What should we do if Bill of Lading is lost?

• Shipping

Cargo transportation by sea is one of the most reliable and most expensive methods of goods delivery worldwide.

Sea lines are one of the most crucial segments of sea carriage market: they process ca. 85% from the global cargo flow transported by waterways.

Probably, when thinking of sea carriage, most suppose the Bill of Lading as a basic document which implies in fact the Contract on sea carriage and supports the whole process of cargo transportation from the Consignor to the Consignee.

Loss of any essential document is a vital problem to enter into a deal, but loss of the Bill of Lading may have the most serious effects.

If sea carriage of the cargo is based on the Bill of Lading, not on the Sea Waybill, such cargo can be released at the port of discharge only against the original Bill of Lading.

In fact, due to loss of Bill of Lading the cargo remains detained at the port of discharge, since neither the Consignor nor the Consignee has sufficient legal grounds for cargo release by the Carrier’s agent.

Despite alleged unlikeliness, loss of the original Bill of Lading may occur quite often. In such cases, one should know what to do in order to receive cargo.

First of all, let us highlight some basic cases where the cargo owner may not hold the original Bill of Lading.

How can it occur?

One of the most widespread cases is a mere loss of Bill of Lading in the process of postal delivery to the Consignee.

Since the goods are issued to the Consignee at the port of discharge against original Bill of Lading, the latter (as soon as issued by the Carrier) should be sent to the Consignee.

Unfortunately, there may be force majeure in the process of delivery, which may result in losing the original Bill of Lading.

It may also happen when the Consignee obtained the original Bill of Lading but failed to take the goods at the port of discharge for any reason; therefore, the Consignor is unable to take back the goods. From the aspect of the Sea Carrier’s Rules, rights on cargo have been transferred after sending the original Bill of Lading.

Is it possible to obtain the cargo in case of losing the original Bill of Lading or losing the control thereon?

What can the carrier propose?

Procedure for issuing new Bill of Lading in case of losing the original counterpart / cargo release without original Bill of Lading is often set forth in the Sea Carrier’s (Line’s) Rules.

Each sea line usually prescribes its own special procedure regulating in detail the cargo owner’s measures to be taken in order to obtain either a duplicate of the original Bill of Lading or the right to receive cargo without original Bill of Lading.

While discussing terms & conditions of issuing duplicate, we should understand the main aspect: first of all, Sea Carrier wishes to defend its interests against any potential claims related to handing-out the cargo.

Despite of any evidence provided by the parties, the Carrier cannot be sure that the request on issuing duplicates of the original Bill of Lading is not related to any fraud scheme in respect of cargo which later may cause proprietary claims against the Carrier to be filed unexpectedly by holder of the Bill of Lading.

Having understood the above risk, the Carrier is concerned in financial security which will recover any proprietary claims, if necessary.

At the request of one of our Clients who faced such a situation, Interlegal experts held negotiations with one of the largest sea carriers and were able to study in detail terms & conditions of issuing duplicate of Bill of Lading or cargo release without original Bill of Lading.

Bank guarantee in favor of the Sea Carrier, aimed to secure recovery of any claims concerning the cargo.

Such bank guarantee is usually issued in the amount not less than 2005 from the cargo cost, for the term of 15-30 months. During that period, costs of the person concerned in cargo release will get frozen on bank account and certainly will be recovered at the expense of such guarantee in case of filing proprietary claims.

Insurance amounting to 200% from the cargo cost, whereunder the Sea Carrier shall act as beneficiary. The Sea Carrier will also demand to pay additional 1.5% from the insurance amount.

Apart from bank guarantee/insurance, all the persons concerned (Consignor, Consignee) may be proposed to issue letter of guaranty/letter of indemnity aimed to release the Carrier from liability.

It is difficult to execute both aforesaid instruments; all of them require additional funds, especially in case of high cargo cost. To choose one of proposed option – it is always a commercial decision to be made on the basis of conditions under each specific situation and assessment of potential risks.

Meantime, a fixed procedure and a possibility to implement it in practice shall not make loss of Bill of Lading (or loss of control thereon) an unsolvable problem.

How to mitigate the risk of loss?

We do not give advice upon choosing reliable postal operator or agent. We suppose that one can make correct conclusions if faces a similar problem.

But let us highlight the more practical recommendations. In particular, in order to mitigate such risks, you may apply telex release (lately, the parties to sea carriage have used such method more often).

Telex release includes the Consignor’s instruction upon cargo release. The Carrier’s agent at the port of loading shall send them to the Carrier’s agent at the port of discharge as per the Consignor’s instructions and in exchange of the original Bill of Lading (if any issued).

Due to telex release, there is no need in providing a full set of the original Bills of Lading at the port of discharge; therefore, there is no risk of losing documents in the process of delivery.

Interlegal law team is ready to cooperate at any required stage, namely: to assist in the process of negotiations with carrier, bank or insurance company.

But you should understand that prompt engagement of lawyers having experience in settlement of such issues will guarantee saving time and avoidance of any undesirable proceedings.

Karyna Gorovaya

gorovaya@interlegal.com.ua