B/L Practical Aspects

The Charterers Rights and the Indemnity

The Hague-Visby Rules require that, after receiving the cargo, the carrier or his master or agent must on the
shipper's demand issue to that shipper a bill of lading. More detailed provisions relating to the shipowners
obligations with respect to issuing bill of lading (B/L) will be set out in the charterparty. For example, BPTIME
3 provides that Bills of lading and waybills shall be signed as Charterers direct, without prejudice to this
Charter.
This obligation to sign bills of lading (B/Ls) as directed relates to the form of the bill of lading (B/L), not the
facts it states: it does not require or condone the signing of bills of lading (B/Ls) which are inaccurate. A carrier
cannot, for example, be obliged to sign a B/L which misstates the quantity or quality of the cargo.
The charterers right to direct the form and content of the bill of lading (B/L) is balanced by the indemnity
included in the charterparty by which the charterer agrees to indemnify the shipowner against all liabilities that
may arise from signing the bills of lading and waybills in accordance with the directions of Charterers to the
extent that such bills of lading and waybills impose more onerous liabilities than those assumed by Owners
under the terms of this Charter (example taken from BPTIME 3).
Statements about Quality and Quantity
Both the Hague and Hague-Visby Rules provide that the description of the cargo in a bill of lading (B/L)
(weight, condition, etc.) "shall be prima facie evidence" of the correctness of the description so given. Under the
Hague-Visby Rules, when the bill of lading (B/L) is transferred to a third party in good faith, the statements
describing the cargo become conclusive because "proof to the contrary shall not be admissible" (HVR, Art III,
r.4).
However, it can be difficult for the carrier to ascertain the condition of the cargo and there can be genuine
debate about the exact amount of cargo on board. It is for this reason that most bills of lading (B/Ls) include a
phrase such as "weight and condition unknown" and "apparent good order and condition" (or an equivalent). By
the inclusion of these provisions, a holder of the bill of lading (B/L) will not be entitled to claim against the
carrier for any shortfall or shortcomings by basing his claim on the bill of lading particulars. However, these
provisions are only effective in cases of genuine doubt, or where checking is not possible. They cannot be used
to cover known discrepancies, or discrepancies which could readily have been detected.
Clean and Claused B/Ls
A "clean" bill of lading (B/L) is issued when the master has no reason to doubt the apparent good order and
condition of the cargo when shipped. If is it apparent to the master that the goods are in fact damaged, he must
describe the damage to the cargo on the front of the bill of lading (B/L), in which case the bill of lading (B/L) is
described as "claused". For example, a bill of lading (B/L) will be "claused" if it includes reference to
discoloration or contamination of the cargo, or to the volume loaded being in dispute.
The statements "weight and condition unknown" or "apparent good order and condition" will not prevent the
bill being clean. However, these phrases are no protection against defects or shortages which are, or should have
been, apparent. A shipowners failure accurately to describe the cargo or its quantity or condition in the bill of
lading (B/L) may entitle his P&I Club to avoid claims for resulting damage.
Shippers sometimes try to persuade carriers to sign a "clean" bill of lading (B/L) and accept a Letter of
Indemnity for any losses arising from their failure to "clause" the bill of lading (B/L) . This will only be
acceptable when there is a genuine difference of opinion as to the condition or description of the goods. If the
defects in the goods are clear, the LOI route will not protect the owner as the LOI will be deemed unenforceable
by the courts. Such an LOI is seen as an agreement between the carrier and the shipper to commit a fraud on an
innocent third party (the holder of the B/L) by concealing the true condition of the goods, and is therefore
unenforceable as a matter of public policy.
Dating a bill of lading (B/L)
The B/L must be dated the date of completion of loading of the cargo covered by the bill. Misdating a bill may
constitute fraud and a carrier will not be entitled to claim under his P&I insurance for any losses arising from
misdating the bill of lading (B/L). In such circumstances, a letter of indemnity from the shipper/charterer will
not be enforceable (because it is designed to facilitate the issuance of a false bill of lading (B/L)) and is
therefore of no assistance to the shipowner.
Signing a bill of lading (B/L)
When the cargo has been loaded, the shipper must present a B/L to the master or his agent for signature within a
reasonable time. The bill of lading (B/L) can be signed by the Master, the ships agent (following an express
letter of authority signed by the Master), the charterers (who may be authorised either by virtue of the
charterparty or by express letter of authority from the Master) or the shipowners head office, in all cases
subject to the Master confirming the contents of the bill of lading (B/L).
Amending a bill of lading (B/L) , Switch and Split
Where a blending or commingling of two separate parcels of cargo en route is required by the charterers, the
bills of lading (B/Ls) already issued for the shipment will need to be switched. Charterparties have detailed
blending provisions. For example, Exxon Mobil uses the following clause in its voyage charters: Charterer will
surrender to Master all original Bills of Lading (B/Ls) for the unblended cargo and the Master will provide new
consolidated Bills of Lading (B/Ls) on completion of blending operations which Bills of Lading will reflect the
actual grade that has been blended.
Similar principles apply where a bill of lading (B/L) holder requires a cargo covered by one bill of lading (B/L)
is to be "split" for discharge as two or more separate parcels. Provided that all originals are surrendered and the
"split" bills accurately record the origin and description of the cargo, it is difficult to see that the carrier will
incur any liabilities arising simply from dividing of the cargo parcels.
However, as noted in INTERTANKOs Practical Guide to Tanker Bills of Lading, The other eventuality in
which switched bills of lading may be envisaged is in order to avoid the impact of such matters as trade
embargoes. Any such device is almost certain to involve the infringement of at least one country's laws, as for
example by falsifying the state of origin of the cargo. The parties to such practices will usually be well aware of
the manifest illegality of what they are doing. They are also likely to understand the possible consequences of
such illegalities, including as they do the possible seizure of both ship and cargo. Where illegality is involved in
a bill of lading switch, an indemnity arrangement will be of no avail as it would be legally unenforceable.
Production and Delivery
The bill of lading (B/L) is the "key" to the goods. Once the master has issued a negotiable bill of lading (B/L),
he has imposed on the shipowner a contractual obligation to deliver the cargo to any person to whom that bill of
lading (B/L) is negotiated and a corresponding duty not to deliver the goods without its presentation. This
contractual obligation is enforceable by the holder of the bill of lading (B/L).
However, as identified by INTERTANKO in its Practical Guide to Tanker Bills of Lading It is nowadays
unusual for an original bill of lading to be available for presentation at the discharge port. This is not (of course)
because communications in general have slowed down; it is because very many cargoes are now traded while in
transit - not just once or twice but in some cases more than a hundred times. Since most such trades will require
to be financed through banks, and on credit terms for at least one party, it often becomes impossible for an
original bill to be available at the discharge port. The right and duty of the master to deliver the cargo to the first
person to present an original bill of lading at the discharge port is a basic principle of maritime law, but it has
little contact with reality in modern trading conditions.
As a result, cargoes are delivered against Letters of Indemnity in which the Charterer identifies the person to
whom the master should deliver the cargo and agrees to indemnify the carrier if he suffers any loss as a result of
delivering to such person. In agreeing to deliver on these terms, the carrier is taking an obvious risk as he does
not obtain a good discharge unless the person to whom he delivers the cargo is the person entitled to it. In
addition, the Carrier will lose his P&I Cover if he delivers without production of the original bill of lading
(B/L). Essentially, the LOI (which is rarely backed by a bank guarantee) takes the place of the carriers P&I
cover.
It is also worth noting that delivery under an LOI does not give the carrier a blanket indemnity. The Carrier still
has to check that the person taking physical possession of the cargo is the person identified as the recipient of
the cargo under the LOI. The standard LOI wording prepared by the IG provides that the Carrier will be
indemnified if he delivers the cargo to the receiver named in the LOI so the Carrier needs to check to ensure
that the person physically taking delivery of the cargo at the discharge port represents the receiver named in the
LOI. This is also reflected in the most recent case we are aware of on delivery under LOIs - The Bremen Max
(2009 LLR 1 at 81). In this case, the Court found that the Carrier has a duty to ensure that he delivers to the
person identified in the LOI, failing which the LOI will not protect the Carrier.