Indemnity Insurers Warn Against Inappropriate Release of Cargo Against Bills of Lading

WORLDWIDE – Professional indemnity insurers the International Transport Intermediaries Club (ITIC), part of the Thomas Miller group, has issued advice that warns port agents of issues with receiving original bills of lading during an unprecedented episode in global commercial history.

With a billion people confined to their homes it may be the case that, because of lockdown or delivery problems, port agents may be asked by consignees to release goods to them without providing a bill of lading in return.

In the instance that the original bills of lading remain with the loading port agent ITIC has already set out guidance in such a situation in its ‘Telex Release’ procedure (remember those days?). Telex release is the industry term for the release of cargo at one port when the original bill of lading has been surrendered at another. Although this is still referred to as a Telex release, today the release is almost always made by e-mail. Telex release is a normal part of liner shipping.

The shipper, or a forwarder, or an NVOCC may choose to surrender the bills of lading to the carrier’s agent in a port other than the discharge port. The carrier’s agent has a duty to collect the original bills of lading before releasing cargo and the bills of lading are normally surrendered to the discharge port agent, but it is not necessary for this to be the case. However, collection by another agent does need to be handled carefully.

The bills of lading are surrendered by the shipper or forwarder or NVOCC to an agent in a port other than the discharge port (usually, but not always, the agent at the port of loading) with an instruction to release the cargo to the consignee or a named party. Once the original bills of lading are in the hands of the Third Country Receiving Agent he sends a ‘Telex release’ to the discharge port agent confirming that the full set of original bills of lading have been surrendered and that the cargo can be released to either the consignee on the bill of lading or some other party authorised by the shipper or the consignee (dependant on whether it is negotiable or non negotiable).

There are two main problems with Telex releases. The first is carelessness in the way that they are worded and dealt with. Considering the value of some of the cargoes which are released in this way, the release instructions which are sent between agents are often extremely casual. There have been several claims reported to ITIC where the Releasing Agent has taken an ambiguously worded message from a Third Country Receiving Agent to be a release, when it was not (usually because the freight has not actually been paid for).

The second problem is of course our old enemy, email fraud. ITIC recommends that agents check the authenticity of messages from other agents to release cargo. This recommendation was based on previous experience of forged faxes ordering Telex Release. ITIC has recently received several claims involving Telex release by faked e-mails. One should remember some of these fraudsters are expert at crafting documents to look totally legitimate. One should always confirm the source is genuine.

The pandemic has of course been a game changer, offering even more increased risk, particularly the chance of goods being released incorrectly. The situation where the load port agent does not actually have the original bills of lading in its possession needs careful handling and ITIC has set out the following steps for port agents to take in order to protect themselves:

• Obtain written permission from the principal to release any cargo without receiving a bill of lading in return
• Ask the principal if a Letter of Indemnity from the consignee is required
• Check all freight has been paid

The principal may ask the agent to check with the shipper (or the ‘to order party’ if the original shipper has already sold the goods on) as to whether they have released the bill of lading to the consignee or to the party requesting the goods. This will help avoid releasing the goods to a fraudulent party. The agent should ensure they pass all relevant information to their principal for review and approval.

Readers are advised that, should they find themselves in this situation, they refer to the full advice from ITIC which can be seen HERE.