Mate's receipt vs bill of lading: remarks, clausing and risk

A mate's receipt is the receipt a ship gives for cargo taken on board. It is signed by the chief officer, who supervises the loading, and it records how much cargo was received and in what apparent condition. The bill of lading is then issued on the strength of it. The receipt comes first, it is not a document of title, and whatever it says about condition should reach the bill.

What the mate's receipt is

The receipt is an operational document, created during or at the end of loading, and it carries the facts the ship itself observed: the quantity received, marks or identification, and the apparent order and condition of the cargo. In bulk trades that quantity may rest on a shore scale figure, a tank measurement or a draft survey that the ship's officers accept.

Under English law it is a receipt, not a document of title: in Nippon Yusen Kaisha v Ramjiban Serowgee [1938] AC 429 the Privy Council held that a mate's receipt is not a document of title and that transferring it does not pass property in the goods. Some commentary says that in certain jurisdictions, Malaysia being the example given, custom has given a mate's receipt that status. That position rests on commentary rather than on a decision that can be cited, so it is not a safe basis for a document of title, and the governing law of the contract is what settles the question. The bill of lading is the transport document, the evidence of the contract of carriage and, if it is transferable, the document of title, see bill of lading types. The mate's receipt can be used to demand the issue of a bill, and a shipper normally surrenders it when collecting the bills. Where the quantity on the receipt and the quantity on the bill differ, the receipt figure is often treated as the stronger record because the chief officer signed it. Treat that as a practical tendency, not as a rule of law, and check how the charter party or the contract deals with it.

Who signs it, and what goes on it

The chief officer signs, on behalf of the master. The surveyor does not sign it, but the surveyor's observations are often what the chief officer and the shipper's agent discuss at the moment the receipt is written. A specific, dated observation is easier to turn into a correct remark than a general impression.

Remarks: clean or claused

A receipt with no remarks is clean. A receipt with remarks on apparent defects is claused. The Swedish Club is direct: a clean remark may only be inserted if the cargo is without defects, and apparent defects must be recorded on the receipt. The reason it gives is a practical one: a charter party may require bills of lading to be issued in strict conformity with the mate's receipts, so the receipt is where the condition first becomes part of the record.

The remarks should be specific. The Swedish Club recommends setting out defects in full. Where the remarks from a loading survey are too long for the bill, a clear reference to the survey report with the report attached is acceptable, and Steamship Mutual has a separate article on clausing a bill by incorporating survey reports.

From receipt to bill of lading

The bill repeats the receipt. Under the Hague-Visby Rules (Article III rule 3) the carrier, on demand, issues a bill showing the marks, the number of packages or the quantity or weight as furnished by the shipper, and the apparent order and condition of the goods. Under Article III rule 4 the bill is then prima facie evidence of receipt as described, and proof to the contrary is not admitted against a third party acting in good faith.

A charter party may say the master signs bills "as presented" by the charterer. The Swedish Club is clear that this does not remove the carrier's duty to record the apparent order and condition accurately. Where the cargo was damaged before loading, the bill must be claused despite such wording.

The Swedish Club lists three situations in which the master should refuse to sign a bill: an incorrect date of shipment, an incorrect port of loading, or an obviously wrong description of the cargo.

Why a clean bill against a claused receipt is a problem

• For the buyer and the bank. They rely on the bill. A clean bill hides a defect that the ship itself recorded.
• For the carrier. The Swedish Club states that failing to clause a bill where it should have been claused may prejudice P&I cover, so there may be no insurance for the cargo claim.
• A letter of indemnity does not fix it. Issuing a clean bill against an LOI where the cargo is damaged does not reinstate cover; the LOI replaces it, and its value depends on the signatory. See letter of indemnity in shipping.
• For the evidence. In a later cargo claim the difference between receipt and bill is the first thing a claimant, or the carrier's club, looks at.

The commercial pressure is real: the Swedish Club notes that a letter of credit can demand a clean bill, and that a claused bill may mean the seller is not paid. That is exactly why the surveyor's record must be accurate before the documents are drawn up. See the letter of credit and the inspection certificate.

Practical rule

Get a copy of the signed mate's receipt before you issue your certificate, and compare its quantity and remarks with your own record. If they differ, say so in writing to the shipper's agent and the chief officer that same day, before the bills are released.

From nomination to certificate

The remarks, the quantity and the dates all start as entries made on board. FOSS (Field Operational Services System) supports the document flow from nomination to certificate: offline entry on board, built-in calculation methods as used in the sector, document generation, and an audit log per entered value, so that "who entered what" is on record. See how FOSS supports the flow.