TT Talk - Forwarders' Certificates of Receipt

One of the questions members frequently ask the Club is about the difference between a forwarder's certificate of receipt (FCR) and an NVOC (non-vessel-operating carrier) bill of lading.

Although the two documents look very similar and can have similar functions, they are legally very different.

There is a common misconception about the status of an FCR, as we have seen numerous examples in claims files of FCRs being issued "to order". An FCR is what it says: a certificate issued by a forwarder confirming that he has received the stated cargo in apparent good order and condition from the named shipper and that he is holding them for irrevocable dispatch to the named consignee. Delivery of the goods to the consignee does not depend on the surrender of the FCR to the forwarder or his agent, so an FCR is NOT a negotiable document of title.

The FCR is intended to bridge a gap that often appears in international transactions. For instance, a forwarder may be engaged by a project manager to assemble a shipment from a number of different suppliers. An individual supplier may be selling on Ex Works (EXW) terms and is therefore entitled to be paid as soon as he has delivered the goods to the forwarder. Under normal circumstances the shipper would receive a bill of lading which would enable him to call on the letter of credit. However, the forwarder may require some time to get the shipment organised (perhaps there are other things to do as well, such as packing), and maybe he does not wish to issue his own "received for shipment" NVOC bill. As the actual carrier has not yet taken charge of the cargo, he cannot issue a bill of lading either, leaving the shipper facing some delay before he gets paid. The FCR can fill that gap: it gives the buyer the assurance that the seller has handed over the cargo and cannot get it back. The buyer can therefore release the funds to the seller, in return for the FCR (or he can tell the bank to accept an FCR under the letter of credit). Once the FCR has been handed over in exchange for payment, the seller has effectively assigned the benefit of the contract to his customer and has no further right to stop or delay the transport.

An FCR never represents or evidences a contract of carriage by sea, as a bill of lading does, although naturally forwarders should assume a duty of care for the goods in their custody and control. The FCR can also be evidence of a contract of forwarding/cargo handling. An FCR is seldom, as recognised by a common law judge, a "stand alone receipt" with the forwarders being a mere "conduit".

The FCR is also commonly used in trades where a middleman is involved, who wishes to hide the names of his supplier and his customer from each other. The shipper hands the goods to the forwarder who can then issue an FCR confirming that he has received the goods. This allows the middleman to pay the shipper and receive the FCR in return. As soon as the forwarder gets the original FCR back from the middleman, he will be able to issue his NVOC bill of lading to him, confirming the contract of carriage and enabling the middleman to control the delivery to his customer. Because the supplier still retains the right to give new instructions to the forwarder - provided that he surrenders the original FCR - forwarders must wait until they have the FCR safely back in their possession before issuing or releasing the relevant bills of lading to the middleman.

In issuing an FCR, the forwarder gives an undertaking that the cargo will not be returned to the shipper: this is an important element underpinning the trust that can be placed in the document. Once the FCR has been transferred to the buyer in exchange for payment, the seller no longer has any further power over the shipment. As noted above, the shipper who has received an FCR can only cancel or revise the forwarding instructions if he returns the original document to the forwarder.

An FCR does not encompass any right to a claim for the surrender of the goods, but merely confirms that the forwarder has received them with certain irrevocable forwarding instructions agreed with the consignor or consignee. Only ONE original document needs to be issued (unless a copy is required) and it should be marked "Non-Negotiable" to avoid disputes;

In view of the widespread misunderstanding of the nature of this document, members are well advised to make sure that their clients, requesting an FCR, are aware of its proper use and its limitations.

More on this subject can be found on Peter Jones's website

to which we are indebted for much of the information on which this summary is based.