“Help, carrier refuses to show commercial information relating to the cargo on the bill of lading”
This is a regular complaint one hears from shippers and also the basis of many arguments between shippers, their agents, freight forwarders, clearing agents, brokers and shipping lines because many customers maintain a view that the carrier is being pedantic about this..
Some of the commercial information that the customers want to show on the bill of lading include but not limited to:
- Value of the cargo – the most important requirement ;
- Incoterms® ;
- Terms and conditions of the sale (sales contracts) ;
- References to letter of credit information such as LC Number, shipment date ;
- Origin of the goods
Why does a shipper need all this commercial information on the bill of lading..??
Although there is no straight answer to the reason for this, my personal opinion is that the shippers may be forced to show this commercial information on the bill of lading due to the requirements thurst upon them by documentary credits like the Letter of Credit..
You will find that the customers who request commercial information to be shown on the bill of lading usually will be taking a negotiable bill from the shipping line..
A negotiable bill may have a Letter of Credit behind it, in which the buyer or the issuing bank (the buyer’s bank) may set some requirements like below..
For the buyer, this information could represent a means to ensure that the goods ordered matches the goods shipped and declared on the bill of lading..
After all, the bill of lading is the only document that has all the details linking the cargo, the container, mode of transport (ship name/voyage etc).. All in one place..
Many people in the trade are used to bill of lading drafts going back and forth between shipping line, shipper and agent because there was a word or punctuation missing in the final draft..
Sometimes, Nominated Banks may also be pedantic about following the requirements of the LC because if the requirements are not followed 100%, it could mean a delay in the negotiation process with the issuing bank and buyer which could stall payments..
Why do carrier refuse to show commercial information on the bill of lading..??
While the above information may be important to a buyer or a seller on the basis of their contract of sale or LC, there is a popular misconception that a bill of lading is a contract of sale between the buyer and seller..
It must be remembered at all times that the bill of lading is only a transport document that fulfils among others, the role of being an “evidence of the contract of carriage” and is NOT a contract of sale between the buyer and seller..
Therefore, any information shown on the bill of lading should relate only to the contract of carriage between the shipper and the carrier and nothing related to the terms of sale between the buyer and the seller..
In fact, the fact that the shipper on the bill of lading need not even be the original seller of the cargo and the shipper need not even be from the same country as the country of export shows how much emphasis a bill of lading places on the relationship between the actual buyer and seller or the parties actually entering the contract of sale..
The main reason that the carriers do not encourage requests from shippers to show commercial and sale-related information on the bill of lading is LIABILITY..
The bill of lading as a transport document is subject to certain terms and conditions and showing such information may prejudice the carrier’s right to limit its liability for cargo loss or damage..
Similar to cargo insurance taken by a seller or buyer for their cargo, a carrier also has their own insurance covers to cover carriage liabilities..
These insurance policies may only cover (among other things) the carrier’s assets, their responsibilities and liabilities, but not the cargo or its value..
If you look at the terms and conditions of a bill of lading you will see some clauses limiting the liability of the carrier
Basis of Compensation
Without prejudice to any applicable limitation of liability in accordance with the provision set forth in sub-clause 6 hereof, the basis of compensation shall be limited to the sound value of the goods so damaged or lost (excluding insurance) and the freight on a pro-rata basis, if paid. In no circumstance whatsoever, the carrier shall be responsible for indirect damage, loss of profit or consequential damage.
If Carrier will nevertheless be considered liable for loss or damage resulting from delay, such liability shall not exceed three (3) times the Freight.
COGSA limitation to US carriage
When the Carriage is to or from the United States of America as stipulated in Clause 6.1, and unless the nature and value of the Goods is declared on the face of the Bill of Lading in the condition set out in Clause 8.2, the Carrier’s limitation of liability in respect of the Goods, shall not exceed US$ 500.00 per container, package, bundle, pallet, or other unit, or when the Goods are not shipped per container, package, bundle, pallet or other unit, US$ 500.00 per customary freight units.
In some cases, showing such information on the bill of lading may lead to unnecessary squabbles between the customer and carrier..
For example, let’s say the Incoterms® DDU 123, Gangnam-gu between the buyer and seller is included in the body of the bill of lading..
The receiver could argue with the carrier, that their term is DDU 123, Gangnam-gu and insist that the carrier clear and deliver the goods to Gagnam-gu even if the bill of lading may only be a port-to-port bill of lading consigned to Busan and not a combined transport bill of lading showing a place of delivery..
The Incoterms® does not affect the contract of carriage entered into between the shipper and the carrier and therefore the carrier is not obliged to accept the consignee’s argument which may be right in terms of the sales contract..
Does the customer have the option to show cargo value on the bill of lading..??
Of course, the client has an option and that is an Ad-Valorem Bill of lading..
Ad valorem is Latin for “to the value”.. An Ad Valorem bill of lading is a bill of lading which shows the value of the goods covered by the bill of lading..
Many P&I clubs view an Ad Valorem bill of lading as a ruse to override the package/unit limitation set out in Article IV Rule 5(a) of the Hague or the Hague Visby Rules (the Rules) because by accepting to specify the value of the cargo in the bill of lading, the carrier may be waiving their rights to limit the amount of damages recoverable by a cargo claimant..
However, the carrier’s bills of lading also have the relevant terms and conditions to cover the issue of liability for Ad Valorem bills of lading..
For example, carrier bills of lading display below in terms of Ad Valorem bills of lading :
The Merchant agrees and acknowledges that the Carrier has no knowledge of the value of the Goods. Higher compensation than that provided for in this Bill of Lading may be claimed only when, with the written confirmation of the Carrier, the value of the Goods declared by the Shipper upon delivery to the Carrier has been stated by the Carrier in the box marked “Declared Value” on the front of this Bill of Lading and ad valorem charges paid. In that case, the amount of the Declared Value shall be substituted for the limits provided in this Bill of Lading. Any partial loss or damage shall be adjusted pro rata on the basis of such Declared Value.
So there is an option for the customer to show the cargo value on the bill of lading but if this requirement is mandatory for the shipment, then the customer should advise the carrier of this requirement before even booking the cargo with the carrier..
The carrier may issue an Ad Valorem bill of lading subject to the customer paying additional freight and/or premium to cover the additional liability that the carrier is taking..
But there could be a stumbling block for carriers in the form of the International Group Pooling Agreement..
The International Group Pooling Agreement is an agreement by The International Group of P&I Clubs, a grouping of thirteen P&I Clubs which provide marine liability cover (protection and indemnity) for approximately 90% of the world’s ocean-going tonnage..
This agreement excludes cover in cases where due to an ad valorem declaration, the value of the goods declared exceeds the figure of the normal $2,500 per unit, piece or package..
This means where cargo is carried under an Ad Valorem bill of lading and the value per unit piece or package stated is in excess of US$2,500 the recovery shall be limited to US$2,500 per unit piece or package or the limitation per unit, piece or package specified in the Hague-Visby Rules whichever may be higher..
Carriers, therefore, may choose to include below clause in the bill of lading to cover themselves where they may be “forced” to accept customers requests due to commercial considerations
the reference to the letter of credit and/or the import license and/or invoice in this contract of carriage is included solely at the request of the merchant for his convenience and to meet his commercial requirements. The carrier does not warrant the accuracy of this information, which is not a declaration of value and in no way affects the carrier’s liability under this contract of carriage. The merchant acknowledges that the value of the goods is unknown to the carrier.
However, as per Standard Club, “a reference to an L/C in a bill of lading does not make a bill of lading ad valorem – and a carrier need therefore fear no loss of its limitation and that clubs need not deprive cover from carriers issuing such bills of lading.”
In summary, the issue of an ‘Ad Valorem’ Bill of Lading and inclusion of certain commercial information in the bill of lading increases the carrier’s potential legal liability more than what they are covered for under the contract of carriage in the bill of lading like the Hague, Hague-Visby Rules and Hamburg Rules..
Therefore, carriers may be loathe to display commercial information relating to the cargo on the bill of lading..
Whether you are a carrier or customer, what has been your experience with regards to this..?? Share your experiences/thoughts in the comments..
Article republished after updating some information to reflect current market practices..