Bill of lading types: straight, order, bearer and switch B/L

A bill of lading can be straight (made out to a named consignee), order (to order, or to the order of a named party) or bearer, and in commodity trade a switch B/L often replaces the first set during the voyage. The type decides who may demand delivery and how the document can be sold on. The wording of the consignee box is therefore a commercial decision, not a formality.

What a bill of lading does

Every bill of lading does three things at once.

• Receipt. Under Article III rule 4 of the Hague-Visby Rules the bill is prima facie evidence that the carrier received the goods as described. Once the bill has passed to a third party acting in good faith, proof to the contrary is not admitted.
• Evidence of the contract of carriage. The Rules apply to contracts of carriage covered by a bill of lading or any similar document of title (Article I(b)).
• Document of title. A transferable bill lets the holder demand the cargo and sell it while it is afloat. That is what makes a bill acceptable as a payment document, see letter of credit and the inspection certificate.

The particulars on the bill come from the shipper, which is why the shipper is deemed to guarantee the accuracy of marks, number, quantity and weight at shipment and must indemnify the carrier for loss from inaccuracies (Article III rule 5). Under rule 3 the carrier may decline to state marks, number, quantity or weight if it has reasonable grounds for suspecting they do not represent the goods actually received, or no reasonable means of checking them. That proviso does not reach the apparent order and condition of the goods: those the carrier must state, so visible damage or contamination belongs on the bill as a remark.

The main types

Straight bill of lading

A straight bill names one consignee and is not made out to order or to bearer. It cannot be passed on by endorsement. That limits its use as a trading document, because the goods cannot be resold by handing over the paper.

It is still a bill of lading. In The Rafaela S (House of Lords, 2005) a straight bill was held to fall within "bill of lading or any similar document of title" under the Hague-Visby Rules, and the carrier was held to need presentation of the original to deliver, even without an express term. Delivering to the named consignee on proof of identity alone is therefore a risk for the carrier. A sea waybill is the document meant for deliveries without presentation.

Order bill of lading

An order bill is made out "to order", or "to the order of" a named party such as the shipper or a bank. It is transferred by endorsement and delivery. The Carriage of Goods by Sea Act 1992 (section 1) uses the same line: a document that cannot be transferred by endorsement, or as a bearer bill by delivery, is not a bill of lading for the purposes of that Act, which is why a straight bill falls outside it. (The Rafaela S concerned the Hague-Visby Rules, not the 1992 Act.) The order bill is the standard form in bulk commodity trade because one cargo can change hands several times between loading and discharge. Whether the consignee box names the shipper, a bank or a buyer also decides who holds control over the goods, which is often tied to the payment terms in a CIF contract.

Bearer bill of lading

A bearer bill is transferable by delivery alone. Whoever holds the original can claim the cargo, with no endorsement trail to check. The same property means the paper itself is the only safeguard, so its loss is a loss of control over the cargo.

The switch B/L

A switch bill is a second set of bills issued in place of the first set, normally by the carrier or its agent at a port during the voyage. It is not a legal type of its own, and it is always a replacement.

Why it is issued

Skuld lists a legitimate reason: the consignee changes logistics plans and the goods are to be delivered at another port than first envisaged. The TT Club describes the purpose as concealing the identities of supplier and end user between trading parties.

The risks

• Two sets in circulation. If the new bills are issued before the original set is collected and cancelled, two sets exist for the same cargo. The carrier can then face competing claims from two holders. Both Skuld and the TT Club insist that the originals are collected and cancelled first.
• Misdescription. Changing the shipment date, the package count, the weight or the remarks can harm a buyer who relies on the original bill. The TT Club advises not altering these particulars. Skuld adds that the new bill should carry the real date of issue, not the original date.
• Sanctions and illegality. A request to change the port of loading or the origin of the cargo may aim to conceal where the cargo came from, for example to evade sanctions or duties. Skuld warns that complying can make the carrier complicit.
• P&I cover. Skuld notes that cover can be lost if a switch bill is backdated or contains a description the carrier knows is wrong.

The controls Skuld recommends are short: check why the bills are wanted, confirm the requester holds the full original set, compare the draft with the original bill, cancel and recover the original set, and obtain an indemnity counter-signed by a reputable bank. See also the letter of indemnity in shipping.

Why this matters on the quay

The surveyor does not issue the bill, but the bill repeats the surveyor's work. For oil the quantity comes from the shore tank measurement; a draft survey is the method only on a ship and only when there is no other way. The condition comes from the loading inspection, and the dates from the statement of facts. A remark left out on the quay becomes a clean bill, and the clean bill becomes the evidence in a cargo claim. The link to the mate's receipt is explained in mate's receipt versus bill of lading.

Practical rule

Before you sign a certificate that names a bill of lading, read the consignee box and the set number on the bill. If the bill is a switch set, the quantity, date and port on the certificate must match the original set, not whatever the new bill says.

From nomination to certificate

Every type of bill pulls on the same paperwork: nomination, loading figures, remarks and certificate. FOSS (Field Operational Services System) keeps that flow in one place, with offline entry on board, built-in calculation methods as used in the sector, document generation and a client portal where the client sees nomination, progress and documents. See how FOSS covers the document flow.