The Invisible Article – 2.0

My previous blog post included the following statement:


Such requirement is not helpful – rather: it is destructive! Why not say: “Bill of Lading” or perhaps even better: “Non-negotiable sea waybill?”


One may question why the “Non-negotiable sea waybill” is mentioned in this context. Or taking it one step further: On many occasions I have mentioned the Non-negotiable sea waybill. In these cases I refer to my article “The Invisible Article” and the book where it can be read. So I find it most fair to re-publish that particular article, so that it can be read free of charge. So below is the article … and even in a new version, where it has been updated to UCP 600. I hope you enjoy it:



The Invisible Article – 2.0

by Kim Sindberg 2013


Kim Sindberg explains why non-negotiable sea way bills covered under UCP 600 Article 21 are rarely called for under LCs, what their benefits are, and how trade can be simplified by using them rather than negotiable bills of lading.


It would have been interesting to be able to read your thoughts, when your read the headline on this article. Was it:


1. “oh no – he must mean Article 20 – typical!” or

2. “what is Article 21 exactly – have to check” or

3. ‘the non-negotiable sea waybill’?


I bet that a clear majority of readers would have answered 1 or 2 while only few would have said 3; the latter of course is exactly right. The purpose of this article is to discuss the non-negotiable sea waybill (NNSW), which is covered by UCP 600, Article 21. I call it “The Invisible Article” because it seems that – even though it may indeed be relevant in many situations – no one is able to find it; or more precisely: it is practically never used in LC transactions.


The NNSW and the UCP 600

The Non-negotiable Sea Waybill was introduced in UCP 500. In what you may refer to as “the bright light of hindsight,” it is very interesting to read the comments in “UCP 500 & 400 Compared”(1):


‘This is a new article to reflect the NC’s comments on the need for individual transport articles to address the non-negotiable sea waybill.’




“There has been an increasing commercial trend towards the use of the non-negotiable sea waybill…”(2)

No doubt the introduction of this article was based on facts and apparent “market need.”


The NNSW is a document that is being used more and more out there in the real world, and consequently there should be a UCP article to cover it!


It is, however, fair to say that even if one accepts the argument above (and I see little reason not to), then the life of UCP 500 Article 24 and today UCP 600 article 21 has so far not been successful at all. I have never seen any statistics, but it is my clear impression that this document simply is never required in LCs!(3)


This is also the impression you will get if you look at additional ICC publications: I have not been able to find one ICC opinion the deals exclusively with UCP 500 Article 24 or UCP 600 article 21. The closest I could find was R.285/TA.29 which was a “combined Article 24 and Article 26 (multimodal) question.”


In all fairness it must be mentioned that the NNSW have finally found its way into the ISBP. ISBP 745 includes paragraphs describing the practice regarding NNSW (Although one may argue that there hardly is any practice).


And so it is clear: for one reason or another no one seems to notice Article 21.


UN and the Rules for NNSW

Before going further into the reasons that may provide the background for this lack of interest in Article 21, I will draw the attention to a document issued by UN/CEFACT: “Recommendation 12/Measures to Facilitate Maritime Transport Procedures.”(4)


One purpose of this document is to agitate for the use of the NNSW. The overall recommendation is that the NNSW should be used in all cases “except in cases where it is intended that the goods will be sold in transit, or where there is a strong and valid case for independent documentary security.”


In LC transactions the report states that “Removing the negotiable transport document from the vast majority of international maritime transport movements could have a beneficial effect on Documentary Credit procedures.” The document even goes as far as to argue that the absence of the bill of lading (“a complicated document of title”) “could result in a significant reduction in the rejection rate.”(5)


In any case the report argues strongly that a document according to UCP 500 Article 24 (now UCP 600 article 21) is just as good as one according to Article 20 (Bill of lading). The only “but” is the question of “passing control and ownership of the goods to the buyer.”


I am sure that sellers, buyers, and bankers reading this consider this a significant issue. There are, however, ways around it, as will be discussed later.


What may also be interesting to touch on are the rules governing the NNSW. These are called “CIM Uniform Rules for Sea Waybills.” In these rules there are a couple of issues that may be of interest to the LC banker considering using Article 21:

First of all, there is one “discrepancy” if the CIM rules are compared to UCP 600 Article 21.


Article 21 is almost identical to Article 20 (bill of lading), which means that it is a so-called port-to-port document, whereas the CIM rules indicate that they covers a carriage “which is to be performed wholly or partly by sea.”(6) This latter is therefore a multimodal transport – with the twist that, at least one leg of the transport must be performed by sea.


Second, Rule 6 “Right of Control” is relevant. From this it follows that the default rule is that the shipper has the right to control the goods until the consignee is claiming delivery.(7) This may of course be unfortunate in LC transactions, as the seller may (in theory) utilize this right, after presentation of the documents under the LC.


It is however possible for the shipper to transfer the right of control to the consignee.(8)


The introduction to the rules states that “Paragraph (ii) relates to the shipper’s transfer of control to the consignee. The problem of how this option should be exercised was discussed but no changes made.” The important element is that it is possible to transfer the right of control from the shipper to the consignee.(9)


I may be misinterpreting the UN/CEFACT document, but I sense an almost hostile tone towards the banks and the LC instrument, which I do not quite understand. That set aside, I must say that I support the purpose: To facilitate the NNSW being used more often – and actually more often than the traditional bill of lading – and also in LC transactions.


Identifying the problem

So what is the problem? Why is it that no one seems to be able to find Article 21?


Most likely there is not one problem, but a number of problems. Let me address some of them:


The LC and the B/L is Like Hand in Glove

I once chaired a debate on transport documents in the UCP at the Danish Chamber of Commerce. I asked the audience if they used the NNSW. Not surprisingly the answer was “no.” The reason given was that “this offers no security,” that is, the goods are just being delivered to the buyer and that’s all. I then asked: what about the air waybill – or for that matter the CMR consignment note? I must admit that I was surprised by the answer: “Those should not be under LC transactions either. Only the negotiable bill of lading should be under the LC, as it carries ownership to the goods – so when the documents are paid for and delivered – ownership of the goods is passed on.”


The reason the answer surprised me is that I often see LCs calling for air waybills and CMR consignment notes (not at the same time of course). It goes without saying that there are some elements for the parties to consider; e.g., access to goods, collateral – that sort of thing. To me, however, the problem has been to find out the intention of the parties, and (perhaps) how important a lien is. If the goods are an important element in determining whether to issue the LC or not (for the issuing bank), then a common practice is to consign the goods to the issuing bank. That would in any case prevent delivery of the goods to the buyer before the buyer has paid under the LC.

Thus there is no doubt that the bill of lading is a good match for the LC, but that does not rule out other options.


… If Goods Are to Be Sold While at Sea …

When you ask buyers and sellers why it is that they ask for a negotiable transport document, you will often get the reply that it is possible that the goods are to be sold while at sea. When you then ask how often that happens, by far most companies will reply: hardly ever.


I would suggest that, before goods are shipped, buyers and sellers have a pretty good idea whether ownership of the goods is to be transferred to third parties while at sea. In most transactions it will not; while in others, it happens almost every time, such as in oil transactions.(10)


The bottom line is that the argument that a negotiable bill of lading must be used because the goods may be sold while at sea is simply not valid – as the parties know beforehand if this is to be the case or not.


We Used To

Another argument you may meet is that “we used to do it like this and do not want to fix what isn’t broken.” To some extent I can understand that argument, but it does not really drive innovation. One should also consider the risks involved. The argument above by UN/CEFACT that the bill of lading is a “complicated document” is not at all wrong. If everything goes as planned, then there is no problem. But if something does go wrong, then it may not be the easiest problem to fix. For example, if the full set of original bills of lading is lost in the mail, then usually the only way for the buyer to get the goods is to persuade his bank to issue a shipping guarantee. Such is often without amount and expiry date. If a NNSW is lost in the mail, then the goods will still be released to the stated consignee.


The way forward

The way forward is extremely simple – and obviously very hard. It is just a matter of doing it – but apparently no one is. So first of all a humble request: For buyers, sellers, and bankers requiring a negotiable bill of lading under an LC, please consider carefully if it is really necessary, or if something else – like the NNSW – could be considered for the specific transaction. And before you argue that this does not provide the same “security:


1: for the LC bank; that they loose ‘control’ over the goods,

2: for the seller; that goods may be delivered to the buyer before payment, and

3: for the buyer; that goods may be re-routed by the seller, and the buyer will still have to pay because LC compliant documents are presented,


let me suggest a practical way forward:


1. Make sure that the NNSW is consigned to the issuing bank, and not to the buyer (LC applicant) – just as happens so often in air shipments. That way there is no risk that goods can be automatically released to the buyer, as this will require a “release of goods” by the issuing bank, which of course is not made until the documents are accepted.

The LC requirement could be something like:

“Non-negotiable sea waybill issued to bank XX [issuing bank], showing Company YY [LC applicant] as notify party, marked freight ZZ [collect / prepaid]”


2. Make sure that the shipper transfers the right of control to the consignee (issuing bank) to prevent a situation where the seller (LC beneficiary) is paid under the LC and afterwards utilizes his right to have control over the goods, for example, to nominate another consignee.


Bimco has suggested the following wording (which of course also should be a LC requirement):


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).


In my view this would satisfy most of the LC transactions where a negotiable bill of lading is required today.



If has been said that the negotiable bill of lading is the main obstacle to making the entire LC process electronic. It goes without saying that there are more obstacles than that, but nevertheless if it is possible to “remove” the bill of lading, a major obstacle has been removed!


I will conclude this article, not just by making strong argument in favour of the NNSW, but also in favour of “free thinking”; that is, that when a ‘transport document’ is chosen for a specific deal, then it should be the one that fits the deal best and not the one that the parties used to choose.


I would argue that the bill of lading is too complicated in many cases, but it also goes without saying that, in others, the NNSW is too simple.


Albert Einstein once said that: “Everything should be made as simple as possible, but not simpler!


Exactly the same applies for trade – and the choice of transport documents.



(1) ICC Publication No. 511. Edited by Charles del Busto. Comments on Article 24 are on page 72.

(2) It is also interesting (in the light of the discussion about B/L clauses creating confusion about delivery with or without the original B/L) to note that the comments clearly consider the NNSW not to be a traditional bill of lading or document of title, but a waybill allowing the goods to be delivered to the consignee upon proof of identity. Nothing in the UCP 500 – except the name of the documents – makes the distinction.

(3) In this connection also refer to The UNCTAD report : The Use of Transport Documents in International Trade, November 2003 (search UNCTAD/SDTE/TLB/ 2003/3 to download the report). This report indicates that the great majority – 88% – use negotiable bills of lading – but 51% also use non-negotiable sea waybills.

(4) Document CEFACT/2004/IT022, 26 November 2004. Prepared by the International Trade Procedures Working Group (ITPWG)

(5) Unfortunately the document does not offer further arguments for this statement, which from a UCP point of view seems strange; simply because article 23 (Bill of lading) and 24 (NNSW) are almost identical – title of articles excluded of course.

(6) Rule 2; Definitions.

(7) This is reflected in Rule 6 (i).

(8) This is reflected in Rule 6 (ii).

(9) Again it is fair to refer to The UNCTAD report: The Use of Transport Documents in International Trade, November 2003 (search UNCTAD/SDTE/TLB/2003/3 to download the report). On page 13 the ‘control clause’ is discussed. The conclusion is, that due to little litigation this clause has never been tested, so it is ‘not entirely clear to which degree clauses of this kind achieve their objective.’

(10) This is interesting indeed, as it seems that the bill of lading is almost ‘designed’ to cover oil transactions. In real life it is unfortunately so that the agreements travel faster than the bill of lading, for which reason a number of LOI’s (indefinable guarantees often without maximum amount and expiry) are issued.


Kim Sindberg is Trade Finance Consulatnt at Sindberg Consult

His e-mail address is

More information:



Note that version 1 of this article has been published in:

* LC Monitor March/April 2006 Volume 8, Issue 2

* The book “UCP 600 Transport Documents” (2012, ISBN 978-1-888870-54-1) Page 129+

* The book “From Beginning to Beginning – Trade Finance Articles from 2003 to 2011” (2012, ISBN: 978-87-7114-551-9) Page 138+





Have a nice weekend and take care of each other and the LC!




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