In the final blog post of this series, we look at the Transport Document. Keep in mind that, regardless of whether the transport document is needed by the Buyer for the Seller, there will always be a need for a transport document to satisfy the needs of the carrier. That’s why it’s important to know and understand the following:

• What is the Transport Document and what purpose does it serve?
• Generic definitions from the Transport Document Terms and Conditions
• Key elements of the Transport Document
• What do the Incoterms® rules say about the Transport Document?
• What does the UCP 600 say about the Transport Document?

Purpose of the Transport Document (Bill of Lading or Waybill)

1. Receipt by the carrier. Note the carrier will receive, and certify to having received, the packages, not the content of the packages. The carrier will always endorse the transport document with words such as “Said to Contain” and “Shipper’s Load, Stow, Count, and Seal”. The carrier will rarely, if ever, certify to the contents of packages. The carrier has therefore undertaken to carry the container, not the content of the container.
2. Evidence of a Contract of Carriage. The transport document is often referred to as the contract of carriage. This is misleading because for a contract to be fulfilled, it requires two signatures viz. the party offering and the party accepting. A transport document has only one signature, that of the carrier or its agent. The ‘contract’ exists in the offer by the carrier to the Merchant of the freight rate and other costs or terms, and the acceptance by the Merchant of that offer.
3. Negotiability. There are technical legal interpretations of negotiability versus transferability which we will not get into, focusing rather on the generally accepted language in everyday use. In short, the Transport document may be issued consigned “To Order” or consigned “To Order of a Named Party”. This is usually a Bank i.e. it is “Negotiable”. If “To Order” the Shipper will, when all financial and other obligations have been met, endorse the bill of lading (B/L) which is blank endorsed, or in favour of the Consignee who may then claim entitlement to the cargo. If “To Order of the Bank”, it is the bank that will endorse the document allowing the entitled party to claim the cargo. Hence a “To Order” allows entitlement to be transferred from one party to another.

Definitions

Apart from some of the obvious definitions such as Carrier, Hague / Hague Visby Rules, COGSA, Container etc. one of the most important definitions to grasp is that of Merchant which is defined variously as:

Taken from ONE Lines: “Merchant” includes the Shipper, Consignee, owner, Person owning or entitled to possession of the Goods or of this Bill, Receiver, Holder, and anyone acting on behalf of any such person, including but not limited to agents, servants, independent contractors, non-vessel operating common carriers (“NVOCCs”), and freight forwarders.

Taken from EM Lines: “Merchant” means any Person who at any time, in relation to the Goods, has been or becomes the shipper, consignor, consignee, exporter, importer, the holder of the Bill of Lading and/or the receiver or the owner of the Goods, any person entitled to possession of the Goods, any Person having a present or future interest in the Goods, or any Person acting on behalf of any of the above-mentioned Persons including a Factor.

The importance of the definition of Merchant lies in the fact that the carrier’s T&Cs describes that the Merchant has ‘joint and several liabilities’ towards the carrier. Note: simply by being named in the contract does not mean you have joined the contract. However, by being named and then by taking active steps to join, one could then join the definition of Merchant and have joint and several liability to the carrier.

Key Elements of the Transport Document

The Shipper as Contracting Party: the carrier will always view the Shipper as the Contracting Party. The Shipper books the cargo, declares the cargo description, weight, measurement, leading marks etc. and it is to the Shipper, that the carrier will release the Transport Document (B/L). Taking it further:

• If Straight – only the Shipper can determine, by surrender of the ‘Original’ document to the Consignee, when it may be entitled to the cargo,
• If Negotiable, usually “To Order” is in fact “To Order of the Shipper” or “To Order of a Named Party, usually a Bank”, it is the Shipper who will either endorse the B/L transferring entitlement to the intended receiver, or release the original B/L to the Bank thereby allowing the bank to endorse the document,
• If a waybill, the Shipper MAY change the Consignee details,
• If there is default by the Consignee, the Carrier will almost certainly look to the Shipper for remedy,
• If cargo is unclaimed at the destination, the carrier may return the cargo to Port of Load at the Shipper’s expense.

Carrier’s Custody

The cargo is in the care of the carrier and therefore subject to the carrier’s limited liability in terms of the Hague and Hague Visby Rules from the commencement of loading to the point of discharge. If the carrier accepts the cargo at a place other than the Port of Loading and delivers it to a place other than the Port of Discharge (multi-modal transport document) the cargo will, with possible further limits of liability, cover the cargo from Place of Acceptance to Place of Delivery as defined in the relevant fields on the transport document. This limited liability is defined in the carrier’s Terms and Conditions.

Cargo Description

As already stated, the carrier accepts for carriage, the packages. The contents are described by the Shipper but the carrier has no evidence to support the Shipper’s description and so protects itself with clauses such as “Said to Contain” and “Shipper’s Load, Stow, Count and Seal”.

So much for what the B/L is and what it does. But what about the hapless buyer of 10 containers of generators. You will recall, he bought under what he thought were FOB terms. To take this forward, let us look at what Incoterms® 2020 says about the transport document and let us look at what the UCP 600 says.

What do Incoterm® Rules Say?

“Article A6 Delivery/transport document

The seller must provide the buyer, at the seller’s cost, with the usual proof that the goods have been delivered in accordance with A2.

Unless such proof is a transport document, the seller must provide assistance to the buyer, at the buyer’s request, risk and cost, in obtaining a transport document.”

Assuming that the Buyer and Seller have agreed that the required proof of delivery is a transport document, the A6 says nothing about what type of transport document is required. It could for example be a straight bill of landing, a negotiable bill of landing, or a waybill. The only requirement is that it be a transport document.

What UCP 600 Says

Articles 19, 20 and 21 of UCP 600 describe at length the conditions that the transport document must meet and the information that it must contain. At no point does it talk about the type of transport document viz. Straight B/L, Negotiable B/L, or Waybill.

Choice of Transport Document

• Nowhere in the Incoterms® rules or in the UCP 600 does it state what sort of transport document is required,
• For a bank-financed purchase, the bank will require a negotiable B/L, made “To Order of The Bank”,
• Where for whatever reason, the Seller feels a need to mitigate the risk of non-payment, it may call for an original B/L. There is absolutely no reason for it to call for a “To Order” B/L,
• The Buyer gains nothing by calling for anything other than a Non-Negotiable Sea Waybill. Any form of Original or Negotiable B/L adds delay and potentially, additional cost to the transaction. The buyer would therefore be well advised to call for a Sea Waybill unless there is an intention on the part of the buyer to sell the goods en route,
• Reference blog 004 negotiates open account terms to eliminate the need for an original or Negotiable B/L,
• If there are reasons why an open account is not possible, the buyer may consider discussing with its financial institution the use of Bank Payment Obligations.

The International Chamber of Commerce publishes a range of model contracts. The ICC Model Contract International Sale (Manufactured Goods) ICC Publication: 811E is a very useful reference for constructing a Sale Contract.