Imagine this scenario: after painstaking negotiations and successful international trade deals, your goods cross oceans only to be lost due to a simple bill of lading error, leaving you without payment. This is every exporter's worst nightmare. The bill of lading, one of the most crucial documents in international trade, contains consignee information that directly determines cargo ownership and risk control. Today, we examine the critical considerations when filling out the consignee field to help you navigate international trade with confidence.
Three Types of Bill of Lading Consignees: Different Strategies for Different Scenarios
The consignee field on a bill of lading appears simple but carries significant implications. There are three primary approaches, each suited to different trade situations and risk considerations:
1. Order Bill of Lading (To Order/To Order of Shipper/To Shipper's Order): Flexible Control
The order bill of lading, as the name suggests, indicates who may take delivery. The most common form is "To Order of Shipper," meaning the shipper controls who receives the goods. This format offers maximum flexibility, allowing the shipper to endorse and transfer the bill of lading before arrival, enabling resale or maintaining control over the cargo. It's particularly valuable in letter of credit transactions as it prevents unauthorized release of goods without proper documentation.
2. Bank Bill of Lading (To Order of xxx Bank): Financial Security
When a bank provides financing to an importer, it may require the bill of lading to name the bank as consignee ("To Order of xxx Bank"). This arrangement gives the bank control over the cargo as loan collateral. Only after the importer repays the loan will the bank endorse the bill of lading to them. While not commonly used, this method provides essential security for financial institutions.
3. Straight Bill of Lading (ABC COMPANY): Simplicity Requires Trust
The straight bill of lading names a specific consignee (e.g., "ABC COMPANY"). While simple and convenient (allowing the named party to claim goods with identification, without presenting the original document), this format carries higher risk. In some jurisdictions, consignees can claim goods without original documentation. Unless parties have established trust or full payment has been received, exporters should generally avoid straight bills of lading to prevent non-payment situations.
High-Risk Countries: Where Cargo May Be Released Without Documentation
Due to local laws or trade practices, these countries present higher risks of cargo release without proper documentation. Extra caution is advised when trading with:
- Latin America: Brazil, Honduras, El Salvador, Dominican Republic, Nicaragua, Colombia, Guatemala, Costa Rica, Venezuela
- Asia: Vietnam, India, North Korea
- Africa: West African nations including Angola, Congo
- Europe: Turkey
Balancing Trade Practices and Risk Management
In practice, buyers often request straight bills of lading with their company named as consignee. However, from a risk management perspective, shippers should insist on order bills ("To Order of Shipper") because:
- It prevents release with document copies
- Protects against fraudulent claims of lost documents
- Allows cargo redirection if payment issues arise
When buyers insist on straight bills, ensure full payment before shipment. Alternatively, consider issuing an order bill initially, then converting to straight bill after payment confirmation.
Legal Considerations: How Courts Determine Consignees
In trade disputes, courts consider these factors when determining legitimate consignees:
- Customs import declarations
- Customs duty payment records
- Bill of lading annotations and endorsements
- Delivery orders
- Trade contracts
- Notify party information
Frequently Asked Questions
Who controls cargo ownership?
Ownership belongs to the lawful holder of the original bill of lading, determined by its type and endorsements. Only original ocean bills serve as title documents.
How to handle buyer requests for straight bills?
Secure full payment before shipment. If impossible, explain company policy and propose initial order bill conversion after payment.
Does withholding documents guarantee security?
No. With straight bills, buyers might still claim goods through alternate means. Full payment remains the surest protection.
Why is notify party information important?
For order bills, complete notify party details ensure proper arrival notifications. Missing information may lead to customs penalties or cargo confiscation.