Jan 03

Bill of Lading vs Sea Waybill

Bills of lading and sea waybills are the two basic documents that attest to the carriage of goods by water, both domestically and internationally. They have much in common as well as some differences. Goods require transport by sea, in most cases, because they have been sold by a seller to a buyer. Often, these two parties are in different countries or in two geographically separated regions of the same country. Often too, where the seller and buyer are strangers and do not trust one another fully, the sale is financed by a documentary credit (letter of credit) issued by the purchaser’s bank in his country in favor of the seller’s bank in his country. It is important to distinguish the contract of sale of the goods, and the possible documentary credit arrangements which may attend that sale, from the contract for the carriage of the goods from the port of loading to the port of discharge or, as is more often the case, from place of receipt of the goods by the carrier to place of delivery. Sea waybills and bills of lading are documents attesting to the contract of carriage, although they are, of course, closely related to the underlying contract of sale, and, where applicable, to the documentary credit transaction of the banks concerned as well The sea waybill is a non-negotiable receipt for the goods loaded aboard the carrying vessel at the port of loading, which also evidences the terms and conditions of the contract of carriage. They are not negotiable documents, nor documents of title. Because the waybill is non-negotiable, banks involved in documentary credit sales, in most cases, do not allow for the use of waybills in such transactions. The sea waybill, unlike the bill of lading, does not have to be tendered by the named consignee or its agent at the port of discharge or place of delivery in order to take possession of the goods there. It suffices if the consignee identifies itself as the party identified as such in the document. For this reason, the sea waybill lends itself well to contemporary international maritime commerce where negotiability of the transport document is not required by the parties to the contract of sale or by the banks involved in financing the purchase through documentary credits, because the waybill consignee does not need to wait for the waybill to arrive by mail from the shipper or to make its way through the complex and rigorous checking process to which bills of lading are exposed in the banking chain in a documentary credit sale. At the same time, the shipper with whom the carrier has contracted remains in control of the goods until just before delivery, and may change the delivery instructions as permitted under the terms of the contract of carriage. Bills of lading fulfill three basic functions. They are receipts for the goods; they evidence the terms of the contract of carriage and (except for the nominative or “straight” bill of lading) they are said to be “negotiable documents of title”. Similar to sea waybills, bills of lading today usually are standard-form contracts which, in general, are seen as the best evidence of the contract of carriage, although not necessarily the exclusive evidence. Bills of lading are of three types: a) the nominative or “straight” bill; b) the “order” bill; and c) the “bearer” bill. “A sea waybill is a non-negotiable transport document and its great advantage is that its presentation by the consignee is not required in order for him, on production of satisfactory identification, to take delivery of the goods, thus avoiding delay both for him and the carrier where the goods arrive before the waybill.” All bills of lading are normally issued in at least three originals, usually by the master or an agent of the carrier. In the past, one original was normally given to the shipper for transmission to the consignee (or a bank), one kept by the shipping line (the carrier) for its records, and one carried on board attached to the ship’s manifest. Today, we often see shipping lines, in particular those in the liner trade, issuing all three originals to the shipper or its agents, the freight forwarder. Once one of the originals is tendered or surrendered to the carrier or its agent in order to take delivery of the cargo, the other originals are void. In documentary credit transactions, the bill of lading, together with other “shipping documents” (including the sales invoice, the certificate of origin, etc.), must be surrendered to the seller’s bank (the “advising bank”) and transferred thence to the buyer’s bank (the “issuing bank”) which issued the documentary credit in favor of the seller, and then eventually to the buyer, so as to permit him to take delivery of the goods at the port of discharge. The “straight” bill of lading, like the sea waybill, is a receipt for the goods issued by the carrier or its agent and it also evidences the terms of the contract of carriage. Like the sea waybill, it is not negotiable. Or, more precisely, it is negotiable only once, from the original shipper to the named consignee. Unlike a sea waybill, however, one of the originals of the bill of lading must be surrendered by the named consignee or its agent to the carrier or its agent at the port of discharge or place of delivery, in order to permit the consignee to take delivery of the cargo in question. In practice, slowness of mail delivery and the risk that bills of lading will get caught up in the banking system, mean that at times the cargoes in question arrive at the port of destination before the bills of lading reach the hands of the purchasing consignee or endorsee or its agent. The “to order” bill of lading is one which consigns the goods to the order of a specified person, who may even be the seller itself or the seller’s bank. The seller endorses the bill of lading over to, for example, the buyer upon payment and transfers the rights relating to the document to him. For example, the bill of lading is endorsed “to the order of XYZ Co. Ltd. or assigns”. The order bill is said to be negotiated by endorsement and delivery. One of the originals of the order bill of lading must be surrendered to the carrier or its agent at the port of discharge or place of delivery in order to take delivery of the goods. The “bearer” bill of lading may take a number of forms. It may state that it is “to bearer”. Or it may be a bill of lading that mentions no particular consignee. Or it may be an order bill of lading that fails to mention to whose order it is made. It may also be a bill of lading that is endorsed in blank (e.g. if it is merely signed by its holder, without specifying to whose order it and the goods concerned are consigned). The bearer bill of lading is transferred by simple delivery. The last such bearer must surrender the bill of lading to the carrier or its agent at the port of discharge in order to take delivery of the goods. What is common to all bills of lading is that the holder (whether named in the bill of lading or simple endorsee) has the right of possession of the goods, and shipping lines, upon receipt of one original, are obliged to deliver the goods accordingly. Source: http://www.cmla.org