Consignee on AWB

[larryBacon]

A letter of credit calling for an AWB stipulated that the shipment be consigned to the issuing bank for A/C applicant. This raises two issues :

1. Banks continue to issue L/Cs erroneously calling for the issuing bank to be shown as the consignee. As the AWB is not a document of title, this is of no value, and only serves to confuse things.
2. In the case alluded to above, the negotiating bank refused to allow an AWB showing (a) the applicant as notify party (b) the applicant in any other part of the AWB other than the consignee box.

I would be interested in views expressed as to the validity of such rejection.

Laurence A. J. Bacon
laurence_aj@hotmail.com

[PGauntlett]

1) It is perfectly acceptable for an issuing bank to require its name to be shown as consignee on an AWB. This will give it security over the goods since they cannot be released until the bank gives a Delivery Order to the clearing agents. In such circumstanes the applicant will have signed a trust receipt.
2) It cannot be a discrepancy for other parts of the AWB to show the applicant's name. It is not an inconsistency and does not change the nature of the document

[AbdulkaderBazara]

1) To have control over the goods, many banks will have the AWB consigned to them and later on facilitate the release of the goods to their customers by issuing a certificate or delivery order to the shipping agent i.e. after their customers have satisfied the banks' requirement by either paying for the goods or signing a promisory note, trust receipt or bill of exchange for the value.

2)The bank may again opted not to have the applicant know abt the arrival of goods from any other sources except the bank. It could be the bank's policy but there should not be any harm in having the applicant appear as a notify party in addition to the bank's name. Both could be notified.

[larryBacon]

I would like to make a small clarification to my original message : This L/C called for the AWB to be consigned TO ORDER of the issuing bank. Unfortunately I find this all too often, despite it being meaningless.

[vobrien]

When you say "this is of no value, and only serves to confuse things." in connection with AWB being consigned to the Issuing Bank you are not correct.

Regardless of whether the bank called for the AWB to be consigned to Issuing Bank or to ORDER of Issuing Bank the Bank can retain constructive control over the goods in either case.

Banks or importers who deal with this on a regular basis do not find this confusing.
[edited 4/12/01 8:10:16 PM]

[larryBacon]

Airwaybills are neither documents of title nor negotiable transport documents. Therefore it is pointless for banks to consign them to order/order of a bank as title cannot be conveyed or transferred by means of this document. The fact that some banks/importers continue to do so indicates how difficult it is to change bad practices. It may also indicate a lack of understanding of the fundamental difference between negotiable documents of title and non-negotiable transport documents. Of course there are circumstances where banks consider it prudent to gain direct control of the goods and, in the case of air freight, this should be done by consigning the goods to themselves. This then gives the bank the option to divert the delivery of the goods as it sees fit.
However, in either case, the carrier is under no obligation to deliver to a party other than the consignee on the AWB. Banks should be mindful of Article 4 of UCP when drafting such a credit.
Readers may be interested to know that I presented my above opinion at the IIBLP L/C Survey conference in Dublin on 22/23 March to a gathering of about 70 L/C practitioners and there were no dissenting opinions voiced.

Laurence A. J. Bacon

laurence_aj@hotmail.com

[vobrien]

Original posting from LB said

"1. Banks continue to issue L/Cs erroneously calling for the issuing bank to be shown as the consignee. As the AWB is not a document of title, this is of no value, and only serves to confuse things."

In your posting above you said"there are circumstances where banks consider it prudent to gain direct control of the goods and, in the case of air freight, this should be done by consigning the goods to themselves. This then gives the bank the option to divert the delivery of the goods as it sees fit"

I think there is some inconsistency here. When banks are financing imports and shipments are being made under an air transport document banks often find it prudent to have the goods consigned direct to themselves.

Yes, you did make a comment from the floor at the IIBLP and it is true that there was no response.



[edited 4/25/01 9:41:15 PM]

[T.O.Lee]

I was in the IIBLP forum in Dublin. I wished I could comment on this issue but I couldn't. I did not make any comment because I was not given the microphone in many occasions although I kept raising my hand. So after a few trials, I gave it up!

I tried to write further but I was told by the pop up message that the cache was full. That is why I edit so many times in each message. This is really irritating.

Making a "TO ORDER" AWB is absolutley wrong. A CDCS banker should not have done this. A "To Order of Issuing Bank" BL only gives a bank virtual comfort. It may expose the bank, once it claims to be a consignee, to many risks attached to a consignee, for example, paying heavy demurrage, huge cleaning fees for poluting the harbour due to crude oil spillage, claims by other cargo owners for contaminating their cargoes, so on and so forth.

"To order of shipper and blank endorsed" (created by some smart maritime lawyers for protecting the bank) is a much better alternative to achieving the same results.

Please excuse me that I cannot continue this complicated subject here as this needs a very lengthy explanation.

We are from www.tolee.com

[edited 6/20/01 5:59:26 PM]
[edited 10/26/01 3:26:34 AM]

[PavelA]

I am a bit disappointed that interesting debate ended in confusion and diversion. I agree with above that AWB consigned to the issuing bank is very standard feature. Also I agree with statement that to require the AWB to be consigned to the order is not correct. Anyway as AWB is not negotiable document of title, I think that this “to the order” will not be given any effect and the AWB as such will be normally treated as consigned.

I see the last comments by T.O.LEE as not applicable as they seem to be related to different mode of transport then air.

Pavel Andrle

[edited 8/30/01 7:38:47 PM]

[hatemshehab]

A STATEMENT OF CONFESSION

I should support the comments given and thank Mr. Bacon for raising this issue. What I have seen is the same thing that Mr. Bacon has pointed out lately in his query. Many a bank require AWB made to order, simply because they do not issue delivery order as Mr. AbulkaderB has stated. On the contrary, they endorse it like they endorse the negotiable bill of lading. I have seen this not in one bank but in more that ten banks in my own eyes.

The funny thing is not this but some of these banks although hiding behind the
Concept of protecting themselves from the applicant’s taking delivery of the cargo, they require 100% cash collateral on such L/Cs. So your issue Mr. Bacon is not simple as it might appear, it really requires a lot of education and feedback on the part of bankers as well as transport professional.

Since my statement is for confession only I will stop here asking for forgiveness from my fellow bankers for this innocent one.