Documents in Trade Transportation

April 25, 2020

Documents in International Trade Transportation System

(Published in the Financial Express in 2019)

Dr. Shah Md Ahsan Habib[1]

Transport documents are very crucial in international trade transactions considering several aspects. The documents represent the contract of carriage, containing the conditions that are associated with the shipping transaction including terms and conditions under which the transport operation will take place. Transport document indicates that the goods were delivered in good conditions i.e. the carrier does not accept any merchandise that is visibly damaged or contains noticeable flaws; notify the seller/exporter or indicate that in the document. It also shows the ownership of the goods, determining who is authorized to present themselves at customs to receive the merchandise.

Documents are crucial elements in international trade transactions, and transport documents are at the center that mainly includes Bill of lading; Multimodal bill of lading; Airway bill; and CMR documents; Courier Receipts/Postal Receipts. A Bill of Lading is a document issued by the agent of a carrier to a shipper, signed by the captain, agent, or owner of a vessel, furnishing written evidence regarding receipt of the goods (cargo), the conditions on which transportation is made (contract of carriage), and the engagement to deliver goods at the prescribed port of destination to the lawful holder of the bill of lading. The BL is the authentic receipt delivered by a carrier, confirming that the goods therein specified (markings, types of goods, number of packages, etc.) have been loaded or taken in charge for loading on a designated vessel for carriage to a specified port. Apart from the Master copy, BL is established in two or three ‘originals’, signed and stamped by the carriers or their agent.

AnAir Waybillis a non-negotiable transport document covering transport of cargo from airport to airport. The Air Waybill must name a consignee (who can be the buyer), and it should not be required to be issued ‘to order’ and/or “to be endorsed” as it is not a title of property of the merchandise as international standard rules. TheCMR Transport Document is an international consignment note used by drivers, operators and forwarders alike that governs the responsibilities and liabilities of the parties to a contract for the carriage of goods by road internationally. The carrier usually completes the form, but the sender -in other words the exporter- is responsible for the accuracy of the information and must sign the form when the goods are collected. The consignee will also sign the form on delivery, which is essential for the carrier to be able to confirm the delivery of the goods and to justify the payment for its services. The CMR transport document is not a document of title and is therefore non-negotiable. This document is prepared by the exporter and the freight forwarder and is addressed to the importer and the carrier.

‘Negotiability’ is a critical feature associated with some transport documents. Negotiable bill of lading operates as a receipt and provides evidence that goods conforming to the contract have been shipped as agreed and is in the physical possession of the carrier for delivery to the consignee at destination. This evidentiary aspect of the document is important, both as between seller and buyer, in relation to obligations under the sale contract, and it contains or evidences the relevant terms of contract with the carrier. Where goods are lost or damaged in transit or are short delivered, these terms are the basis on which cargo interests may be able to pursue a claim against the carrier. The negotiable bill of lading operates as a transferable document of title, and it is this aspect, which sets the document apart from non-negotiable sea way bills. As the goods will only be released at the port of discharge against surrender of the bill of lading, possession of the document amounts to constructive possession of the goods.

A Non-negotiable seaway bill functions as a receipt for shipment and as evidence of the contract of carriage, however, the document need not be presented in order to obtain delivery of the goods from the carrier. On the one hand, the utility of this type of document is limited by the fact that the document itself cannot be used to transfer possession and property; and it is not workable if sale of the goods in transit is envisaged or if independent, documentary security is required by a buyer or by a bank involved in a letter of credit or other finance arrangement.  In connection with the difference with negotiable bill of lading; since the negotiable transport document represents the title over the goods and can be made out ‘to order’ for the purpose of re-sale of goods or for their pledging as security in respect of LC finance, financing banks and third party buyers rely on negotiable BL details to a much greater extent than a Seller involved in a long-term relationship-where the non-negotiable BL serves primarily as a transport document, similar to the CMR-WB.  

Other transport documents like carriage of goods by road, rail and air, consignment notes do not operate as documents of title. Equally, other documents which may be issued in relation to sea-carriage, such as ship’s delivery orders or freight forwarders’ receipts do not share the document of title function.  In recent years, the growth in multimodal transportation has given rise to an increase in the use of multimodal or combined transport documents. Standard form documents are often designed to be used both for carriage of goods by sea (port of loading to port of discharge) and for transport from point-to-point (receipt to delivery). Documents for multimodal transport may be made out in negotiable form (to order), so as to operate as a negotiable document of title.

Each transport document has its own advantage, disadvantage and risks.  A negotiable transport provides constructive possession, i.e. exclusive control over the goods. It provides clear advantages, if sale of goods in transit is envisaged and/or if documentary security is required by banks or buyers involved in an international sale or financing. However, the document needs to be physically transferred to the final consignee, possibly along a chain of buyers and banks. These include high administrative costs related to the issue, processing and transfer of paper documentation and additional costs due to delayed arrival of the document at the port of discharge, in particular where travel times are fast, e.g. in short-sea shipping. If a negotiable document is not available by the time a vessel is ready to discharge, a carrier may frequently agree to release the goods against a letter of indemnity, which may seriously compromise the position of an unpaid seller or bank.

A non-negotiable ‘straight’ bill of lading, if recognized as a non-negotiable document of title, as is now the case in English law, offers the same advantage as a negotiable bill of lading in terms of documentary security, but, due to its non-negotiable character, is not suitable where sale of goods in transit is envisaged. Delayed arrival of the document at the port of discharge may be less likely, if still possible. The legal effects of a non-negotiable ‘straight’ bill of lading are, however, not entirely clear in all jurisdictions and may differ depending on the specific features of the document itself.  Non-negotiable sea way bills and other documents, which do not qualify as documents of title, are advantageous where the distinct characteristics of a document of title are not required, as the need for physical transmission of the document and thus the potential for delayed arrival of the document does not arise.

[1] Professor and Director (Training), BIBM ([email protected]).

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