My Original bill of lading (OBL) is lost………..!!!!!!
A chilling sentence that creates panic in the hearts of many of the people involved in a global trade transaction involving an Original Bill of Lading..
While shipping and transport documents do get lost in transit, does it mean the end of the world for the shipper or consignee especially if the most important transport document in global trade is lost..??
Not necessarily.. There are a few options as below..
What is a bill of lading..??
Let’s have a quick recap on What is a Bill of Lading and why there is a big fuss if it is lost..
A Bill of Lading has 3 basic purposes or roles :
1) Evidence of Contract of Carriage – emphasis on the term “Evidence“
The B/L is the EVIDENCE of the contract of carriage entered into between the “Carrier” and the “Shipper or Cargo Owner” in order to carry out the transportation of the cargo as per the sales contract between the buyer and the seller..
2) Receipt of Goods – emphasis on the term “Receipt“
A B/L is issued by the carrier or their agent to the shipper or their agent in exchange for the receipt of the cargo.. The issuance of the B/L is proof that the carrier has received the goods from the shipper or their agent in apparent good order and condition, as handed over by the shipper..
3) Document of Title to the goods – emphasis on the term “Title“
It means that the holder of the B/L has the title to the goods which gives them the right to claim the goods or further transfer it to someone else..
Why the big fuss if an original bill of lading is lost..??
The loss of an original bill of lading could have a severe impact on cargo delivery and ship operations, especially in the bulk or break bulk sectors as the offloading of the cargo only happens on presentation of the original bill of lading..
As per the terms of the contract of carriage a carrier can only deliver goods against the presentation of at least one original bill of lading.. If the bill of lading is an “order” bill of lading, the master of the ship has the obligation to ensure that delivery is made to the last valid endorsee presenting the original bill of lading.. Once that rightful delivery has been done, it discharges the carrier from further obligations..
Issues surrounding an incorrect original bill of lading, or improper or lack of endorsement on the original bill of lading could affect various parties including the ship owner, ship operator, ship’s agent, port, shipper, or consignee..
This could further lead to a very quick escalation of ship demurrage and other contractual penalties which could be very prohibitive..
Loss of original bills of lading and the subsequent processes that need to be followed could also lead to delays in the transfer of funds between the various parties such as seller, buyer, banks, etc potentially causing a chain of financial losses..
In the case of container shipments, the impact may not be that severe as container delivery happens much later and may not affect the ship or ship owner/charterer..
What to do when the OBL is lost..??
- The party who last had possession of the bill of lading before it was lost should advise entities who were party to the trade transaction about the loss of the OBL..
- The entities may include, but not restricted to shipper, exporter (remember they could be different), consignee, importer, bank or financial institution, shipping line, ship owner, ship operator, port agent, freight forwarder, and anyone else in the chain who may be affected due to this loss..
- As proof, the party may post an advertisement or notification in the local media about the “loss” of the original bill of lading..
- In case of urgent requirement of the goods and to mitigate delays, the receiver could resort to a court order advising the carrier to deliver the goods to the last valid endorsee who would have presented the OBL..
- This may be based on a surety bond given by the entity claiming the goods, for an amount approved by the court..
- The carrier may request a Letter of Indemnity from the entity claiming the release of goods. indemnifying them against liability under the outstanding original bill..
- You can download a generic Letter of Indemnity here.. Please note, that since various shipowners, operators, and carriers may have their own format, it is always best to check with the carriers on their format..
- In some cases, the carrier may require the bank’s agreement to join in the LOI.. This is the format of the LOI including the bank that can be used for the same.. Here is a bank guarantee format of CMA CGM as an example..
As you can see, the loss of an original bill of lading could be a catastrophe in many cases and could lead to unnecessary tension and stress for many parties..
Shippers, Consignees, Banks, Ship Owners, and others involved in the issuing, receiving, and negotiation of trade documents do have a few options to avoid such headaches of sending and receiving original bills of lading :
- Switch to Electronic Bill of Lading which removes the need for issuance and sending and receiving of paper bills of lading..
- Issue Sea Waybills instead of negotiable B/L, but this would need the seller and buyer to have absolute trust in each other.. This also means that the B/L is non-transferable or non-negotiable so only the named consignee can take delivery of the goods after proving their identity..
This article has been republished after some critical updates