31 May 2023

Legal Regulation of Bills of Lading in International Maritime Carriage

May 31, 2023

BRACE Law Firm ©

The development of international trade relations is impossible without international freight transportation; various countries produce goods required by a vast number of consumers in other states. The delivery of goods under foreign trade contracts to the consumer is carried out by different types of vehicles, the accompaniment of which requires documentary processing of the cargo.

Maritime transport is used for a large number of types of goods, both in bulk and for containerized transportation. At the international level, the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of 1924 (the "International Convention for the Unification of Certain Rules relating to Bills of Lading" or the "Hague Rules") established uniform rules regarding bills of lading and became the governing document for international maritime cargo transportation. [1] At the same time, in accordance with the United Nations Convention on the Carriage of Goods by Sea (concluded in Hamburg on March 31, 1978; ratified by the Russian Federation on March 12, 1997) (the "UN Convention on the Carriage of Goods by Sea"), a bill of lading is a document that confirms a contract of maritime carriage and the receipt or loading of the cargo by the carrier and under which the carrier undertakes to deliver the cargo against this document. A statement in the document that the cargo must be delivered to the order of a named person, to order, or to the bearer represents such an obligation.

In accordance with Article 785 of the Civil Code of the Russian Federation (the "Civil Code"), under a cargo transportation agreement, the carrier undertakes to deliver the cargo entrusted to it by the shipper to the destination and issue it to the person authorized to receive the cargo (the "consignee"), while the shipper undertakes to pay the established fee for the transportation. The conclusion of a cargo transportation agreement is confirmed by the preparation and issuance of a transportation invoice (a bill of lading or another document for the cargo provided for by the relevant transport charter or code) to the shipper.

Furthermore, the existence and content of a contract for the maritime carriage of goods may be confirmed by a charter party, a bill of lading, or other written evidence. [2] After receiving the cargo for transportation, the carrier must, at the shipper’s request, issue a bill of lading to the shipper. The shipper guarantees the carrier the accuracy of the data provided for inclusion in the bill of lading and is liable for losses caused to the carrier due to the inaccuracy of such data.

The shipper may require the carrier to issue a sea waybill or another document confirming the receipt of the cargo for transportation instead of a bill of lading. The rules established for a bill of lading apply to such documents, except for the rules concerning the bill of lading as a document of title.

A bill of lading also qualifies as a transportation (shipping) document, which confirms the existence of a contract for the carriage of goods and accompanies them during such carriage. [3] When using maritime cargo transportation, a bill of lading is also submitted when notifying the customs authority of the arrival of goods in the customs territory of the EAEU. [4]

Moreover, the absence, irregularity, or loss of a transportation invoice does not in itself constitute grounds for declaring a cargo transportation agreement unformed or invalid. In such cases, other evidence may confirm the existence of contractual relations between the parties. [5]

Data Contained in a Bill of Lading

Considering the provisions of the Hague Rules, after receiving the goods and taking them into its charge, the carrier, master, or agent of the carrier must, at the shipper's request, issue a bill of lading to the shipper containing the following: [6]

The leading marks necessary for identification of the goods as furnished in writing by the shipper before the loading of such goods starts, provided that such marks are stamped or otherwise shown clearly upon the goods (if uncovered) or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage;
The number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper;
The apparent order and condition of the goods.

Furthermore, in accordance with the UN Convention on the Carriage of Goods by Sea, a bill of lading must include the following data: [7]

The general nature of the goods, the leading marks necessary for identification of the goods, an express indication — where applicable — of the dangerous character of the goods, the number of packages or pieces, and the weight of the goods or their quantity otherwise expressed, all such particulars as furnished by the shipper;
The apparent condition of the goods;
The name and principal place of business of the carrier;
The name of the shipper;
The name of the consignee if named by the shipper;
The port of loading under the contract of carriage by sea and the date on which the carrier took charge of the goods at the port of loading;
The port of discharge under the contract of carriage by sea;
The number of originals of the bill of lading, if more than one;
The place of issuance of the bill of lading;
The signature of the carrier or a person acting on its behalf;
The freight to the extent payable by the consignee or other indication that freight is payable by the consignee;
An indication that the carriage is subject to the provisions of the UN Convention on the Carriage of Goods by Sea, which nullify any stipulation derogating therefrom to the detriment of the shipper or the consignee;
A statement, if applicable, that the cargo shall or may be carried on deck;
The date or the period of delivery of the goods at the port of discharge, if expressly agreed upon by the parties;
Any increased limit or limits of liability, if agreed upon.

Under Article 144 of the Merchant Shipping Code of the Russian Federation (the "CMM RF"), a bill of lading must include the following data:

The name and location of the carrier;
The name of the port of loading under the contract for the maritime carriage of goods and the date the carrier received the cargo at the port of loading;
The name and location of the shipper;
The name of the port of discharge under the contract for the maritime carriage of goods;
The name of the consignee, if named by the shipper;
The name of the cargo, the leading marks necessary for identification of the cargo, an indication — where applicable — of the dangerous nature or special properties of the cargo, the number of packages or pieces, and the mass of the cargo or its quantity otherwise expressed, with all data provided as furnished by the shipper;
The apparent condition of the cargo and its packaging;
The freight to the extent payable by the consignee or other indication that freight is payable by the consignee;
The time and place of issuance of the bill of lading;
The number of originals of the bill of lading, if more than one;
The signature of the carrier or a person acting on its behalf.

By agreement of the parties, other data and clauses may be included in the bill of lading; a bill of lading signed by the master of the vessel is deemed signed on behalf of the carrier.

A signature on a bill of lading may be handwritten, printed in facsimile, perforated, stamped, in symbols, or by any other mechanical or electronic means, provided it does not contradict the law of the country where the bill of lading is issued.[8]

The following are categorized as guarantees of the shipper:

The shipper is deemed to have guaranteed to the carrier the accuracy of the particulars relating to the general nature of the goods, their marks, number, weight, and quantity furnished by it for inclusion in the bill of lading; the shipper must indemnify the carrier against loss resulting from inaccuracies in such particulars, and the shipper remains liable even if the bill of lading has been transferred;
Any letter of guarantee or agreement by which the shipper undertakes to indemnify the carrier against loss resulting from the issuance of a bill of lading without reservations regarding the particulars furnished by the shipper or the apparent condition of the cargo is void against any third party, including a consignee, to whom the bill of lading has been transferred;
Such a letter of guarantee or agreement is valid against the shipper unless the carrier or person acting on its behalf, by omitting the reservation, intended to defraud a third party, including a consignee, who acts in reliance on the description of the cargo in the bill of lading;
In the event of intentional fraud, the carrier is liable — without the benefit of the limitation of liability provided for by the UN Convention on the Carriage of Goods by Sea — for loss incurred by a third party, including a consignee, because it acted in reliance on the description of the goods in the bill of lading. [9]

Types of Bills of Lading and Multiple Originals

A bill of lading has several types and may be issued as:

To a named consignee (a "straight bill of lading") [10];
To the order of the shipper or consignee (an "order bill of lading") [11];
To bearer (a "bearer bill of lading").

An order bill of lading that does not specify whether it is issued to the order of the shipper or the consignee is deemed issued to the order of the shipper.

At the shipper's request, several copies (originals) of the bill of lading may be issued, with each copy indicating the number of existing originals. After the cargo is delivered based on the first presented original, the remaining originals lose their force.

A bill of lading is transferred in accordance with the following rules:

A straight bill of lading may be transferred by name endorsements or in another form in accordance with the rules established for the assignment of a claim;
An order bill of lading may be transferred by name or blank endorsements;
A bearer bill of lading may be transferred by simple delivery.

After the cargo is loaded on board, the carrier must, if the shipper so requires, issue a "shipped" bill of lading to the shipper, which — in addition to the data required by regulatory documents — must state that the cargo is on board a specific vessel or vessels and indicate the date or dates of loading. If the carrier previously issued a bill of lading or another document of title to the shipper regarding this cargo, the shipper must return such document in exchange for a "shipped" bill of lading at the carrier's request. The carrier may satisfy the shipper's request for a "shipped" bill of lading by amending any previously issued document, provided that the amended document includes all data required in a "shipped" bill of lading.[12]

Additionally, another type of bill of lading is known as a "through bill of lading". Through bills of lading are used if the maritime carriage constitutes only part of the total transportation and the goods must be transported by different land and sea carriers. These bills of lading also apply when the maritime carriage itself is divided into separate stages carried out by different shipowners through transshipment. A through bill of lading is typical for modern container transportation where goods are carried from the place of loading to the destination in the same containers but by various modes of transport. [13]

Functions and Tasks of the Bill of Lading in International Transportation

Based on the legal framework for using a bill of lading, its functions are defined as follows:

It is evidence of a contract of carriage. This function arises from the legal provisions of regulatory documents stating that a bill of lading confirms the existence of a contract for the carriage of goods. It is important to note that a written foreign trade contract reduces the possibility of disagreements.
It confirms title to the goods. Logistic delivery chains are diverse; in international transportation, the "Incoterms" international rules are used, which determine the transfer of ownership of goods based on the chosen delivery basis. During maritime transportation, the carrier must issue a bill of lading to the shipper, which confirms the acceptance of the cargo on board for transportation to the consignee.
It serves as a commodity receipt or voucher. A bill of lading is a receipt according to which the cargo is transferred from the shipper to the carrier.

The tasks of a bill of lading include:

Protection of the cargo from third-party claims;
Receipt of the cargo at the destination by the lawful consignee;
Accurate description of the goods being transported.

Given the often lengthy transportation time, the issued bill of lading helps prevent third-party claims on the transported cargo, thus protecting the goods from unlawful possession.

The shipper does not accompany the cargo throughout the entire delivery path to the consignee; the accompaniment is provided by the processed bill of lading, by which the lawful consignee receives the cargo at the destination.

Identification of the transported cargo is a crucial component of transport logistics; an accurate description of the goods allows the consignee to correctly identify the purchased item. Consequently, both the Hague Rules and the CMM RF contain provisions detailing how the description of the transported goods must be conducted.

Clauses in a Bill of Lading

Since the UN Convention on the Carriage of Goods by Sea and the CMM RF define the processing of a bill of lading based exclusively on data provided by the shipper, these regulations grant the carrier the right to enter relevant clauses in the bill of lading.

If a bill of lading contains data concerning the name of the cargo, its leading marks, the number of packages or pieces, the mass, or the quantity, and the carrier (or person issuing the bill on its behalf) knows or has reasonable grounds to believe that such data does not correspond to the cargo actually received (or loaded, in the case of a shipped bill of lading), or if the carrier lacked reasonable means of checking such data, the carrier must enter a reservation in the bill of lading specifically indicating the inaccuracies, the grounds for suspicion, or the lack of reasonable checking means. [14] This same rule is reflected in Article 16 of the UN Convention on the Carriage of Goods by Sea.

Furthermore, if the carrier or person acting on its behalf does not specify the apparent condition of the cargo in the bill of lading, it is deemed that the cargo is in good apparent condition.

Except for data regarding which a reservation has been entered, a bill of lading serves as evidence — unless proven otherwise — of the carrier's receipt of the cargo as described in the bill. Proof to the contrary by the carrier is not permitted if the bill of lading has been transferred to a third party acting in good faith in reliance on the description contained therein.

When transporting certain goods, it is not always possible to verify the exact quantity (e.g., during the transportation of petroleum products); therefore, most bills of lading contain an "unknown clause" (e.g., "weight and quantity unknown"). This clause allows the carrier to avoid unpleasant consequences from the shipper or consignee regarding inaccuracies in determining weight or volume. However, it is important to remember that a reference to a clause in the bill of lading stating that a sealed container was accepted and that the details of the name and weight are unknown to the carrier is not accepted as a defense. This is because, under the CMM RF and international conventions, it does not exempt the applicant from fulfilling legal obligations to the customs authorities of the Russian Federation, including providing accurate information on the number of packages, their marks, and the name and weight of the goods. [15]

Disposal of Cargo Based on a Bill of Lading

In accordance with Article 149 of the CMM RF, the shipper has the right to dispose of the cargo until it is issued to the consignee or until such right is transferred to the consignee or a third party. If the right to dispose of the cargo is transferred to the consignee or a third party, the shipper must notify the carrier.

At the same time, the shipper has the right to demand the return of the cargo at the place of departure before the vessel's departure, delivery at an intermediate port, or delivery to a person other than the consignee named in the transportation document, provided all originals of the bill of lading are presented or appropriate security is provided, and in compliance with the rules of the CMM RF.

The correctness of the documentation required for cargo transportation affects numerous circumstances related to logistics, including delivery, acceptance, taxation, and the liability of the parties. Consequently, when conducting international transportation of goods, it is necessary to follow the requirements established not only by international law but also by the requirements of partner countries in foreign trade transactions.

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References

International Convention for the Unification of Certain Rules of Law relating to Bills of Lading of 1924. Concluded in Brussels on August 25, 1924.
Clause 2 of Article 117 of the CMM RF.
Article 2 of the TC EAEU.
Article 89 of the TC EAEU.
Clause 20 of Resolution of the Plenum of the Supreme Court of the Russian Federation No. 26 dated June 26, 2018, On Certain Issues of the Application of Legislation on Agreements for the Carriage of Goods, Passengers, and Luggage by Road and on Transportation Expedition Agreements.
Clause 3 of Article 3 of the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading.
Article 15 of the UN Convention on the Carriage of Goods by Sea.
Clause 3 of Article 14 of the UN Convention on the Carriage of Goods by Sea.
Article 17 of the UN Convention on the Carriage of Goods by Sea.
Resolution of the Fifth Arbitration Court of Appeal No. 05AP-5412/2019 dated September 3, 2019, in case No. A51-6148/2018, On Declaring Unlawful the Decision of the Customs Authority to Refuse the Release of Goods under Customs Declarations and on Compelling the Customs Authority to Release the Goods under the Re-export Customs Procedure. Request denied.
Resolution of the Arbitration Court of the North Caucasus District No. F08-8080/2022 dated September 9, 2022, in case No. A32-35897/2020: The company believed that the refusal to issue the original bill of lading caused cargo confiscation and subsequent losses. Request denied due to improper defendant.
Clause 2 of Article 15 of the UN Convention on the Carriage of Goods by Sea.
Letter of the FAS Russia No. ShS-22-3/660@ dated August 21, 2009, On Sending Systematized Materials on Documenting Operations during the Transportation of Goods.
Clause 1 of Article 145 of the CMM RF.
Resolution of the Arbitration Court of the Far East District No. F03-958/2022 dated March 31, 2022, in case No. A51-7921/2021, On Annulling a Resolution to Hold Liable under Part 3 of Article 16.1 of the CAO RF for Reporting Inaccurate Data to Customs – Understating the Weight of Imported Goods. Denied; violation proven; reservation in bill of lading does not exempt from accurate declaration.