TT Talk - Who can safely be named as ‘shipper’ on a bill of lading?


According to the Maritime Code of the People's Republic of China (PRC), there are two kinds of shippers:

 

  • The 'contractual shipper', being the person on whose behalf the carrier’s bill of lading is issued.
  • The 'actual shipper' who delivers the goods to the carrier (whether line or NVOC).

 

Either kind of shipper may request a bill of lading, but the code does not specify to which party the carrier shall issue if both shippers demand the bill of lading. Whilst this situation is not unique to China, it seems to be increasingly prevalent.

The issue arises from the nature of the trade. The 'contractual shipper' (usually intermediate merchant or trading house) buys the goods from a factory or seller then arranges a booking with the carrier. Once payment arrangements have been made, the seller arranges customs clearance and delivers the goods to the carrier – as a result falling into the definition of 'actual shipper'. The goods are delivered to the consignee at final destination by the carrier, and the 'contractual shipper' gets paid by the consignee, settling payment to the seller ('actual shipper') if that has not been done.

Disputes usually arise when the seller (actual shipper) fails to get payment for the goods after they are delivered to the carrier. When this happens, the seller typically will apply to the carrier to prevent the bill of lading being issued to the contractual shipper. The contractual shipper is likely to insist that the carrier is obliged to issue the bill of lading to them alone, arguing that it is they who are the party arranging the booking with the carrier, and as a consequence there is a contractual obligation.

In such circumstances, carrier may consider the following steps:

  1. Do not issue any bill of lading, and ask the contractual shipper and actual shipper to resolve the issue. If agreement is reached, the carrier can safely issue the bill of lading to the party entitled to receive it.
  2. If no agreement is forthcoming or apparent, the carrier should ask the contractual shipper to provide evidence that they have settled the payment to the actual shipper already, such as a receipt or bank transaction. It is still prudent for the carrier to check with the actual shipper, owner of the shipment, or the bank, prior to issuing the bill of lading to the contractual shipper. Further, the carrier should retain any evidence of the trade payment on which they may need to rely.
  3. In the absence of such evidence, it may be safe under Chinese law for the carrier to issue the bill of lading to the actual shipper. However, an alternative would be to issue to the actual shipper, showing the actual shipper as the bill of lading shipper and contractual shipper as consignee. This protects the trade relationship and allows the contractual shipper to present the document once the payment is resolved, allowing another bill to be raised for the envisaged carriage, naming the contractual shipper as the shipper.

In one such case under Chinese rules a 'contractual shipper' (Party A) was an intermediate merchant and arranged a booking for a shipment from China to Brazil. The 'actual shipper' (Party B) was a factory which provided the goods, arranged customs' clearance, settled all exporting fees, and delivered them to the NVOC. Subsequently, a dispute arose between Party A and Party B where both requested bills of lading. TT Club advised the NVOC. Meanwhile, the consignee confirmed that the shipper was Party B, to whom the NVOC ultimately issued original bills. It transpired that Party A arranged payment to Party B, who returned original bills of lading to the NVOC. The consignment was telex-released to the consignee and the matter successfully concluded.

In other jurisdictions it is likely to be different. It may for example be necessary to apply to a court for determination of ownership – a process sometimes known as inter-pleading. Bottom line however the carrier needs to take care to ensure that the documents do not violate the ownership of goods.

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