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More Comment on the role of negotiable bill of lading - Remarks by Felipe Arizon and the UN/ECE

by Felipe Arizon

Comments by Felipe Arizon, Co-Editor for Spain, on the last Forwarderlaw commentary .on the controversy over introduction of bills of lading clauses concerning surrender of the negotiabile bill of lading in exchange for delivery. 

A clause that is inconsistent with the function of a bill of lading as a document of title makes no sense, in so far as;

  1. the parties to the sale contract may just as well agree to use a sea waybill,
  2. the security for banks, for shippers and receivers is placed at risk by such clause, unless the parties to the sale contract expressly provided that such clauses are admitted.

      1. Otherwise they should be rejected as not matching the definition of a bill of lading, which under most jurisdictions is a document of title.

        Without the parties prior consent such a bill of lading containing a clause undermining the requirement that the necessity that it be surrendered at the port of destination, the vendor is in breach of the sale contract.

        ------------------------------------------------------

        The UN/ECE is encouraging the use of non-negotiable documents. Clause 3 of Recommendation 12 of Measures to Facilitate Maritime Transport Documents Procedures 2d Edition states:  

        ... Recommendation No. 12 sought a change in official and commercial practice to:

        (i)minimise the use of negotiable transport documents and encourage the use of alternative sea waybills or other non-negotiable transport documents;

        (ii)encourage the use of single original transport documents;

        (iii)encourage the use of blank back and standard transport documents.

        It must be kept in mind that this recommendation is to discourage unnecessary use of negotiable documents (Paragraph 20 (1) (a)), as is evident from the following passage from Recommendation 12:

        "Bearing all the above comments in mind it is suggested that the commercial parties should:

        [blickquote](i) appreciate the advantages and encourage the use of the non-negotiable sea waybill instead of the bill of lading, where goods are not traded in during the course of transit (see paragraphs 22 to 26);

        (ii) appreciate the disadvantages of using the negotiable bill of lading when not essential to the commercial transaction and consequent disadvantages, cost and risk of achieving release of the goods at destination against a bank letter of indemnity in the absence of an original bill of lading. . . . "

        Gordon Cragge, Director, Facilitation of SITPRO, UK confirms there is still an important role for negotiable documents:

        “The reason why customers choose documentary credits is generally because they want a secure payment mechanism. It is therefore not surprising that they also want a secure transport document, if one is available; a sea waybill offers relatively little protection to the seller or the buyer. The customer’s choice is driven not by confusion as to words used on the documentary credit application form (as suggested in the draft Recommendation), but because the protection of a documentary credit is significantly weakened by the use of a waybill. That is why few documentary credits call for a sea waybill. Even if a documentary credit is not used, the protection of a negotiable bill of lading may still be required. For example payment by ‘cash against documents’ is significantly more secure using a negotiable bill of lading than a waybill.”

    February 9, 2004

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