by Lumley Marine & Logistics, “Forwarders Combined Cover”, provides insurance cover under the ‘Errors and Omissions’ section in the event that cargo is released without the appropriate bill of lading, except where there is deemed to have been intentional or reckless conduct. For further information contact Jake Hesson on (02) 9248 1261 or email jhesson@lumley.com.au.


* Excerpted from Australasian Freight Logistics Issue 12, June/July 2008 (p.18)

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