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At a recent meeting, bankers discussed the situation of a bank’s newly formed international department receiving shipping documents under its first LC issued. Documents were found in good order and the bill of lading required the bank’s endorsement. In the absence of a rubber stamp, the LC specialist handwrote on the back of the B/L the usual clause:
“Deliver to the order of …” [bank name] [manual signature]
Within hours of picking up the documents, the applicant phoned the banker to inform that the shipping company/freight forwarder is holding the cargo due to an irregular endorsement of the B/L. And the free time (before incurring demurrage charges) is running out fast.
After the banker contacted the freight forwarder, the manager confirmed that they are unable to accept the B/L, as endorsements are usually rubber stamped. The freight forwarder manager added that they have not seen this kind of endorsement before and fear it might be spurious.
Among meeting participants, no one indicated that they had encountered such a situation in their LC work. The following questions were considered:
After the meeting, Francisco Rodriguez, CDCS, GLS, chose to share his thoughts with DCW readers. He further analyzed the surprising stance taken by the freight forwarder, who had no justification to refuse a manual endorsement by saying that it “might be spurious”. The banker would have been well-justified to ask the freight forwarder whether their internal procedures or policy had clear instructions on what an endorsement should look like and how it should be made. Neither UCP600 nor ISBP745 address how a B/L is to be endorsed. In the U.S., the closest legal directive might be Uniform Commercial Code, Article 3 (Negotiable Instruments), however; an ocean bill of lading is not, per se, commercial paper but a document of title and a contract for carriage.
As an alternative, it was learned that a senior executive of the bank sought to remedy the situation by quickly sending an email to the freight forwarder, vouching for the officer who had signed the bill of lading. This attempt was unsuccessful. Finally, the bank had to send a letter of indemnity to the freight forwarder to obtain release of the goods.
This scenario makes me wonder how this carrier would have reacted to a particular transaction my bank dealt with a few years ago: 15 sets of bills of lading under an LC presentation were endorsed by way of creating a Word document containing all the details of our rubber stamp endorsement and a pdf signature was inserted. Each B/L was run through the printer with the incipient, but neat, endorsement. No questions were asked.
With the recent enactment of the UK Electronic Trade Documents Act and laws similar to it anticipated in other jurisdictions, coupled with imminent adoption by banks and corporates of platforms like Surecomp’s Rivo and WaveBL, it seems this approach could be one interoperable way to prevent snags in the supply chain and trade finance fields in the future.