Bill of Lading, abbreviated as B/L, is a very Important Document in International Trade.It serves as document of title, a contract of carriage, and areceipt for goods.
Since B/L is also a Document of Title to the goods, some export companies will take it for granted that:
Generally speaking, a B/L can ensure safety of your goods, but still, there are exceptions, like the following case.
Case
In 2010, Company A, an export company in Sichuan, and Company B, an import company in the US, signed a clothing export contract, which states that the amount of money is 200,000 dollars, and the mode of payment is 30 days L/C. Company B issued the L/C, and designated another import company as the consignee, and an American shipping company as the carrier.
Company A arranged delivery and submitted documents to the bank on time, but didn’t receive money for a long time.
Then the issuing bank put forward discrepancies and returned the documents to Company A. Company A immediately inquired into the state of the goods, but was informed that they had already been taken.
Company A asked the shipping company why it had released the goods although all the 3 original Bills of Lading were still at the bank and Company A had never asked it to do so.
And the answer from the shipping company was that: according to the US law, in the case of Straight B/L, the carrier can release goods without an original B/L, but just with an Identity Proof of the consignee. Therefore, the shipping company couldn’t be blamed for this.
As a result, Company A lost both goods and money though it had original B/L.
Company A failed to ask the shipping company to pay for their loss, so they filed a lawsuit against the company.
However, the judgment from the court was that in this case, the US Merchant Marine Act of 1936 shall be applied and according to this Act, when it comes to Straight B/L, the carrier may release goods without an original B/L, as long as the consignee provides his valid Identity Document, therefore, the shipping company was judged innocent.
Conclusion
In this case, Company B had designed a trap from the very beginning, but Company A didn’t see it through and ended in a loss of both goods and money.
If we further analyze this case, we can find that Company A made 3 mistakes:
Company A didn’t find out the differences between Straight B/L, Order B/L, and Open B/L in the target country. But, as required by Company B, it simply used Straight B/L, which became a source of danger.
02
Company A used FOB, and let Company B designate the carrier. This seems like an easier option, but the carrier designated by Company B would definitely help Company B, so it didn’t inform Company A when Company B picked up the goods without making any payment.
03
The two sides didn't make an agreement on which law shall be applied when signing the contract, which gave the court an excuse to apply the target country's law and judge the carrier's doings as appropriate.
Hope you who do international business in China can benefit from the analysis of above case. In addition , please try to avoid the situation like the case and leading to the ending in a loss of both goods and money. If you have any experience, feel free to share with us.
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