Bill of Lading

Alfred Ofori-Abebrese
Regional Maritime University
Accra, Ghana
DEFINITION OF CONTRACT OF CARRIAGE

A Contract of Carriage of goods is a contract

where by the carrier undertakes to carry specific
quantity of cargo on a particular route or routes
over a given period with specified restriction or
terms. This type of contract usually takes the
form of a bill of lading or charter party.
 THE IMPLIED OBLIGATIONS OF THE CARRIER

Under the contract of carriage the carrier is under an implied

obligation to;
– provide a seaworthy vessel
– Perform the voyage within reasonable time
– Carry the cargo to agreed destination without deviation
– Use due care and skill in carrying the goods.
 THE IMPLIED OBLIGATIONS OF THE SHIPPER
Under the contract of carriage the shipper or the cargo owner is under an
implied obligation to;

– provide cargo

– properly package, mark and weigh the goods

– give an accurate and adequate information about the nature of the goods

– nominate a safe port especially in a voyage charter party

– Take delivery of the cargo

– Pay the agreed freight

– Contribute to general average

 DEFINITION OF BILL OF LADING

A bill of lading may be defined as a document

signed by the ship owner or by the master or
other agent on behalf of the ship owner,
evidencing that certain goods have been shipped
on a particular vessel or have been received for
shipment.
 B/L DEFINITION (CONTINUED)
It sets out the terms on which those goods have
been delivered to and received by the ship owner
or the agent of the ship owner. Thus the bill of
lading acts as a receipt signed by the master or on
his behalf indicating in what apparent order and
condition the goods have been received on
board.
 BASIC INFORMATION CONTAINED IN A BILL OF LADING
• Reference number • statement that goods were
• shipper’s name/address received on
• consignee’s name/address, or ‘to board/loaded/shipped ‘in good
order’ order and condition,’
• notify party’s name/address
• qualified by suitable any
• loading port
remarks about defective order
• Place of receipt
• Place of delivery
or condition;
• loading date • number of original bills of
• vessel’s name lading issued in set;
• discharge port • signature of carrier, master or
• number and type of packages agent. Copies should be
• contents stamped ‘copy –non –
• weight or volume negotiable’
• any leading marks • Terms of contract (back)
 TYPES OF BILL OF LADING
1. Bearer bill of lading
• A bill of lading providing for the delivery of the
goods to whoever holds the bill. The bill is a
bearer bill of lading if:
- It is explicitly identified as such;
- It names the consignee as “bearer”
- It is an order bill of lading which fails to
mention to whose order it is; or
- It is an order bill of lading endorsed in blank.
• A bearer bill is negotiable by its mere delivery.
 TYPES OF BILL OF LADING CONT.
2. Order bill of lading

A bill of lading providing for delivery of the

goods to the order of a specified person, by
words such as “consigned to XYZ Co. Ltd. or to
order or assigns”. An order bill is negotiable by
endorsement and delivery of the document to
the endorsee.
 TYPES OF BILL OF LADING CONT.
3. Named (nominated) bill of lading

A bill of lading providing for the delivery of the

goods to a named person, without also
specifying “to order or assigns”. The named
consignee obtains delivery of the goods by
surrendering one of the originals of the bill to
the carrier or his agent. Although a document of
title, the nominate bill of lading is not negotiable.
 TYPES OF BILL OF LADING CONT.
4. Straight bill of lading

A non-negotiable bill of lading. A “straight bill” states that

the goods are consigned or destined to a specified person.
It is marked “nonnegotiable” or “not negotiable” on its face.
It may be transferred by its holder by delivery, accompanied
with an agreement (express or implied) to transfer the title
to the bill or to the goods it represents.

A straight bill cannot be negotiated free from existing

equities; its endorsement confers no additional rights on
the transferee.
 TYPES OF BILL OF LADING CONT.
5. Clean bill of lading

The face of a clean bill of lading bears no

notation of the bad or questionable order of
the goods. It means that the goods have been
received on board in apparent good order and
condition.
This is contrary to uncleaned/claused bill of
lading
6. Claused bill of lading
A bill of lading that contains adverse remarks as
to the apparent order and condition of the
goods to which it refers, or a bill of lading
which contains defective qualifications as to
the weight or quantity of the goods loaded
thereunder.
 TYPES OF BILL OF LADING CONT.
7. Multimodal transport bill of lading
Carriage by sea is likely to be involved as a major
stage of the transit. The tendency is to adapt a
multimodal transport document. This form of
transport document covers at least two different
forms of carriage. It indicates the place at which
the goods are taken in charge by the carrier which
may be different from the seaport or place of
loading and final destination which may differ
from port or place of discharge.
8. Combined Bill of Lading
Refers specifically to a contract in which one
carrier contracts as principal for all stages of a
multimodal journey and not just as principal
for one leg of the journey and as agent to
arrange the remainder.
9. Through Bill of Lading
Refers specifically to a contract in which one
carrier contracts as principal for one leg of the
journey and as agent to arrange the remainder.
The bill of lading covers the whole transit and
the shipper deals only with the first carrier.
This type of bill of lading enables a through
rate to be quoted but liability is segmented.
 TYPES OF BILL OF LADING CONT.
10. FIATA COMBINED TRANSPORT BILL OF LADING

A bill of lading whereby the contractual carrier will be a freight

forwarder, notwithstanding that this party will play no physical
role in the actual carriage of the goods.
This document was developed by an international association of
forwarding agents called FIATA. It is a sellable ocean bill of lading
for combined transports using several means of transport (also
known as multimodal or intermodal transports).
The freight forwarder who issues the FBL accepts the responsibility
as the transporter during the duration of contract, including any
loss, pilferage and damages that may occur.
 TYPES OF BILL OF LADING CONT.
11. Groupage bill of lading/House B/L

• Forwarding agents are permitted to “group” together particular

compatible consignment from individual consignors to various
consignees, situated usually in the same destination country/area,
and despatch them as one consignment. The ship owner will issue a
GROUPAGE B/L whilst the forwarding agent, who cannot hand to his
principals the “SHIP OWNERS B/L” will issue to the individual
shippers a CERTIFICATE OF SHIPMENT sometimes called HOUSE BILL
OF LADING. At the destination, another agent working in close
liaison with the agent forwarding the cargo will “break bulk” the
consignment and distribute the goods to the various consignees
 TYPES OF BILL OF LADING CONT.
12. Ocean through bill of lading

A bill of lading invoking a series of contracts to

carry goods to a final destination by two or more
successive ocean carriers. A “pure” ocean
through bill of lading is a bill of lading whereby
the issuer undertakes to be responsible for the
carriage of goods by successive ocean carriers
from the point of reception to final destination.
 TYPES OF BILL OF LADING CONT.
13. Switch bill of lading
A switch bill of lading is issued by or on behalf of the carrier
in substitution for the Bill of lading at the time of
shipment.
Under this procedure, the original set of Bills of lading
under which the goods have been shipped is surrendered
to the carrier or his agent in exchange for a new set of
bills in which some of the details, such as those relating to
the names and address of the shipper, date of issue of the
bills or the port of shipment have been altered.
 TYPES OF BILL OF LADING CONT.
• 14 SPLIT BILL OF LADING.
A shipper of bulk cargo may wish to sell the
cargo to individual buyers all of whom for
commercial reasons need or request a
separate bill of lading, as distinct from a ship’s
delivery order. Such bills of lading are
sometimes referred to as Split Bills of Lading
 TYPES OF BILL OF LADING CONT.
• 15 Ad valorem bills of lading
An ad valorem bill of lading is a bill of lading which
shows, on its face, the nature and value of the
goods. By stating the value, the shipper is no longer
bound by the per package limitation of the liability
set out in the Hague-Visby Rules in Article 4, rule 5.
in return for the loss of the right to limit, the
shipowner is entitled to claim ad valorem freight –
that is a freight which reflects the high value and
high risk of carrying the good.
 TYPES OF BILL OF LADING CONT.
16. House to house bill
Indicates goods are conveyed from the exporters
premises and conveyed to the consignee’s
premises and thereby providing a combine
transport document.
17. Port to port bill of lading
The conveyance of a consignment or
merchandise starting and finishing at the
ship’s side. Hence the inland movement prior
to and subsequent to the sea carriage is
effected by the agent or his agent.
 TERMS AND CONDITIONS OF THE BILL OF LADING

 The terms and conditions of the bill of lading set out

or outlines the various contractual terms - rights and
responsibilities as well as immunities or defenses of
the carrier and the shipper under the bill of lading
clauses at the back of the bill of lading.
 BILL OF LADINGS CLAUSES
 IDENTITY OF THE CARRIER CLAUSE

A clause that identifies the contractual carrier under a bill of lading.

This clause defines the actual carrier whose responsibility to carry the cargo.
Bill of lading signed by the master himself or by the others on his behalf
usually bind the shipowners as carriers, since the owners are the master’s
principals.

However, where the vessel is demise or time chartered, the party which
appoints the master and who is therefore normally his principal is the
demise charterer rather than the owner. In such circumstances, a
signature by the master, or by others on his behalf, will normally bind the
demise charterer or agent as the carrier.
 BILL OF LADINGS CLAUSES

 CLAUSE PARAMOUNT

A clause in the bill of lading or the charter party which stipulates that the
contract of carriage is governed by rules of a specified convention or a
particular statute. In most cases stipulating that the contract of carriage is
governed by the Hague Rules or the Hague-Visby Rules.
 BILL OF LADINGS CLAUSES

 HIMALAYA CLAUSE

A clause which is incorporated into the charter party or bill of lading contract
to provide agents, servants, sub-contractors…(etc) of the carrier the
benefits of all exclusions and limitations enjoyed by the actual carrier
under the bill of lading which protects them from consignees or endorsees
for the claims in contract or tort.
 BILL OF LADING CLAUSES

 LIEN CLAUSE

Lien is a right to retain possession of cargo to secure outstanding claims due

to the carrier. Under the terms of bill lading, the shipowner has the right
to retain the cargo as security in certain circumstances. In other words, he
has a lien over the goods. The circumstances in which he can exercise the
right are
– Payment for freight, assuming payment and delivery are concurrent;
– Moneys spent in protecting the cargo; and
– General average contribution

It should be noted that this lien is a contractual lien.

 BILL OF LADING CLAUSES

 TRANSHIPMENT CLAUSE

This clause relates to circumstances where cargo is to be transhipped and

allows the shipowner to undertake the voyage in this way and may be a
means of enabling the shipowner to be absorbed from the responsibility
once the goods have left his vessel, even though he has, under the terms
of the bill of lading, undertaken to carry the goods until final destination.
Whether he is successful in so doing depends very much on the precise
words used.
 BILL OF LADINGS CLAUSES

 FAILURE TO TAKE DELIVERY OF THE GOODS CLAUSE

This clause sets out the rights of the carrier in the circumstance of the
consignee’s failure to take delivery of the goods. For instance, if for any
reason whatsoever the consignee refuses or fails to take delivery of the
goods upon their being discharged and made available at the port of
discharge or place designated for delivery regardless of the free time
prescribed by tariff or local regulation, the carrier shall have the right
without notice to unstuff the goods and to store them at the risk of the cargo
owner. Such storage shall constitute final delivery hereunder and thereupon
all liability whatsoever of the carrier with respect of the goods shall cease.
 BILL OF LADINGS CLAUSES

 LATENT DEFECTS CLAUSE

Where the bill of lading contains a clause excluding liability for a latent defect,
it has been interpreted to mean a defect that could not be discovered on
such an examination that a reasonable skilled man would make. In other
words, a defect not obvious from a cursory inspection.
 BILL OF LADINGS CLAUSES

 TIME-BAR CLAUSE

A clause found in a contract of carriage where all claims must be submitted

within a specified period from final delivery date or expected date of
delivery.

For example, all liabilities whatsoever of the carrier shall cease unless suit is
brought within 12 months after delivery of the goods or 12 months after
the date when the goods should have been delivered.
 BILL OF LADINGS CLAUSES

 NOTICE OF LOSS CLAUSE

Clause relating to the period where the carrier should be notified of loss or damage.

For example, unless notice of loss of or damage to the goods and general nature of

it be given in writing to the carriers agent at the port of discharge or place of

delivery, as applicable, before or at the time of the removal of the goods into the

custody of the person entitled to delivery thereof under the bill of lading or if the

loss or damage be not apparent within three consecutive days thereafter, such

removal shall be prima facie evidence of the delivery of the carrier of the goods as

described in the bill of lading. Notice of any claim shall be addressed to carrier’s

local agent at the port of discharge.

 BILL OF LADINGS CLAUSES

 LIBERTY CLAUSE

A clause authorizing the carrier to deviate in specified circumstances. A

deviation may be justified by the terms of a specific clause giving the
carrier a liberty to call at additional ports during the voyage. For example,
a bill of lading containing a clause giving the carrier liberty to proceed to
and stay at any port or ports in any situation.
 BILL OF LADINGS CLAUSES

 SHIPPER’S RESPONSIBILITY CLAUSE

The shipper shall be deemed to have guaranteed to the carrier the accuracy,
at the time the goods were accepted by the carrier, of the description of
the goods, marks, number, quantity and weight and any statement as to
the content of the containers or other packages as furnished by him; and
the shipper shall indemnify the carrier of all losses, damage and expenses
arising or resulting from inaccuracies or inadequacies of such particulars.
 BILL OF LADINGS CLAUSES

• CONTAINERS STUFFED BY SHIPPER CLAUSE

When container is stuffed by shipper or his agent, the bill of lading shall be a
receipt only for the container and the carrier shall not be responsible for
count of the contents, nor for concealed damage or for improper loading
or missing of articles in the container. Carrier shall not be liable for any
loss, damage or injury caused by improper stuffing of container when such
has been performed by the shipper or on the shipper’s behalf.
 BILL OF LADINGS CLAUSES

 PERILS OF THE SEA CLAUSE

Where the contract expressly excludes liability from perils of the sea, the
courts have interpreted it to refer to any damage that have been caused
by storms, sea water, collision, stranding or perils that peculiar to the sea
and which could not have been avoided by exercise of reasonable care.
 BILL OF LADINGS CLAUSES
 ARREST OR RESTRAINT CLAUSE

An arrest clause in a bill of lading excluding liability for loss or damage due to
arrest or restraint of the vessel. This clause has been interpreted to apply
to a number of situations.
It has successfully invoked where the government of a country takes
possession of the goods through embargo, arrests, or blockades; where
there is the prohibition of the importation of the goods; or where the
goods cannot be discharged due to quarantine restrictions. It does not
however apply to situations where there is restriction imposed on sea
routes for safety of shipping or to any political disturbances.
 BILL OF LADINGS CLAUSES

 HOSTILITIES AND RIOTS CLAUSE

Bill of ladings normally contains exclusion clause relieving the shipowner of

liability in the event of damage caused by riots or other commotions.
The reason for this clause is that a common law exception of act of public
enemies’ does not cover civil wars, riots, or other disturbances. The
common law exception only cover acts committed by states with whom
the Sovereign is at war.
 BILL OF LADINGS CLAUSES

 STRIKES CLAUSE

It is common to find clauses exempting liability in the event of strikes. The

word ‘strike’ refers to a concerted stoppage of work by men done in the
view of improving their wages or their conditions. The strike exemption
not only cover direct loss but also losses caused by after-effect of strike-
for instance, where loading is delayed as a result of congestion due to
strike even though the strike had ended by the time the ship calls at the
port of loading.
 BILL OF LADINGS CLAUSES

 CASPIANA CLAUSE

The bill of lading may contain a clause that allows the carrier to discharge
goods for a strike-bound port at any safe and convenient port.
Where there is a caspiana clause, the consignee will not be able to recover
the cost of transshipment of the goods to the original destination once the
strike is over.
 BILL OF LADINGS CLAUSES
 BOTH TO BLAME CLAUSE

This is a clause where the cargo owners indemnify the carrier against liability
to another vessel in collision. For instance, in case of collision with another
ship as a result of the of the negligence of the other ship and any act,
neglect, or default of the master, mariner, or pilot, or the servants of the
Carrier in the navigation or in the management of the ship, the owners of
the goods carried here-under will indemnify the carrier of all loss or
liability to the other or non-carrying ship or her owners in so far as loss or
liability represents loss of, or damage to, or any claim whatsoever of the
owners of the said goods, paid or payable by the other or non-carrying
ship or her owners to the owners of the said goods and set-off, recouped
or recovered by the other or non-carrying ship or her owners as part of
their claim against the carrying ship or carrier.
 OTHER TRANSPORT DOCUMENTS
Ship’s delivery order

• A ship’s delivery order is refer to any document which

is neither a bill of lading nor a sea waybill but contains
an undertaking which:
• Is given under or for the purposes of a contract for the
carriage by sea of the goods to which the documents
relates, or of goods which include those goods; and
• Is an undertaking by the carrier to a person identified
in the document to deliver the goods to which the
document relates to that person.
 SEA WAYBILL
Waybill (Sea waybill)

• A waybill is a non-negotiable receipt issued after

receipt of the goods by the carrier.
– It is clearly marked “non-negotiable”.
– It is usually employed in the container trade for
normal shipments with consent of the shipper who
does not insist on being issued a negotiable bill of
lading.
– It is not a document of title and cannot therefore be
used to transfer title in the goods to a third party.
 SEA WAYBILL CONT.
• A waybill is useful in these times of speedy carriage where
cargo often arrives before the documents.

• It is also useful for transactions where the shipper and

consignee are related or are subsidiaries of one another and
where the rigid production of banking documents is
unnecessary.
• Waybills are also used in large, long-term transactions in
which the shipment is only part of a major, well-secured, long-
term agreement between the shipper and consignee.

• Generally, waybills are useful wherever financing is not

provided in exchange for documents, e.g. open account sales.
 SEA WAYBILL CONT.
• It may travel with the goods on the ship and does
not need to arrive ahead of the goods for the
receiver to claim the goods. It is often used where
there is trust between the buyer and seller, and is
preferred to a bill of lading in trades where bills of
lading often lag behind the cargo (e.g. short-sea
trades), and where there is no contractual
requirement for bills of lading ( e.g. in a sale not
involving a letter of credit).
 BASIC FUNCTIONS OF BILL LADING
It functions
(1) as a receipt for goods (either received from the
shipper ashore or loaded on board)
(2) (if made out ‘to order’) as a negotiable document
of title;
(3) as good evidence of a contract between the
shipper and the carrier; however between the
carrier and a third party the B/L is the contract.
(4) If stamped with remarks indicating that the freight
has been paid, the B/L acts as a receipt for freight.
*(2) and (4) do not always apply. The bill of leading can also be used as a document of
tittle
 HOW DOES A BILL OF LADING FUNCTION AS EVIDENCE
OF CONTRACT?

• It should either contain the carrier’s terms,

conditions and exceptions (as on a liner bill of
lading) or state where these can be can be found
(as on a charter party bill of lading).

• The fact that a bill of lading has been issued by

the carrier is strong evidence that a contract of
carriage with him was entered into by the shipper.
The contract may be by verbal agreement earlier
 HOW DOES A BILL OF LADING FUNCTION AS A RECEIPT
FOR GOODS?
• A bill of lading should only be issued once goods
have been received, either into the custody of a
carrier or forwarder, e.g. At an inland container
depot (a ‘received’ bill of lading), or on board the
vessel ( a ‘shipped’ or’ ‘ ocean’ bill of lading).
• Acting as a receipt for goods is the basic function
of any bill of lading.
• The bill of lading acts as a receipt and
acknowledges that the carrier has taken
possession of the goods.
 HOW MAY A BILL OF LADING FUNCTION AS A
RECEIPT FOR FREIGHT?
• If freight was paid before issue (e.g. advance freight paid
to a carrier operating a liner service), the bill of laden
should be stamped ‘freight paid’ or ‘freight pre-paid’.

• No freight can be demanded when at the discharge port.

If not so stamped, freight may be demanded before
delivery of the goods.
 BILL OF LADING AS A DOCUMENT OF TITLE
• By being a negotiable bill of lading, i.e. one of the set of
‘originals’ made out ‘to order’. This enables the bill of
lading representing the goods to be passed to a bank or
an alternative buyer (perhaps in a chain of buyers)
simply by the present title-holder (the transferee) on the
back of the bill of lading.

• A negotiable bill of lading is similar to a cloakroom

ticket; whoever has the possession of it can claim the
goods.
 WHAT WILL PREVENT A BILL OF LADING FROM
BEING A NEGOTIABLE DOCUMENT OF TITLE?
• Having a particular consignee’s name inserted on its
face, i.e. not being made out ‘to order’ will have a
particular consignee’s name inserted and are therefore
not negotiable to a third party, e.g. a bank or a second
buyer of the goods.

• They are therefore similar to a crossed cheque. Copy bills

of lading are not negotiable.
 ENDORSEMENT ON A BILL OF LADING

• Endorsement is the act of assigning a negotiable

instrument, such as a cheque or draft or a bill of
lading. By just signing a B/L on the back (endorsement
in blank), it turns into a bearer’s B/L.
• The rights of the instrument can be transferred to
somebody else by signing ‘Deliver to the order of … or
similar wording. This is called an endorsement in full.
• If the endorsement states: ‘Deliver to ….. Without the
‘to order phrase, the B/L is turned into a non
negotiable straight B/L.
 LETTERS OF INDEMNITY CONNECTED WITH BILL OF
LADING
 Letter of indemnity is given to the ship or carrier in
connection with a bill of lading:

 Against issue of a ‘clean’ bill of lading when cargo is

shipped that is not in ‘apparent good order and
condition’; and
 when goods are being claimed at the discharge port
without surrender of one of the set ‘original’ bills of
lading.
 BILL OF LADING FRAUD
Bill of lading fraud is any species of fraud arising out of
commercial dealings transacted in and intended to be carried
out in shipping with the use of the bill of lading.
Overall, it is the process of obtaining money or services or
property in the goods or as pecuniary advantage by one or
more parties to a transaction from the other party of parties
by unjust or illegal means.
 BILL OF LADING FRAUD
 A person who, with intent to defraud:
 falsely makes, alters, forges, counterfeits, prints, or
photographs any bill of lading purporting to represent goods
received for shipment;
 utters or publishes as true and genuine any such falsely made,
altered, forged, counterfeited, printed, or photographed bill
of lading; or
 issues, negotiates, or transfers for value a bill which contains a
false statement as to the receipt of the goods, or as to any
other matter;
 PARTIES INVOLVED IN BILL OF LADING
FRAUD
 The shipper on the buyer
 The buyer on the shipper
 The seller or buyer (or both) against Customs
 The seller or buyer (or both) against the carrier
 The cargo owner against the insurer
 BILL OF LADING FRAUD CONT.
 Bill of lading fraud can be committed in many different ways.
Various methods are used to create a forged original bill of lading.
 There are four (4) general types of fraud involving a forged bill
of lading:
1. Those created to secure the cargoes release.
2. Those created for a non-existent cargo and vessel in order to
obtain payment from an unsuspected party
3. Those created for non-existent cargo, allegedly carried on an
existing vessel, in order to obtain payment from an
unsuspecting party. Often it is shown that the vessel was at the
port at the relevant time the bill of lading was said to have
been issued.
4. Those created to present to a bank to obtain letter of credit
funds.
 BILL OF LADING FRAUD CONT.
 These fraud can come in many forms. It can involve:
 The sale of cargoes that do not exist
 Fraudulent representation of on Cargo Documents
 The attempt to illegally claim on Letters of Credit
 Fake Letters of indemnity as well as
 Theft of cargo and/or cheating over quantity and quality
 CASE SCENARIO:
Forged Bills of Lading with the intention of stealing the cargo

 The Fraudsters create a fake set of Bills of Lading that looks sufficiently
genuine against which they seek to take delivery of the cargo in advance
of the genuine Receiver.
 This fraud may have received some “Insider” assistance, as the
Fraudsters will need key information – if not a copy of the genuine Bill –
in order to ensure they can achieve delivery at the discharge Port.
 Lesson Learned:
 Ensuring that there is always a clear chain of custody for any set of
original Bills is very important.
 Agents, if they want to avoid being held liable, will also have to ensure
that they conduct proper checks against documents presented to
ensure their genuine nature. If in doubt, a phone call can help to clear
up many issues and concerns. If, however, serious concerns persist
(such as clear errors or inconsistencies on documents) then calling a
“halt” to operations will be a prudent step to take.
 CASE SCENARIO:
“Fake Cargo Sale” – a parallel transaction
 The Fraudsters will seek to create genuine looking Bills of Lading or other Cargo Documents,
copying corporate styles and logos, and going as far as including genuine ship and shipment
details. The Fraudsters appear to be well informed about the particular type of cargo being
shipped.
 In one particular case, the Fraudsters knew of the exact trading pattern of a Member’s vessel and
were able to give credible details of her route and alleged cargo, so as to make the transaction
appear legitimate. They offered to sell a cargo that allegedly was on board, but the vessel was in
fact trading a different cargo altogether that had been sold already to genuine buyers from
genuine sellers.
 The Fraudsters seek to gain by seeking a Buyer for their alleged cargo and then either obtaining
payment direct or by way of a Letter of Credit opened in their favour as part of the transaction.
 In some cases involving the Container Industry, the Fraudsters go so far as to create fake websites,
and give fake tracking numbers, to give the appearance of a genuine shipment that can be tracked
“live”.
 LESSON LEARNED :
 Fraudsters can take significant steps to create a legitimate appearance for their scheme.
Cursory or brief checks may be insufficient to detect the underlying scam. Unless dealing
with known and proven counterparties (who confirm the deal back) extra caution should
be taken to ensure a particular proposed offer is in fact genuine
 One particular Red Flag to this type of Fraud is that the offered cargo may be at a
significant discount to prevailing market prices, and aiming at trapping a Buyer with a deal
that is “too good to pass on”.
 CASE SCENARIO:
Freight Forwarder issues/re-issues Bills of Lading with cargo miss-
descriptions
 The Master of the vessel has the responsibility and right to issue Bills of Lading for the cargo laden on his
ship. In practice this is often delegated / contracted out to Charterers and their Shipping Agents on the basis
that any Bills issued must conform with Mate’s Receipts issued during the loading operation.
 It is important to ensure that Bills do accurately reflect the cargo laden, because a knowing miss-declaration,
for instance claiming that a cargo of cars is “new” while they are fitted with old engines, is a fraud. The 3rd
Party Buyer of the cargo expects new cars, not refurbished vehicles, and he is paying the price for new cars.
 This can create problems for ship-owners where the Bills are issued, or perhaps re-issued, by a Party several
steps removed in the contractual chain, and these Bills contain clearly inaccurate information. The Owner
may not even know that this event has occurred, until confronted with a cargo claim at the discharge Port.
 Typically the “fraud” will involve:
 a deliberate over statement as to quantity laden
 a knowing miss-description of the cargo laden
 the post or ante dating of the Bill of Lading
 This is done in order to ensure documents pass as “clean” through the Banking system, obtain more sale
proceeds, and put the transaction into sale and Letter of Credit “windows”. In all cases, however,
misinformation is used to obtain financial benefit, or greater financial benefit, than should have been due
had accurate information been provided.
LESSON LEARNED:
 Delegating an important right/obligation such as issuing cargo documents should only be done to trusted
counterparties and in line with clear indemnities and counter-obligations to protect the Owner. If a cargo is
laden that clearly is not “new” or “clean” then extra care has to be taken that any cargo document issued
very precisely describes the exact nature of the cargo
 CASE SCENARIO:
the “Trojan” Container
 The Containerization of global trade has given incredible benefits to shipping and the
world economy, yet has also given rise to numerous opportunities for fraud.
 The “Trojan” Container is the one that is alleged to contain a certain specific cargo, yet
upon discharge it turns out that the contents are quite different. This type of fraud
includes:
 Cargo of plastic shipped for recycling contained a small amount of used diapers
 Cargo of rolls of textiles contained smuggled cigarettes
 Various methods to hide drugs
 Waste and rubbish, or other redundant material to give the impression of [x] tons weight, but the
real goods were never shipped (but were paid for)
 LESSON LEARNED:
 The volume of containerization as well as the need for fast processing leaves little time
to ensure that cargo manifests are checked rigorously and even then physical contents
are not routinely checked against the manifest by the vessel (that would be a logistical
and practical impossibility in the trade).
 A great degree of reliance is therefore placed on Freight Forwarders to ensure that
both contents and weight are properly declared. In case of concern, it is better to
isolate a box and have it inspected, even leaving it behind, rather than risk a vessel
with thousands of boxes on board being detained for alleged immigration, customs and
other legal infringements at the discharge Port.
 SPECIFIC RED FLAGS (CHECKLISTS)

 COUNTERPARTY ISSUES
 Identities of unknown or new Brokers and Principals could not be
verified independently
 Supposedly separate entities share postal addresses and/or there
are other contact detail inconsistencies
 Counterparty or Intermediary’s activities are being undertaken
away from the place/jurisdiction where their registered address
places them
 Excessive pressure or aggressive behavior in pushing for a deal
combined with a willingness to overlook or waive “discrepancies”
 Avoidance to questions requiring clear answers
 SPECIFIC RED FLAGS (CHECKLISTS) CONT.

 DOCUMENTARY ISSUES
 The proposed trade and the proposed shipping and finance
documents are inconsistent
 Incomplete cargo documents or information thereon is
inconsistent with the usual terms of the trade
 Documents with alterations outside of normal trade practice
 Post or out dated Cargo Documents
 Documents contain errors or otherwise have suspect validity
 SPECIFIC RED FLAGS (CHECKLISTS) CONT.

 TRANSACTION ISSUES
 The proposed transaction is highly undervalued or provides for
an unusual profit margin
 The trade is unusual in terms of its nature or geography
 Payment is to be made/received in cash
 Numerous Intermediaries are involved, more than usual in any
event
 Requests for unexplained payments
 Overly complex transaction(s)
 Routing of funds via third parties or countries
 Unexplained changes to transaction details