L/C Demands a B/L Stating That All Original B/Ls Must be Surrendered

What are the risks for an exporter if a letter of credit demands submission of not one but all original bills of lading to the carrier at the port of discharge for delivery of goods?

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A negotiable bill of lading is a bill of lading where the consignee’s name is preceded by the words “to order,” thus allowing the consignee to endorse the bill of lading to another party, thereby transferring title of the relative goods to another party. (1)

The importer has to present at least one original copy of the negotiable bill of lading to the carrier’s agent at the port of discharge in order to receive goods from the carrier.

What happens if letter of credit requests presentation of all original bills of lading to the carrier as follows?

  • Bill of lading to clearly indicate that the goods can only be delivered at destination port only on submission of all 3 sets of original bills of lading.

Question Comes from Heidi, Hayward, California, USA:

Can you please take a look at the following L/C language for the required documents of the B/Ls and confirm this will be manageable with the steamship lines?

  • Full Set of clean on board bills of lading made out to the order of opening bank and marked “freight prepaid” and notify applicant.
  • Bills of Lading to show the name and address and telephone/fax numbers of shipping company/agent representing them at port of destination.
  • B/L to clearly indicate that the goods can only be delivered at destination port only on submission of all 3 sets of original bills of lading.

Please advise.

Thank you,

Answer:

Thanks for your question.

Above letter of credit condition, which can be evaluated as a standard format, used by many banks under field 46-A: Documents Required.

The only part that you should be careful is the following one:

  • Bill of lading to clearly indicate that the goods can only be delivered at destination port only on submission of all 3 sets of original bills of lading.

Apparently the issuing bank would like to say:

  • Bill of lading to clearly indicate that the goods can only be delivered at destination port only on submission of all original bills of lading.

The problem with above condition is that it contradicts surrender clauses of the most, if not all, bills of lading in circulation as can be seen on below image.

surrender clause of a bill of lading
Surrender clause of a typical negotiable bill of lading used in port to port container carriages.

Each original negotiable bills of lading is equally represents the title of goods, as a result when one them surrendered to the carrier, the remaining ones becomes void.

For this reason it is highly recommended either correction or deletion of this clause from the letter of credit.

Sources:

  1. International Trade Procedures: A guide to doing business abroad, Wells Fargo Bank, Page: 70
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