I surrender (my B/L)
Last week I was – as I often am – in an LC related discussion. The topic was “Surrendered bill of lading” … and especially how to deal with such when required by an LC. This discussion revealed some interesting angles, and I thought that I would share those with you.
First of all it is important to stress, that there is no universal definition of “Surrendered bill of lading” – so it may well be that interpretation and handling differs between countries and continents and shipping lines and carriers etc…
In any case – the interpretation that I most often hear is that the B/L is “surrendered” by the shipper to the carrier. That is when the shipper have received it from the carrier it is returned to the carrier. The returning of the bill of lading is (or rather should be) followed by an instruction regarding the release of the goods … this would normally be that the goods must be released to the consignee mentioned on the bill of lading upon arrival.
So far so good … but that opens for a number of highly relevant questions:
Why would the parties choose to do it like that?
There may indeed be a number of good reasons – one is that the transit time between the shipper and the consignee is short – so following the normal paper trail, the documents would arrive later than the goods. By doing it this way the goods can be released to the consignee upon arrival – and release will not be delayed due to documents being stuck in the mail or in the bank ….
But … why not just use a sea waybill made out to the consignee?
This could work also – but there is one challenge; namely the “right of control.” When using a (non-negotiable) sea waybill it is normally so that the shipper has the right to control the goods until the consignee mentioned on the sea waybill is claiming delivery. This problem is “eliminated” when surrendering the full set of bill of lading. In such case the goods will be released based on the instruction given by the shipper; and after surrendering the full set bills of lading the shipper has no control over the goods.
Fine … but still – would there not be a possibility of using a sea waybill regardless of right of control?
Yes indeed – it is actually possible for the shipper to transfer the right of control to the consignee. E.g. by ensuring that the shipper transfers the right of control to the consignee. Bimco has suggested the following wording (which should be added to the sea waybill):
“I, the Shipper (named in the Shipper Box on the face of this Waybill) hereby transfer the right of control to the cargo carried under this Waybill to the consignee (named in the Consignee Box on the face of the Waybill).”
Read more about how to use the non-negotiable sea waybill in LC transactions in my book “UCP 600 Transport Documents” - Appendix A: An Article on the Non-Negotiable Sea Waybill and Chapter 4.2.3 “Article 21 Non-Negotiable Sea Waybill.”
Anyway – back to the “Surrendered bill of lading.” As indicated there may indeed be good reasons to use such “model” – but there are (at least) two core challenges:
First of all – as indicated – there is no universal interpretation of what it actually means! Therefore it is vital that it is based on a precise agreement between the parties!
Secondly – and closely related to the first one – when used in LC transactions it simply is not sufficient merely to require a “Surrendered bill of lading” in the LC! It must be spelled out in the LC what kind of document – containing what kind of information must be presented. For example it would most likely be a copy of a bill of lading – after all the intention is that the original is surrendered to the shipping line – so it would make no sense calling for an original. Bear in mind UCP 600 article 17(a): “At least one original of each document stipulated in the credit must be presented.” Also; is it sufficient that the document presented is simply stamped “Surrendered” or is something else (on the document) required ….?
And last – but surely not least – it should be observed that by doing it this way the goods will automatically be released to the consignee. In an LC transaction the consignee is the applicant … so in this case document acceptance and release of goods are totally detached from each other. Saying it another way; if documents are discrepant they may be refused; and the beneficiary (shipper) may not be paid – but the applicant may still receive the goods ….
Of course the LC banks deal with documents and not with goods (UCP 600 article 5) – but when LC requires a bill of lading (i.e. NOT a Surrendered bill of lading), refusing the presentation means that the applicant do NOT get possession of the original bill of lading; and consequently will not get access to the goods …
As always – when using LC’s the key to success is clear and unambiguous requirements. This is also the case here. The parties may well choose to trade based on “Surrendered bills of lading” but in such case – they must be precise as to the document(s) to be presented under the LC.
This being said – I will take this opportunity to raise the flag for the non-negotiable sea waybill – with a “right of control” text (as suggested above) … that could work as a perfect replacement of the “Surrendered bill of lading” … if drafted in a good and clear way.
Take care of each other – and the LC!
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