Bill of lading is a transport document covering the carriage of goods by sea.
Consignee means a person entitled to take delivery of the goods under a contract of carriage indicated on a bill of lading.
Shipper means a person that enters into a contract of carriage with a carrier. Shipper also known as consignor.
On today’s post I explain the main differences between the consignee and shipper fields of bills of lading.
Differences Between Consignee and Shipper
Seller versus Buyer:
Usually consignor is the exporter and consignee is the importer in any shipping document used in international trade. Bill of lading is not an exception.
Position Against Goods:
Consignor hands out the goods to the carrier at the port of loading. Consignee takes delivery of the goods from the carrier at the port of discharge.
Title of Goods:
Consignee field determines how title of goods will be delivered from the shipper to the consignee.
Consignee field determines if the bill of lading issued in straight, negotiable or bearer format.
Shipper determines how consignee field is completed by giving necessary instructions to the carrier.
On today’s post I explain the main differences between the consignee and notify party fields of bills of lading.
Differences Between Consignee and Notify Party
Delivery of Goods:
Carriers hand over goods to the entity stated on the consignee field. Notify party can not claim goods from the carrier under sea shipments.
Optional versus Mandatory Field:
Notify party can also be used as an optional field and need not to be completed. On the other hand consignee field is mandatory and needs to be completed in all occasions.
Title of Goods:
Consignee field determines how title of goods will be delivered from the shipper to the consignee. Notify party has no connection with the title of goods.
Consignee field determines if the bill of lading issued in straight, negotiable or bearer format.
Single versus Multiple Entries:
It is possible to enter multiple company names under the notify party field. On the other hand consignee field always completed with single entities.
The way that consignee field is completed can affect how the goods are to be transferred from shipper to consignee.
There are three possible consignee field instructions available on a bill of lading.
Straight Bill of Lading: Bill of lading states the consignee’s actual name. Depending on the commercial law of the destination country, consignee may clear the goods with or without needing to present an original bill of lading.
Straight bills of lading may create a risk factor for the shippers if they have not received the payment in advance of the shipment.
Especially under letters of credit and cash against goods payment methods, this option should be used with caution.
Negotiable Bill of Lading: Negotiable bills of lading are the ones that are consigned to order of a named party such as to order of the shipper, to order of the issuing bank or to order of the importer etc.
Title of the goods can be transferred through endorsement by stamp and signature.
Negotiable bills of lading generally used under letters of credit and cash against documents payment methods.
Bearer Bill of Lading: This option states that the goods must be delivered by the carrier to the party,whose in possession of the original bills of lading.
As a result importer and exporter can freely determine the contents of the bills of lading.
Under Cash Against Documents payment method banks do not check the documents, but how the bill of lading is completed is important in terms of delivery of goods.
Shipper: Shipper means a person that enters into a contract of carriage with a carrier. Shipper also known as consignor.
Under CFR, CIF, CPT, CIP, DAT, DAP and DDP Incoterms, exporter sings the contract of carriage with a carrier and becomes the shipper.
Although importer enters into a contract of carriage with the carrier under FCA, FOB and FAS incoterms, once again on the basis of “documentary shipper” term the exporter should be mentioned as a shipper on the bill of lading.
Rotterdam Rules explain documentary shipper as ”means a person, other than the shipper, that accepts to be named as “shipper” in the transport document…”
Consignee: Consignee means a person entitled to delivery of the goods under a contract of carriage or a transport document.
Consignee is one of the most crucial fields on a bill of lading. This field determines not only to whom the shipment is to be delivered, but also signifies the position of the bill of lading against the title of goods.
Especially under letters of credit and cash against documents payment methods, how consignee field is completed is very crucial.
How to Complete Consignee Field under Letters of Credit Payment Method?
Under letters of credit consignee field must be completed according to the letter of credit terms and conditions.
Issuing banks generally state bills of lading conditions under field 46-A.
In most cases issuing banks demand that the bill of lading should be issued to order of the issuing bank. Less frequently it is also possible that issuing banks demand bills of lading to be issued to order and blank endorsed.
In very rare situations, issuing banks may request bills of lading to be consigned to applicants. In these situations the beneficiaries must be alerted against various risks including fraud risk.
Example 1: A bill of lading issued under a letter of credit transaction: Issued to order of the issuing bank.
How to Complete Consignee Field under Cash Against Documents Payment Method?
Although it is not possible to consign a transport document to a bank without having the bank’s advance acknowledgement as per documentary collection rules (URC 522), it is a customary act to made out the bill of lading to order of the presenting bank.
Example 2: A bill of lading issued under a cash against documents transaction: Issued to order of the importer’s bank.
How to Complete Consignee Field of a Bill of Lading Under Cash in Advance or Open Account Payments?
Under cash in advance and open account payments, exporters and importers complete the transaction without interfered by a 3rd parties such as a banks.
Shipping documents are sent directly to the importer by the exporter via express courier or registered postal services.
As there is no 3rd party exists in the transaction, bill of lading may be made out to the name of the importer company under cash in advance and open account payments.
Example 3: A bill of lading issued under an open account transaction: Bill of lading consigned to the importer.
Notify Party: Notify party means a person that should be notified by the carrier when the shipment arrives at port of discharge.
Notify party has no effect on title of goods, which determines delivery of the goods to the consignee.
Notify party is mostly importer, importer’s forwarder or importer’s custom’s broker.
Examples:
On above Example 1: Consignee : To order of the issuing bank, Notify Party: Importer
On above Example 2: Consignee : To order of the importer’s bank, Notify Party: Importer
On above Example 3: Consignee : Importer, Notify Party: Importer
Carrier: Carrier means a person that enters into a contract of carriage with a shipper. The carrier shall carry the goods to the place of destination and deliver them to the consignee.
The carrier is bound before, at the beginning of, and during the voyage by sea to exercise due diligence to:
Make and keep the ship seaworthy;
Properly crew, equip and supply the ship and keep the ship so crewed, equipped and supplied throughout the voyage; and
Make and keep the holds and all other parts of the ship in which the goods are carried, and any containers supplied by the carrier in or upon which the goods are carried, fit and safe for their reception, carriage and preservation.
The carrier shall during the period of its responsibility properly and carefully receive, load, handle, stow, carry, keep, care for, unload and deliver the goods.
How to Complete Carrier Field under Letters of Credit Payment Method?
Letters of credit rules state that a bill of lading, however named, must appear to: indicate the name of the carrier and be signed by:
the carrier or a named agent for or on behalf of the carrier, or
the master or a named agent for or on behalf of the master.
Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent.
Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or for or on behalf of the master.
Carrier’s Agent: Carrier’s agent means a person authorized to transact business for and in the name of the carrier.
Carrier’s agent is an optional field on bills of lading, because of the fact that the bill of lading could be signed by a carrier, a master or simply by a forwarder.
How to Complete Carrier’ Agent Field under Letters of Credit Payment Method?
When an agent signs a bill of lading for [or on behalf of] the carrier, the agent is to be named and, in addition, to indicate that it is signing as “agent for (name), the carrier” or as “agent on behalf of (name), the carrier” or words of similar effect.
When the carrier is identified elsewhere in the document as the “carrier”, the named agent may sign, for example, as “agent for [or on behalf of] the carrier” without naming the carrier again.
Consignee field on the multimodal bill of lading must be completed according to the instructions stated in the letter of credit.
In a contract of carriage, the consignee is the person to whom the shipment is to be delivered whether by land, sea or air.
The consignee field can be seen on the following transport documents : Bill of lading, multimodal bill of lading, charter party bill of lading, sea waybill, air transport document (air waybill), road transport document (CMR) and rail transport document etc.
A transport document covering at least two different modes of transport is regarded as a multimodal bill of lading according to the letter of credit rules.
The consignee field on the multimodal bill of lading can be completed mainly in 5 different ways.
Multimodal bill of lading consigned to the order of the issuing bank
Multimodal bill of lading consigned to the issuing bank
Multimodal bill of lading consigned to the order of the applicant
Multimodal bill of lading consigned to the applicant
Multimodal bill of lading consigned to order and blank endorsed.
If the issuing bank finds out that the consignee field of a multimodal bill of lading has not been completed as per letter of credit terms, then the issuing bank will issue a discrepancy, which is known as consignee different than letter of credit.
Letter of Credit Discrepancy Example: Consignee Different Than The Letter of Credit on a Multimodal Bill of Lading
A letter of credit has been issued in SWIFT format, subject to UCP 600, with the following details:
Letter of Credit Conditions
Field 46A: Documents Required: Full set of multimodal bill of lading issued by a shipping company marked freight prepaid made out to COMMERZBANK marked notify applicant indicating that the goods have been dispatched, taken in charge or loaded on board.
The beneficiary presented a multimodal bill of lading with the following data:
Multimodal Bill of Lading
Consignee: To the order of Commerzbank
Notify: Applicant Company
Discrepancy: Multimodal bill of lading shows a consignee which is different than what is indicated in the letter of credit.
Reason for Discrepancy: If a credit requires a multimodal or combined transport document to show that the goods are consigned to a named party, such as “consigned to the issuing bank” (a straight consignment), rather than “to order” or “to order of the issuing bank”, the multimodal or combined transport document must not contain words such as “to order” or “to order of” that precede the name of that named party, whether typed or pre-printed.
