Scroll to top
© 2020, NAU Pte Ltd | All Rights Reserved

Bills of Lading – NVOCC’s


Jagan - May 12, 2022 - 2 comments

  1. A Bill of Lading (“B/L”) is perhaps the most important shipping document given that it facilitates the transfer of title to the cargo. While the B/L is generally considered to have three functions (Receipt, Evidence of a contract of carriage and Document of title), there are other possible functions including the Statement of Factsi. The question is who is entitled to issue a B/L? In the article, Freight Forwarder’s Bill of Lading: Are they Bills of Lading?ii, Dr Kasiiii argues that a Bill of Lading can only be issued by “a sea carrier in his capacity of carrier”. Dr Kasi cites both the scholarly article of Schmitthoffiv and the case of The Juliav and concludes that B/L’s issued by NVOCs are an anathema and have caused severe commercial problems and should be statutorily controlled. We do not quite agree with his comments and would instead prefer for the shipping market to arrive at the solution by themselves.
  2. Assuming that “B/L’s” issued by non-sea carriers (say NVOCC’s) are not considered B/L’s, then such carriers could easily avoid the application of the compulsorily applicably cargo conventions such as The Hague or The Hague Visby Rules given that Art 1(b) of The Hague / The Hague Visby Rulesvi only apply to contracts of carriage covered by a bill of lading or any similar document of title. Given that these B/L’s, as argued by Dr Kasi, are not documents of Title, the cargo interests would then be worse off than the present situation. We believe that this is detrimental to the development of trade and instead submit that if a document fulfils the three functions of a B/L, then it is a B/L basis the well-known elephant test – it is difficult to describe it, but you know it when you see itvii.
  3. The way the trade has developed is that Owners used to initially operate their vessels in various markets (including Liner and Tramp). As time went by, some Owners ceased operating their own Vessels and instead preferred to charter it off to others, who may well be other Owners/Operators involved in the Liner Trade. While the Operators could issue Owners Bills of Lading for the shipments (as is generally the case for Bulk shipments), they preferred to issue their Own Bills of Lading to ensure better marketability of their Liner services. These Bills of Lading had a Logo/Symbol together with the name of the Carrier. This led to the development of the House Bills of Lading (“HB/L’s). On the other hand, when it was not necessary to issue such HB/L’s such as in the Bulk trade, charterers preferred that the Owners issue their B/L’s or instead issue such B/L’s as agents of the Owners. These B/L’s issued were “neutral” in nature i.e., they had no logoviii given that Owners were not selling any specific service to the market.
  4. Owner operatorsix also preferred to own/register their vessels as different entities to ring fence their assets. Additionally, some Operators would enter into vessel sharing arrangements with other operators such that they seldom have the control necessary such as propounded in Dr Kasi’s article i.e., possession. This being the case, we submit that there is no actual difference between a Shipping Line who is a VOCC and a NVOCC. In fact, in some trades/sectors, all the liner vessel operator’s act as NVOCC’s given that they all use third party feeders.
  5. Given the above, we submit that it is rarely possible for cargo interests to arrest a vessel to pursue their claim, unless the loss is caused by the fault/negligence of the vessel and in which case some jurisdictions do entitle a direct right of actionx against the vessel. Instead, the cargo interests would have to pursue the carrier in a competent jurisdiction. A common comment often repeated is that cargo interests would have more comfort with a big Container Operator, a Liner Operators who operates vessels (such as the big shipping lines) instead of of NVOCC’s. The fact is that size is not an indication of reliability for example, big Container Operators have also collapsed, such as Dongama, Hanjin Shipping and will continue to do so as this is a result of market forces. We submit that the the reason why cargo interests choose NVOCC’s (or say small container operators) is because of the flexibility and the service offerings which is not provided by the bigger operators. The choice should therefore always be with the users as to whom they wish to engage instead of focussing on “size”. If a cargo interest is not comfortable to engage a NVOCC, they have the choice to choose say a VOCC.
  6. It is often common practice to refer to Bills of Lading issued by Shipping Lines as Master Bills of Lading (“MB/L”) and those issued by Forwarders/NVOCC as HB/Lxi. As explained in 3 above, any B/L which displays a Logo is a HB/L (as it promotes their House). Given that Shipping Lines themselves load their containers on board feeders, they would themselves be receiving B/L’s from the feeder operators. While Shipping Lines may prefer to make a distinction in terminology by calling their B/L as Master B/L’s, say for better marketing purposes, the fact is that for a cargo interest, there is no difference as the document issued as a B/L issued by a VOCC or a NVOCC would fulfill all of their requirements. Accordingly, it would be preferrable to call the various B/L’s as overlying and underlying B/L’s, with the crucial difference being that the underlying B/L’s would be fulfilling all of the three functions i.e., Receipt, Document of Title and Evidence of contract of carriage.
  7. To conclude,
    1. we admit that the development of the B/L has been market driven. Accordingly, it would be best for the market to continue further development instead of tinkering it, say by legislation, and which may stifle both creativity and flexibility.
    2. it would be preferrable to give the same respect to B/L’s issued by NVOCC as those issued by Vessel Operators. We believe that there are enough examples of bad apples occurring both at the  NVOCC’s and VOCC’s. If the market has any specific concerns with any of the NVOCC’s or for that matter any VOCC’s, the market should correct this by taking action and which may include absence of  support.
    3. participants in the shipping business are not naïve and therefore if they choose to engage NVOCC and VOCC’s without conducting any background search, then they should do at their peril. 

      iSee our earlier article, Bills of Lading – one more function! 
      iiThe article can be viewed at https://thac.or.th/bills-of-lading/
      iiiDr Arun Kasi is a well-known Malaysian Lawyer involved in the maritime field. He has recently authored The Law of the Carriage of Goods by Sea published by Springer.
      ivAs stated in Dr Kasi’s article – CM Schmitthoff, ‘The Development of the Combined Transport Document’ in C-J Chen (ed), Schmitthoff’s Select Essays on International Trade Law (Dordrecht: Martinus Nijhoff Publishers, 1988), p. 376.
      vAs stated in Dr Kasi’s article – [1949] AC 293 (UK HL).
      vi
      http://www.admiraltylawguide.com/conven/haguerules1924.html
      viiCadogan v Morris [1998] EWCA Civ 1671).
      viii
      For instance, the Congen B/L 2016 which is issued pursuant to a Charterparty.
      ix
      As an example, Maersk Line operates approx. 708 vessels. They issue Maersk B/L as Mærsk A/S trading as Maersk Line of 50 Esplanaden, DK-1098, Copenhagen K, Denmark. We have a conducted a search in Equassis data base and which reveals more than 375 ships with a Maersk name and 51 Maersk Companies. However, we have not been able to sight Maersk A/S as being the registered owner of any these vessels.
      x
      For instance, the Admiralty jurisdiction of the English Courts as provided under S 20 of the Senior Courts Act 1981
      xiSee article published on “Difference between House bill of lading and Master bill of lading” published at Shipping and Freight Resource, an industry blog maintained and curated by Hariesh Manaadiar since 2008.

Related posts

2 comments

  1. M.S. Vinod Kumar

    Very informative ant well-researched article

  2. Valuable….. extremely useful !!!

Post a Comment

Your email address will not be published. Required fields are marked *