My essay about the ocean Bills of lading were drawn An interesting comment with 4 questions as follows..
1) Do the contractual rights with the carrier extend to the consignee as in the case of negotiable BLs?
2) Can the shipper change the consignee while the goods are on board?
3) Who has insurable interest?
4) In the event of an overall average situation, who can the carrier return for damages?
I love these kinds of thoughtful questions because they reflect exactly the kind of deeper thinking we need to move from simple document issuance to a real understanding of the risks in global shipping.
While I provided a brief response to this comment, I thought these questions deserved a little more explanation based on standard practice and key principles of contract law and maritime law.
Q 1) Do the contractual rights with the carrier extend to the consignee as in the case of negotiable BLs?
Automatic transfer of contractual rights under a negotiable bill of lading is a document of ownership.
When the bill is endorsed and approved, the new holder takes the place of the original shipper and acquires full rights of action against the carrier, including the right to claim delivery and the right to sue for loss or damage.
This transfer happens by law and is one of the defining characteristics of a negotiable B/L.
With a sea waybill, the situation is different and depends on the jurisdiction. A bill of lading is not a document of title and does not transfer rights by endorsement, but some legal systems, such as the United Kingdom under the Carriage of Goods by Sea Act 1992 section 2(1)(b), expressly grant the named consignee rights as if they owned the contracting party’s vehicle.
In countries without such statutory provisions, the consignee may only have a right to claim delivery and any wider contractual rights depend on the specific terms of the carrier’s bill of lading.
Q2) Can the shipper change the consignee while the goods are on board?
Yes, the shipper can issue a change of consignee or reroute the delivery, provided that the document, the carrier and the conditions of the country of destination permit, and provided that the change is made in time and the carrier agrees. But it is subject to practical and contractual restrictions.
In the case of a sea waybill or similar document, the standard terms and conditions of those with special sea waybill stationery expressly state that the shipper may change the consignee up to the time of delivery of the goods, provided the carrier receives written notice and the shipper indemnifies the carrier against any additional costs.
Below is the sea waybill of one of the leading container lines in its terms and conditions.
“3. Right to control, delivery of goods
(1) The consignor is the only party who has the right to give instructions related to the contract of carriage to the carrier.
He has the right to change the name of the consignee at any time so long as the consignee claims delivery of the goods after their arrival at their destination, provided that he gives express written notice to the carrier, or by other means acceptable to the carrier, and undertakes to indemnify the carrier against any additional costs arising therefrom.“
TT Club, which provides mutual insurance and related risk management services to the international shipping and logistics industry, including specialist underwriting, claims management, and risk and loss management consulting, notes:
“If the relevant shipping document is a non-negotiable sea waybill, the consignor’s right to redirect or name another consignee is always exercisable before the consignment is delivered to the original consignee.”
However, there are some practical and legal caveats:
- Changing the consignee may be more complicated if a negotiable bill of lading has already been issued and/or endorsed to another party.
- If the ship has already unloaded the cargo or the manifest has been finalized (customs or shipping authorities), the change may be too late or subject to customs / port restrictions.
- Carrier may reimburse or deduct for administrative costs.
- The change must be clearly and promptly communicated to the carrier (and, if applicable, the port operator).
- Local laws and contractual terms may restrict the change of consignee, particularly where the document is a “direct” bill of lading (ie only a named consignee) or where there is a “non-rejection” clause.
So the answer to the question is yes, but according to the type of document, timing and conditions of the carrier.
Q 3) Who has insurable interest..??
When examining the shipment of goods, any party that suffers financial loss if the shipment is lost or damaged has an insurable interest.
This can include the shipper, buyer or consignee (depending on how ownership and risk are allocated in the sales contract), and parties with financial exposure such as banks or logistics providers.
Marine insurance principles require that the insured has an insurable interest when the insurance is attached, and insurers will always test whether the party making the claim will actually suffer financial loss.
In practice, the insurable interest simply follows the entity that bears the financial risk at each stage of the transaction, for example, a seller who retains title until payment retains the insurable interest until that condition is met.
The essential test is simple: If the goods are lost or damaged, will this party suffer financial loss?..??
If so, they have an insurable interest based on the business relationship, ownership and allocation of risk and financial exposure, not just the bill of lading.
Q4) In case of average general situation, to whom can the transport operator return to compensate his losses..??
When a general average event (an established maritime principle) occurs (i.e. a voluntary sacrifice or expense is made for the common safety of the voyage), the carrier or its agent (often the adjuster) requires all parties involved in the maritime adventure (cargo owners, shipowners, etc.) to contribute to the damage.
In a negotiable bill of lading, the carrier looks to the holder of the original endorsed bill of lading because it is the title document.
With a bill of lading that does not transfer title, the carrier cannot rely on possession of the document.
Instead, recovery is directed to any party defined as a “merchant” in the terms of the bill of lading, including the shipper, consignee, consignee, holder of the bill of lading, and any party to whom the cargo data is sent, as such parties are contractually responsible for securing the GA prior to delivery.
Final summary
• Contractual rights: A negotiable bill of lading transfers rights to the holder of the endorsement because it is a document of ownership. A sea bill of lading does not transfer rights by endorsement, so the consignee’s rights depend on the governing law and the terms of the bill of lading.
• Change recipient: Under a sea waybill, the shipper usually reserves the right to change the consignee until delivery, subject to notice and compensation. In a negotiable invoice, changes may be restricted after the invoice is approved.
• Insurable interest: Insurable interest belongs to any party that suffers financial loss if the shipment is lost or damaged. It looks for the commercial relationship, title and assignment of risk, not the name on the shipping document.
• Overall recovery average: With a negotiable invoice, the GA contribution is claimed from the certified original document holder. With a sea waybill, reimbursement is from any party defined as a “merchant,” such as the consignor, consignee, or consignee.
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