Holding three original bills of lading does not make you the owner of the cargo.. A straight bill of lading names a consignee, and the document of title gives the lawful holder only a right to claim delivery from the carrier.. Ownership passes under the sales contract and applicable law..
One of the functions of a bill of lading is that it is a document of title, depending on how it has been issued.. For many, this creates the impression that whoever holds an original bill of lading must therefore own the goods covered by it..
But does it..??
Let me put a real case to you, one that I first shared with readers of Shipping and Freight Resource more than a decade ago..
It drew several comments and very different views on what the freight forwarder could or could not do.. The original comments are still at the bottom of this article..
So here’s what happened..
A freight forwarder arranged a shipment for a customer and paid the ocean freight to the shipping line, naturally on the understanding that the shipper would reimburse the freight when collecting the original bills of lading..
The issued bill of lading showed ABC as shipper and XYZ as consignee, making the bill of lading a Straight Bill of Lading..
The shipper then disappeared without paying the forwarder.. At destination, the consignee failed to take delivery and could not be traced either..
The container sat at destination accumulating storage and demurrage, and the forwarder, already exposed for the ocean freight, ended up paying those charges too..
The forwarder had possession of all three original bills of lading.. The commercial invoice showed that the cargo was worth more than what the forwarder had paid out..
So there the forwarder was.. Three original bills in hand, money owed, and valuable cargo sitting at destination..
Did that make the forwarder the owner of the cargo..??
The short answer is NO..
And the reason why comes down to one word that causes more confusion in this industry than almost any other..
The problem is the interpretation of the word “title”
A bill of lading performs three commonly recognised functions.. It acts as a receipt for the goods, it provides evidence of the contract of carriage, and, where applicable, it functions as a document of title..
That third one is where everything goes sideways, because in everyday English we use “title” to mean ownership.. So, when we read “document of title”, our brain hears “document of ownership” and the misunderstanding is born right there..
In shipping, document of title means something narrower.. It is the ability of the lawful holder to exercise rights over goods that are physically in the possession of the carrier, including the right to claim delivery of those goods..
That is just a right, and it is NOT a statement about who owns the cargo..
How and to whom ownership passes depends on the underlying sales contract, the intention of the parties, and the applicable law.. In some situations, the transfer of a bill of lading forms part of the mechanism by which ownership passes, but the bill itself is not the proof..
Let’s think about a bank for a moment, because banks are a good example..
A bank financing a trade transaction may hold an original negotiable bill of lading and therefore have real control over the release of cargo.. The buyer cannot get the goods without getting the documents from the bank..
Does that mean the bank bought the cargo..?? Of course not.. The bank has no interest in owning a container of ceramic tiles.. The document is being used to give the bank control and security over goods connected to a transaction it has financed..
Control and ownership are two different things, and once you see that, the forwarder’s position becomes much clearer..
What all original straight bills of lading are actually worth..??
The forwarder was holding three originals of a straight bill of lading naming XYZ as consignee..
Having them in the drawer did not change the identity of the consignee, transfer the underlying sale to the forwarder, or give the forwarder ownership of the goods.. It simply meant that the documents were in the forwarder’s possession..
There is a further wrinkle worth knowing about, because the legal treatment of a straight bill of lading is not uniform across jurisdictions..
In some jurisdictions, a carrier may deliver goods under a straight bill to the named consignee without requiring surrender of an original bill, provided the consignee’s identity is established..
Under English and Singapore law, for example, following the House of Lords decision in The Rafaela S and the Singapore Court of Appeal decision in Voss v APL, at least one original of the straight bill of lading must be presented before the carrier releases the goods..
So, the value of holding those three originals depended considerably on the law applicable to that straight bill..
Reader feedback on how a forwarder can recover money
When I first put this case to readers, the suggestions that came back included exercising a lien, sale of cargo, changing the consignee, issuing a switch bill of lading, and letting the cargo go to auction..
Let’s start with the lien..
1) Could the forwarder have exercised a lien..??
A freight forwarder who is owed freight and other charges may have a lien over the goods or related documents, depending on the forwarding agreement, applicable trading conditions, and governing law..
For example, a FIATA member operating under trading terms incorporating the FIATA Model Rules for Freight Forwarding Services (2019 revision) could rely on Article 15, which provides for a general lien over the goods and documents relating to them for amounts due from the customer, including storage fees and recovery costs, subject to applicable law..
So, in this case, the real questions were:
- Did the forwarder’s trading terms provide a lien over the cargo or documents..??
- Did that lien include a right of sale..??
- Could that right be enforced under the law where the cargo was sitting..??
If the answer was yes, the forwarder may have had a route to recover the amounts owed without needing to own the cargo at all..
Could the forwarder have sold the cargo..??
Only if there was a legal basis for selling goods belonging to somebody else..
That basis might come from a valid contractual lien carrying a power of sale, an enforceable security interest, an abandoned cargo procedure, a judicial process by way of a court order, a customs or port auction, or another right recognised under the applicable law..
Notice that the answer can change depending on where the cargo is standing..
If the goods are sitting in Durban, the contractual relationship between the forwarder and the shipper may be governed by one law, while the procedures needed to exercise rights against those goods or dispose of them bring South African law into play..
2) Could the forwarder have simply changed the consignee..??
This one comes up a lot..
If XYZ had vanished, could the forwarder ask the shipping line to change the consignee to the forwarder, or to somebody willing to buy the cargo..??
It may be possible, particularly if the forwarder was the booking party.. Much depends on whether the line will accept the amendment and on how the manifest has already been filed with Customs..
In some countries, changing parties on a bill of lading after the manifest has been filed is a slow and painful exercise, and Customs may well want to know why the change is being made..
Even if the amendment were accepted, the same problem would arise when the forwarder tried to sell the cargo.. There would still need to be a legal basis for claiming ownership of or disposing of the goods..
3) What about a switch bill of lading..??
A switch bill of lading replaces an existing set with another set, usually because certain commercial information legitimately needs to change while the goods are in transit..
Issuing one does not create rights in goods that the requesting party did not already have.. If the forwarder did not own the cargo before the switch, a new set of bills with different information does not make the forwarder the owner afterwards..
The carrier would also need to be satisfied that whoever requested the switch had the authority to do so, and that the original set had been properly dealt with first..
A switch bill is a documentary mechanism, not a way of manufacturing ownership..
4) And if the cargo is abandoned..??
Cargo may eventually fall into local procedures for uncleared or abandoned goods.. Depending on the country, the cargo, its customs status, the port, and the circumstances, those procedures may allow the goods to be auctioned, sold, destroyed, returned, or otherwise disposed of..
The proceeds are then applied against outstanding charges and claims in accordance with the applicable law and procedures..
For the forwarder, this could provide another route to recovering some of the exposure.. But that would be recovery against the cargo or the proceeds of its disposal under the applicable process, rather than acquiring ownership simply because the forwarder held the original bills..
Which brings us to the distinction that this whole case is really about..
A person may:
- hold the original bill of lading,
- be entitled to claim delivery of the goods,
- have a lien or security over the goods,
- have the right to sell the goods,
- or own the goods..
Depending on the transaction and the applicable law, one party may hold several of these at once.. But they are NOT the same right, and the paperwork in your hand only ever speaks to some of them..
So, does holding the original bill of lading mean you own the cargo..??
No.. It may give you control over the delivery of the cargo, but ownership has to be established separately from the underlying transaction and the applicable law..
The same question now arises with electronic bills of lading.. Under frameworks based on the UNCITRAL Model Law on Electronic Transferable Records, and under the UK Electronic Trade Documents Act 2023, an electronic bill can be possessed and transferred with the same legal effect as a paper original.. That changes HOW you hold the document.. It does NOT change what holding it means.. A digital original in your system tells you no more about who owns the cargo than three printed originals in your drawer..
And BTW, I never did find out how the forwarder’s story ended, and I have often wondered..
Have you been caught in a similar position, holding the originals and still not able to do anything with the cargo..?? I would like to hear how it played out..
This article is intended for educational and informational purposes and does not constitute legal advice.. Rights relating to bills of lading, liens, ownership, enforcement, and disposal of cargo vary according to the applicable law, jurisdiction, contractual arrangements, and circumstances of each transaction..
My Take
I have watched this same mistake cost forwarders real money for over three decades.. The word title does the damage, because in ordinary English it means ownership, and in shipping it means a right to claim delivery.. A bank holding a negotiable bill against a letter of credit has never once wanted to own a container of tiles, and neither should a forwarder.. What protects YOU is not the paper in your drawer, it is a lien clause in your trading conditions that actually works in the country where the cargo is sitting.. Have you read yours lately..??
Article FAQ
What does document of title mean on a bill of lading..??
Why can a freight forwarder holding all three originals still not own the cargo..??
How can a forwarder recover freight and charges when the shipper and consignee both disappear..??
Critical Note: Does a straight bill of lading always have to be surrendered before delivery..??
requested for solution for one case..Fwdr booking 10 containers for Shipper ABC which is consigned to XYZ and now the consignee not taking delivery at destination…Forwarder received the freight n released the B/L to shipper.. now is the forwarder liable or responsible for consignee not taking delivery at destination..
Sir, we have exported 2 FCL of spices, the forwarder insists that he has sent the Original HBL through Registered post. The post contains the copy of HBL and not original. The forwarder is in no mood to co-operate. What should we do to safeguard our interest and the delivery of materials to the original consignee.
cnee abandoned the goods at Port due to financial problems
cargo is now sitting for more than 18 months shipping line did not auction the goods within stipulated time or notified the shipper for 18 months and is now asking shipper to pay all detention & demurrage charges amounting to a huge sum
what is the course of action to the shipper who has lost the goods , freight and also the demurrage/detention charges etc suddenly after this long time
is the jurisdiction at port of discharge or port of loading ?
My question is if the forwarder is acting as an NVOCC, doesnt he have full ownership of the cargo? Since the booking with the actual line is done from the NVOCC foreign office in to the NVOCC in the destination country. The only documents that would show the actual customers name and ownership would be the house bill of lading which is issued by the NVOCC and holds all 3 original house bills.
In a situation that i have seen before the NVOCC or forwarder could not wait for auctions since cargo did not go on Customs G.O. for sale of cargo as shipment was indeed cleared through customs, customer just did not want to pay to retrive cargo and cargo sat for some time at the pier collecting storage and demurrage charges etc. The NVOCC had to pay the shipping line all charges due, the port required payment for storage as well. what happens in this case? Can the NVOCC pay the storage charges, pickup the container, empty the goods in a warehouse, return the empty container to the pier and hold the cargo at the warehouse to minimize exposure? and of course he would need to keep an eye on the amount already spent and the amount that the cargo is worth as the cargo would have to be sold or auctioned off before you end up at a loss.
Can this be done? or would it violate any law.
From an American law student’s perspective, the forwarder would be out of luck. That is, unless he abandons the goods and a subsequent auction covered the forwarder’s ocean carriage costs. From what I understand, these types of shady shipments were the impetus for the back-to-back BOL concept.
What the forwarder should have done is issue a House Bill to the shipper with the shipper’s consignee and just copy the terms of the Master Bill issued by the carrier. In the Master Bill, the forwarder should always designate his own destination agent as the consignee for this exact situation.
Of course Manaadiar, there is no guarantee but just the chance!
my point of view, the auction at destination will be the most legal way to solve the problem.
Agree with you Stan.. The forwarder must try and see if he will get any monies back from the auction to recoup his costs.. But that is if the shipping line will allow it as they still have to recover their storage and demurrage costs..
Dear Lijo Philip,
Agree with you and it’s equal that I wrote before but more widely detailed.
I see two points that can be a bit problematic for FW. First of all as you correctly mentioned FW should “convince/persuade the shipping line” but in fact it’s not so easy as the Line finds it as some fraud action. FW has to be a very good client for the Line. Second one is what will the forwarder do if the shipper will come back after 2 months of reasonable absence and pay all charges? He will found that his cargo was stolen and will start the legal action against FW and against Line who made amendments of shipper without their permission.
As I have also mentioned FW can wait for the Auction at destination in order to try to cover their costs and I agree with errol fynn saying “Finally if actual consignee does NOT comply with all the Customs and Port clearance procedures, before a certain time frame, the Customs officials then put the goods up for Auction at a fixed price which would include their taxes ,shipping lines ,Forwarders and Port costs.There is no guarantee that all parties would receive the full claims.”
Hello Hariesh, first of all salutes for this excellent portal. Very impressive and hope will be kept updated regularly.
In this above case, forwarder being the booking party, should be able to amend the shipper on the B/L to show themselves. As the OB/L still remains uncollected, if the forwarder manages to convince/persuade the shipping line about the absconding shipper, some lines would amend the shipper without any endorsement from the original shipper on the B/L.
This will transfer ownership of the cargo on forwarder’s name.
In this way, fwdr should be able to sell / resell cargo to another consignee ensuring their costs are recovered.
Because the B/L is not ‘To Order’ and is a straight consigned B/L – subject to destination customs manifest amendment B/L can be amended. Line might ask for an NOC from the original consignee on the B/L and an acceptance letter from the new consignee of all the destination costs, det/dem charges etc.
@Errol Fynn
My reasoning for your questions
1. Why were Original Forwarders bills of Lading Not issued ??
A. Many times shipments on L/C do not allow house B/L, specially for FCL cargo. Also it depends on the fwdr, there are many fwdrs who are very small and do not have presence at all the destiantion around the world.
2. Do not do business with unknown people or from the street.
A. In today’s market / economic scenario, every fwdr tries to optimise business. Doing a credit check on all the new customers can help in figuring out who are worth taking a risk.
3. An Original ocean bill of lading should have been issued by the Forwarder showing themselves as shipper and consignee and that would have safe guarded them from any possible losses.
A. As explained in point 1.
Yes, If you have three origianl BLs, you can ask shipping line to issue switch bill… new consignee as their own company.
Good day Hariesh
The document of title in this case I would imagine to be of entitlement and not ownership. The FWDER does not own the cargo but may be entitled to part of the proceeds as we know from the SOF but of course he would have to prove entitlement via the courts of law .
This is an interesting article, as consignment already reached destination, the situation is tricky . The forwarder has to make thorough efforts to trace supplier / customer to pay dues and collect the BL. A legal notice is to be sent out to Supplier / customer at disclosed address on BL for not taking delivery.
The forwarder should request custom authorities to inspect the cargo in said container to ascertain value of cargo through shipping line.
Later they can proceed about ownership, waiting for auction period for disposal of cargo to claim dues etc.,
In my opinion goods can only be released to the nominated consignee as indicated on the ocean bill of lading.The Forwarder on record booked the cargo via the shipping line but All THE SHIPPING DOCUMENTS ,do not reflect any of the forwarders details so legally I still believe the forwarder does not have a legal
claim as being the owner.The shipping line would only be in a position to release the cargo to the Forwarder once the “Consignee ” presents or provides the shipping line with an official letter authorising release of cargo to the “new owner”If a “document of title” is meant to be in the hands of any Tom Dick and Harry then the shipping line would be inundated with law suits from the real owner
of the goods.
Thanks Errol, Stan, Clive and Sam for your comments.. But what about the bill of lading as Document of Title..?? What do you think about the forwarders right to claim the cargo as his own as the bill of lading is a Straight Bill of Lading..??
Dear Gentlemans,
I think there is no much more that can be said in this matter.
All points are clearly described.
I will answer the questions as follows,
A.Yes the forwarder can place a lien on the goods in consultation with the shipping line and his legal advisors as quickly as possible..
B.Although the Forwarder has the 3 Original Ocean bills of Lading in his possession ,he cannot legally claim ownership of the goods simply because of the fact that they are not the “Consignee” and goods can only be released physically
by the shipping line to the nominated Consignee.
C.Yes,its true in certain countries the Customs authorities may not accept a manifest corrector especially after the goods have been discharged from the vessel and lying at the harbour not claimed.The customs could look at such shipment suspiciously.
D.Finally if actual consignee does NOT comply with all the Customs and Port
clearance procedures, before a certain time frame, the Customs officials then put the goods up for Auction at a fixed price which would include their taxes ,shipping lines ,Forwarders and Port costs.There is no guarantee that all parties would receive the full claims.
E.This lesson teaches us the following.
1.Why were Original Forwarders bills of Lading Not issued ??
2.Do not do business with unknown people or from the street.
3.An Original ocean bill of lading should have been issued by the Forwarder
showing themselves as shipper and consignee and that would have safe guarded them from any possible losses.
You write: An Original ocean bill of lading should have been issued by the Forwarder
showing themselves as shipper and consignee and that would have safe guarded them from any possible losses.
Cant undestand, how its possible, that forwarder may issue a bill of lading itself?
Sam kurian, Hello
I mean freight forwarder who places a booking in the Line. They usually give shipping & release instructions, so they also in right to give instruction to correct cnee in the bl. Of course they should confirm that they will pay all customs penalty arrised due to manifest corrector
Good day Hariesh
Compliments on an exceptional Shipping blog . I thoroughly enjoy it even though I am working ‘out of retirement’ . I have introduced your blog to newly recruited personnel in the Shipping Industry and I recommend that your current readers / bloggers encourage their fellow personnel and friends to visit (and learn).
From the statements of facts (sof) the F’WDER has every right tp place a lien on the cargo so that he may recoup funds outlayed however it has to be done via a court of law starting with the port / country of origin and working via the Shipping Line to ensure Port Authorities and Customs at destination port / country are aware of the legal process. If banks are involved through establishments of credits then they may be used as allies and would strengthen the f’wder’s case of claim and also against fraudulent behaviour 9intended or not)
As the forwarder not a party on the bill of lading, believe the shipping line won’t change the consignee or shipper with thier request even OBL surrendered. As per normal practise customs dept at destination will ask for shippers requsition letter for manifest amendment to new consignee. Forwarder can move legally either to shipper or consignee at destination if they signed a forwarding contract.
This is a very interesting question. I’d be interested to know whether it would be legal to assume ownership of the cargo considering the circumstances.
Manaadiar, Good day,
As for the Line (if FW is a agreement/booking party) there is no metter what a problem FW has with the shipper, so FW can find new Buyer, instruct Line to do manifest corrector for the new CNEE, the cargo will be released but….
what will the forwarder do if the shipper will return in 2 months reasonable absence and pay all charges?
I think if there is no legal agreement beetween shipper and their forwarder where are highlighted relevant points so just one way is to keep bol till the moment once owner paid all charges to them and additional charges at destination or till the moment once Line auctioned the cargo at destination to cover the terminal storage. In second case losses of the FW is freight and THCL.
Dear Mr Hariesh
the person who made booking , he obligate for all payment to shipping line, so in this case , i think the shipper who made the booking with his name as a shipper , so why the freight for wording pay all payment , it was chance to less his losses
in the straight master b/l , the FF cant own the cargo
also if it is order or to order , who can endorsement the b/l to FF
it is fraud Case