News Details

Freight Forwarder B/L (FBL) impersonated as "original" Bill of Lading

—Capt. Ashwani Jhingan

 

Freight Forwarder B/L (FBL - Also known as a House Bill of Lading-HBL)

 

A Bill of Lading issued by a freight forwarder or NVOCC is called HBL or FBL. An FBL or HBL is a transport document which is used in sea shipments and multimodal shipments, issued and signed by a freight forwarder, generally on a freight forwarder’s Bill of Lading format, evidenced the terms and conditions of the carriage of goods as specified by the freight forwarder.

 

HBL or FBL is, also, a negotiable document and accepted similar to any B/L. Normally HBL or FBL is issued as per the terms and conditions of "Multi Modal Transport Document Act". The "shipper" in House Bill of Lading is the "exporter" or "shipper" who delivers goods to "freight forwarder and the importer or consignee", the party to whom the cargo has to be delivered by the said freight forwarder.

 

Master Bill of Lading (MBL)

 

Since a freight forwarder has a service contract with a shipping line in order to occupy space in a ship, the forwarder requires the "Master B/L" as evidence that they have delivered the goods to the line. Then they provide you—the client—a House B/L as evidence that your shipment is in their hands. The Master B/L states the name of the freight forwarder at the origin as the shipper, and at the destination as the consignee.

 

The freight forwarder, after receiving goods from shipper, rebooks the same cargo to main carriers who are vessel owners. The main carriers, once cargo received, issues Bill of Lading to whom the cargo booked with him. This is called MBL (Master Bill of Lading). In a Master Bill of Lading, the "shipper" will be the "freight forwarder", who delivers the cargo to main carrier and the "consignee", the overseas counterpart party of the "freight forwarder" who receives the goods from final shipper. 

 

Once after arriving of the goods at destination, the importer approaches overseas counterpart of freight forwarder for cargo and the freight forwarder issues ‘delivery order’ to the importer after receiving necessary destination charges. The said freight forwarder approaches the main carrier to release the cargo after paying necessary charges to main carrier, if any.

 

Case Study: In Australian Capital Financial Management Pty Ltd v. Freight Solutions (Vic) Pty Ltd [November 15, 2017] NSWDC 279, a New South Wales court found that a freight forwarder engaged in misleading and deceptive conduct for issuing "house" bills that appeared to be the original "negotiable" bills. By issuing the bills, the freight forwarder had, in effect, ‘put into the world two sets of documents of title’ as the ocean carrier had also issued negotiable bills for the same shipment.

 

The freight forwarder was also found to be in breach of a warranty of authority for signing the "house" bills as "agent for various ocean carriers", when, in fact, it had no authority to do so. The decision involved the export of sheep skins from Australia to China. At the request of the shipper, who was not a party to the proceeding, the freight forwarder issued "house" bills that named the consignee as "To Order"

 

Background

 

FBLs were stamped "ORIGINAL" and were signed by the freight forwarder, "as agent" for the carrier. The shipper gave the house bills to the plaintiff, a third-party finance company, to secure a loan to enable the shipper to purchase the sheep skins. The finance company extended the loan to the shipper, on the basis that the house bills gave the shipper title to the goods. When the shipper defaulted on the loan, the finance company was unable to obtain possession of the cargo, as the goods had already been released in China using the original bills.

 

"By signing the house bills as agent for the carrier, the freight forwarder purported to contract with the shipper on behalf of the ocean carrier".

 

The Judgment

 

Misleading and deceptive conduct: The Court found that, by issuing the house bills, the freight forwarder represented that the house bills were negotiable instruments, entitling each successive lawful holder to take delivery of the goods.

 

The Court also found that a false meaning was conveyed by the house bills issued by the freight forwarder, namely:

 

That they were issued by the freight forwarder as authorised agent for the ocean carriers.

 

By being endorsed "ORIGINAL" and consigned "TO ORDER", the "house" bills appeared to be "ocean" bills, which would entitle the lawful holder to possession of the goods.

 

Breach of warranty of authority

 

By signing the house bills as agent for the carrier, the freight forwarder purported to contract with the shipper on behalf of the ocean carrier. However, as the freight forwarder did not have authority from any of the ocean carriers to do so, the freight forwarder was in breach of an implied warranty of authority.

 

It should be noted that the claim for breach of warranty of authority was available to the finance company even though they entered into a transaction with the shipper, rather than the freight forwarder.

 

Points of significance

 

The decision highlights the need for freight forwarders to review their practices to ensure that "house" bills are not represented as "original" bills.

 

In particular, when issuing house bills, consideration should be given to the following:

 

Freight forwarders should not be stated as "agents for carriers" – House bills are issued by the freight forwarder and this should be made clear. By stating that bills are issued on behalf of the carrier, it suggests that they are original bills.

 

Correct use of the words "ORIGINAL" and "TO ORDER" – Although not prohibited from use in house bills, it is important to consider how these words may be interpreted, even to third parties without technical or legal knowledge of Bills of Lading.

 

The need to make clear the intention of the Bill of Lading – If it is a house bill, then describe it this way or make reference to the original bill.

 

The case is also an important reminder to carriers, freight forwarders and shippers that cargo interests, including shippers, should not be provided with both the house bill and the original bill. Usually, if a freight forwarder is a party to the carriage of cargo, cargo interests would receive only the "house" bill. The freight forwarder’s agent will release the goods to the cargo interests on presentation of the "house" bill of lading.

 

(Article compiled and contributed by Capt. Jhingan, Chairman and Managing Director of Malaxar. He is an Advocate of the Supreme Court as well as Bombay High Court. Capt. Jhingan can be contacted at legal@malaxar.com. Views expressed here are his own.)