Exercise due care - Three Original Bills of Lading

It is a common practice for a set of three original bills of lading to be issued on a particular consignment and for the wording of the Bill of Lading to provide for the effect that a hand over of one original will void the remaining two original copies. While this is the practice, ideally, the hand-over of all original copies should be preferred in order to lessen the risks of frauds.

Release agents at destinations must be alert to the fact that the carrier would have issued more than one bill of lading and be mindful of fraud that can arise from the abuse of this situation, since it is unlikely that all three original bills of lading will be returned.

A consignee who has placed multiple shipments of the same goods with entitlement to different sets of bills of lading will create greater risks for the releasing agent. One original copy of the first set of bills of lading would be presented to receive the goods (consignment 1) and a couple of days later the consignee could use another original copy of the first set to try and receive the second consignment of goods of similar description. In the meantime the second set of original bills of lading may remain in the hands of the LC bank waiting for consignee's payment to collect these bills of lading.

Whether or not the attempt to receive the consignment 2 (based on another original bill of lading of the first consignment) will be successful depends on the alertness of the release staff handling the delivery order. There are of course different features in both consignments, which would be shown in the two sets of original bills of lading but there are also similarities, which could cloud the alertness of the release staff, especially if one is of less experience.

If the attempt is successful, the consignee would naturally avoid the second original set of bills of lading thereby leading to the shipper not receiving the sales proceed and of course resulting in the release agent and carrier facing a claim for wrongful delivery. This would be an Error and Omission claim under an insurance policy subject to investigation by insurer as to whether a reckless conduct of the release agent had occurred. If there is such conduct, there will be no indemnity under the policy, notwithstanding it is a fraud case.

In a fraud of such nature, it is unlikely that the consignee can be traced for recovery action and the loss would therefore fall on the release agent and carrier.

Simply keeping such fraudsters in minds is not enough. The following relevant steps should be considered:

•  As it is unlikely that more than one original bill of lading is surrendered, always be more careful on the description of goods, especially where there are various shipments of the same types

•  Where there is such close similarity in different shipments, mark the appropriate files to create greater awareness amongst the department staff. Who knows, the absence of one particular staff may co-incidentally create such opportunity for the error to be committed.

•  Pay more attention to BL numbers, container number, markings and if in doubt to refer higher up.

Such simple procedures can go a long way in minimizing the risks of frauds and avoid a claim under the insurance policy of the agent or carrier.

Note: This note is not replacing any professional advice. The Insured or carrier should refer to their insurance practitioners for necessary guidance.