Confusion in and Response to Delivery of Goods without original B/L in the International Sale of Goods

Abstract: Delivery of goods without B/L is a problem that often puzzles buyers and sellers in the practice of international sales of goods. Although B/L is the certificate by which the carrier delivers the goods, in the current shipping practice, there are a large number of cases of delivery of goods without B/L. Therefore, the author will make a preliminary study on the solution to the problem of delivery of goods without original bills of lading, which can be referred to by law and maritime practitioners.

Keywords: delivery of goods without B/L; beforehand preventing; Ex post remedy

I. The concept and reasons for the formation of delivery of goods without original bill of landing

Delivery Cargo without Production Bill of Lading, also known as release of goods without original B/L, means release of goods without original B/L by the carrier or its agent (forwarding agent), Port authorities or warehouse keepers, without recovery of original B/L, against presentation of a copy of B/L or a copy of B/L by the consignee or notify party as indicated on the B/L, to add a letter of guarantee.

Under normal circumstances, the consignee needs original B/L to take delivery of goods, but it often happens that "delivery of goods without original B/L". We call such situation "delivery of goods without original B/L".

The main reason for delivery of goods without B/L is that sometimes the B/L travels at a slower speed than the goods transport, resulting in that the B/L has not yet reached the buyer when the goods arrive at the port of destination, and the buyer cannot request delivery of goods by presentation of the B/L in time from the carrier or its agent at the port of destination.

However, not all buyers requesting delivery of goods by presentation of a copy of B/L with a letter of guarantee are acting in good faith. Some are unable to redeem the original B/L due to financial difficulties, or some are fraudulent, deliberately refuse to redeem the order from the bank and request delivery of goods by presentation of a copy of B/L with a letter of guarantee.

Article 71 of the Maritime Code stipulates that the B/L based on which the delivery of goods is based only on the original B/L, so the copy of B/L does not have the effect of taking delivery of goods by presentation of a copy of B/L with a letter of guarantee is actually not in compliance with the aforesaid law.

II、 Prevention of the risk of delivery of goods without B/L in advance

As mentioned above, delivery of goods without B/L directly endangers the safety of international sales of goods and the existence of the legal system of B/L. But objectively, the legal system of B/L can not meet the needs of shipping, so that delivery of goods without B/L can not be prohibited, even intensified. Therefore, under the existing legal framework, the following ways can be adopted to prevent the relevant legal risk of delivery of goods without B/L in advance:

(I) Pay attention to the choice of trade clauses

When signing an export contract, it is necessary to sign CIF or C&M clauses and avoid FOB clauses in order to prevent the foreign merchant from designating a foreign merchant to arrange transportation. If the Buyer insists on FOB clauses and designates the shipping company and freight forwarder to arrange transportation, the Seller may accept the designated shipping company. However, the Seller shall not accept the transportation arranged by the freight forwarder or representative offices of overseas freight forwarder engaged in international freight forwarder business in China without approval of MOFTEC. The Seller shall also explain to foreign merchants that any activity of operating freight forwarder business and issuing B/L in China without approval is illegal. If the foreign merchant still insists on designating an overseas freight forwarder, procedures must be strictly followed in order not to affect exports, that is, the bill of lading of the designated overseas freight forwarder must be issued by a freight forwarder approved by MOFTEC and the freight forwarder shall take control of the control of the goods. At the same time, the freight forwarder which issues the bill of lading shall issue a letter of guarantee promising that the goods will be released against the original bill of lading circulated by a bank after the arrival of the goods at the port of destination, otherwise the foreign merchant shall bear the liability for compensation for the release of goods without B/L.

(II) Pay attention to high-risk countries/regions releasing goods without B/L

Some Central and South American and African countries implement a policy of unilateral release of goods for import. The customs authorities decide whether to release the goods to the consignee, and the shipping company has no legal right to control the goods. Specifically, Brazil, Guatemala, Nicaragua, Costa Rica, Hontulas, El Salvador, the Dominican Republic, Venezuela and other Central and South American countries, as well as Angola, the Congo and other African countries, can release goods without B/L. In addition, the United States, Canada, the United Kingdom and other countries, is allowed to take delivery of goods by a copy of a straight bill of lading.

Normally, the carrier (forwarder or shipping company) has reason to deliver the goods to the consignee (importer) named by the shipper (exporter) in a straight bill of lading. The carrier is under no obligation to require the person who takes delivery of the goods to produce the original straight bill of lading upon delivery. In other words, the consignee of a "straight B/L" may take delivery of the goods not against the "original bill of lading" but against the endorsement on the "Notice of Arrival" and the consignee's identification. This means that if the exporter does not receive the payment in time, it is of no avail even if the original bill of lading is held by the exporter.

If the goods are exported to Turkey, India and Algeria, the goods will be transferred to the consignee automatically after the importer in the port of destination declares the goods by manifest, i.e., the exporter loses control of the goods.

Since it is easy to deliver goods without original bill of lading in such countries, the payment must be fully paid before the goods are delivered in cooperation with customers from such countries.

(III) Use of an alternative plan

In practice, in order to solve the confusion in the practice of delivery of goods against documents of lading, some alternatives have emerged, namely sea waybill or electronic bill of lading, as discussed below:

1. Sea Waybill (SWB);

A sea waybill, also known as sea waybill, is a non-negotiable document which evidences the international contract of carriage of goods by sea and the receipt or loading of the goods by the carrier, and based on which the carrier undertakes to deliver the goods to the named consignee.

From the definition, we can see that sea waybill is non-negotiable, and the front side of a sea waybill usually bears the word "non-negotiable".

The use of sea waybill can effectively avoid the risks of delivery of goods without original bill of lading. However, since sea waybill is non-negotiable and the currently effective international sea waybill contains no specific stipulation on sea waybill, the use of sea waybill in our international carriage of goods by sea is limited in many ways.

2. Electronic bill of lading (electronic B/L)

Electronic bill of lading (electronic bill of lading) refers to the data related to the contract of carriage of goods by sea transmitted through electronic data interchange system (EDI). Different from the traditional bill of lading, it belongs to a paperless document, that is, according to a certain rule of electronic data.

Like sea waybill, the reason is to solve the problem of delivery of goods without original bill of lading. The parties concerned transfer the relevant data of electronic bill of lading through EDI with a password. This not only solves the problem of inconvenience for the consignee to take delivery of the goods because the traditional bill of lading arrives later than the port of destination, but also effectively prevents the fraud, loss and theft of sea waybill of lading documents, so it has certain transaction security.

            III、 Ex post remedy of delivery of goods without original bill of lading

(I) Actively contacting customers to hold the freight forwarder liable

Delivery of goods without original bill of lading does not necessarily lead to losses. Many customers negotiate delivery of goods without original bill of lading with the freight forwarder because of poor cash flow. Sell first, then pay. In other words, the fact that some customers deliver the goods without original bill of lading does not mean that they will not make payment, but will postpone the payment.

In such a case, the Seller shall actively contact customers and hold the freight forwarder liable. In case that delivery of goods without original bill of lading without prior permission of the Sellers, the Seller shall find the freight forwarder to be responsible for any losses caused thereby.

(II) Protection of rights through legal procedures

If the freight forwarder and foreign buyer malicious collusion or freight forwarder fraud should go through legal procedures and at the same time need to be aware of the following points:

1. Determination of subject of claim

Where the goods are delivered without original bill of lading, the holder of the bill of lading may claim against the carrier or the agent thereof for return of the goods or compensation for losses, and may also claim against a party who takes delivery of the goods without the original bill of lading, claiming joint and several liability with the carrier or the agent thereof.

As the holder of the bill of lading, the shipper may either claim against the carrier on the basis of the transport contract relationship as proved by the bill of lading, or claim against the agent of the carrier for return of goods or compensation for losses, or claim against the buyer in accordance with the trade contract relationship.

As the holder of the bill of lading, the issuing bank may also claim against the applicant for the payment under the letter of credit in accordance with the contractual relationship on entrustment of the issuance of the letter of credit, or claim against the carrier for return of goods or compensation for losses.

2. Paying attention to limitation of action

The limitation of action for maritime litigation is only one year (Art. 257 of the Maritime Code), and the suspension and interruption thereof are also different from the general limitation (Art. 266 and 267 of the Maritime Code). Don't miss the limitation of action because the other party delays it or for your own reasons.

3. Litigation preparation and procedure

          First of all, contact and urge as soon as possible to preserve the written evidence. Written evidence includes the relevant electronic evidence, such as an email with a suffix of the counterparty's company name (in the case of contact records with an individual, the court shall analyze whether the electronic evidence is required based on the specific situation). Second, contact lawyers as soon as possible to send lawyer's letters or reminders and activate the blacklist system as soon as possible, so as to put pressure on the counterparty. Third, sort out the evidence as soon as possible and get well prepared for the litigation. Finally, after the court obtains an effective judgment, the local lawyer or debt collection company may be entrusted to recover the loss. 

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