To switch and how to switch – Switch Bills of Lading, carriers, traders and banks

This paper was presented by Mr Charles Debattista at ICMA XXII Singapore. He is a Barrister and Arbitrator practising from 36 Stone in London in the areas of shipping, international trade and arbitration and  spends about 65% of his time as a barrister and 35% sitting as an arbitrator under various institutional rules and ad hoc. We thank him for allowing us to post his paper for the wider dissemination as this topic would be of interest to our readers. 

            I. Introduction

1. 1. It is not uncommon for Bills of Lading originally issued on the shipment of the goods to be “switched”, i.e. for substitute bills of lading to be issued avowedly in their stead. It is that last phrase“avowedly in their stead” that causes many of the issues which arise when bills of lading are switched– what happens (or should happen) to the original bills, both as a matter of fact and as a matter of law? Do the new bills, as it were, “take over” from the old bills – and if so, what effect does the practice of switching have on the many parties who may come into contact with either the old or the switch bills?
   2. The answers to these questions, such as exist, are Rubic’s cube like in their complexity, which is not surprising. It is sometimes said that if charterparties are from Mars, bills of lading are from Venus: charterparties are only one thing to their two parties – a contract. On the other hand, bills of lading are innately multi-taskers, performing different and nuanced functions at different times and between many different parties having different (and at times conflicting) interests under different contracts, i.e. contracts of carriage, contracts of sale, and letters of credit. If a bill of lading is more complex than a charterparty, having two bills of lading issued in the same shipping operation necessarily raises difficult issues across each of those three contracts.
   3. This paper looks at switch bills of lading from those different perspectives and within the contexts of those different contracts, focusing on the various disputes which this very common practice may and does give rise to from time to
   4. This is a particularly good venue in which to cover this ground, given that it is only just over two years ago that Justice S Mohan delivered a signal decision providing a masterly analysis of the characteristics and legal effects of switch bills in the case of The Jeil Crystal reported at [2024] SGHC 74, [2025] 2 Lloyd’s Law Rep 299. We shall return to that case towards the end of this paper. Suffice it here to say that Justice S. Mohan’s judgment gives a salutary lesson to banks dealing with original bills which are then switched: the issuing bank there, the Banque Cantonale de Geneve, saw its security in the goods go up in smoke when goods were delivered against a letter of indemnity after the original bill was switched. Of that, later, when we come to look at switch bills in the context of letters of credit.
      
      II. Why are bills of lading switched?
   5. As indicated earlier, we shall be looking at switch bills through three different lenses, the contract of carriage, the contract of sale and letters of credit. Before we look through these three different prisms, however, a factual preliminary: why are bills of lading switched?
   6. The simple answer to that question is because one of the cargo parties to the contract of carriage, whether an original party or a party in string, and whether or not the contract of carriage is contained in a charterparty, needs to have text contained in the originally issued bill of lading changed.
   7. And why might that be? The following are only some examples:
      1. changing the consignee: it may be that the original bill names a buyer as consignee, but, once a letter of credit is opened, or once the letter of credit is carefully scrutinised by the seller before tender of documents for payment, the seller now realises they need a bill of lading naming the issuing bank as the consignee.
      2. changing the shipper: a buyer might not wish to announce to the world from whom they bought the goods, whether for purely commercial or for sanctions-evading reasons.
      3. changing load or disport: for much the same variety of reasons, cargo-interests may need to change either the load port or the discharge port.
      4. changing the quantity of goods covered: a seller who shipped 10,000 metric tonnes of a given commodity now needs two bills for 5,000 metric tonnes apiece which are now sold in transit to each of two buyers.
      5. needing a reference to another commercial document in the bill of lading: a buyer selling in string may be asked by its on-buyer to ensure that the bill of lading refers, for example, to a particular type of phytosanitary certificate to which no reference was made in the original bill of lading.
   8. If all that is needed is one specific alteration to data on the original bill of lading, why can that not be satisfied through a simple expedient, the way one normally alters or corrects documents. Why not simply manually alter and initial the particular item in need of change?
   9. Where English law governs the bill of lading, there is authority that a bill of lading thus altered, even if signed or initialled, would not pass muster in international trade. In SIAT di dal Ferro v Tradax [1978] 2 Lloyd’s Rep 470 at 492, [1980]1 Lloyd’s Rep 53, Donaldson J stated that an altered bill of lading was not one which was “reasonably and readily fit to pass current in commerce”… “at least if the alteration is other than the correction of a minor clerical error, the correction being signed or initialled before the bill is issued.” (emphasis added).
   10. It will be readily appreciated that none of the examples set out above relates to a minor clerical error; neither could the necessary alterations have been made before the issue of the first set of bills of Consequently, in each of the above cases, the need is for an entirely new set of bills of lading, a switch bill of lading intended to replace the original one.
   11. This practice, necessary as it is to accommodate the moving requirements of international trade, is not without its risks, risks which the various players can only avoid or minimise through the sensitive handling of these documents, both the original and the switch bill. The practice of switching bills has been acknowledged by judges, albeit with less than unbridled Thus, for example, Longmore J, as he then was, said in The Atlas [1996] 2 Lloyd’s Rep. 642 at644: “No doubt this provision for a second set of bills of lading to come into existence was agreed for not unreasonable commercial motives but it is a practice fraught with danger; not only does it give rise to obvious opportunities for fraud (which is not suggested in this case) but also, if it is intended that the bills of lading should constitute contracts of carriage with the actual owner of the ship (as opposed to any disponent owner) the greatest care has to be taken to ensure that the practice has the shipowner’s authority.”

       III. Switching and the carriage contract

   12. The carriage contract is, of course, the first home, as it were, of the bill of lading and it is trite that the bill of lading can perform any and all of three functions under that contract: first, it is either evidence of or constitutes the contract of carriage itself, depending on who holds the document and when; it is a receipt for the goods shipped; and it can act as a so-called document of
   13. The practice of switching bills of lading raises issues under each of these functions: is there a contractual right to demand the issue of a switch bill of lading; what must the switch bill of lading say about the goods – and when; and what happens to the rights symbolised by the original bill when that bill is switch?
   14. It is the last of those questions which has raised the most burning problems, particularly in the context of bills of lading held by banks as security for payment of sums owed to them under letters of credit. The impact of switching on this third and most important function of the bill of lading as a document of title will consequently be dealt with when we look at the impact of switching on letters of credit, a matter which exercised the High Court here in Singapore in The Jael Crystal [2024]SGHC 74, [2025]2 Lloyd’s Rep. 299. For the present, is there a contractual right/obligation to switch; and secondly, what impact does switching have on what the bill of lading says about the goods on shipment?
   15. Is the carrier bound to switch? If a carrier is approached by a cargo-interest with a request – or sometimes an instruction – to switch bills of lading, is the carrier bound to say Yes of course? Carriers will generally wish to accommodate their client shippers and would generally wish to accede to such a request. A carrier aware of the risks and the complexities involved in switching might, however, have some misgivings about doing so: but is there actually an obligation to switch on demand?
   16. Money might turn on whether the carrier is bound to switch because a refusal to switch might well cause loss to the requesting cargo-interest. Consider, for example, a seller of goods/beneficiary under a letter of credit whose (original) bill of lading is rejected by a confirming bank under a letter of credit which requires tender of a bill of lading naming Singapore as the load port rather than, say, Hong Kong? The only way the seller/beneficiary can be paid under the letter of credit is by tendering a new bill of lading naming Singapore rather than Hong Kong as the load port. Yet the carrier hesitates, possibly just before the expiry date of the letter of credit. To spice things up a bit, imagine the market for the shipped commodity is falling and the seller loses out not only by failing to get paid under the letter of credit through timely and compliant presentation, but by realising less on the goods shipped under an alternative sale.  Is the seller entitled to recover those losses against an unco-operative carrier?
   17. Two situations need to be distinguished:
       1. charterparties imposing a duty to switch on demand: If the seller/shipper making the demand is a charterer, the charterparty may itself give the charterer an express right to request, and impose upon the owner an express duty to issue, switch bills. If the owner has assumed such an obligation towards the charterer, then switch the carrier must, as a matter of simple contract. However, that express term in the charterparty states the position as between owner and charterer: it gives no comfort to the owner who might well face attack later by third parties, possibly as yet unknown (think endorsees, think banks). An owner expressly bound to switch bills (arguably by a clause imposing a duty to sign a bill of lading “as presented” – and presented, and presented?) ought also to impose on the charterer thus indulged an express duty to indemnify the owner for any losses resulting from the switch.
       2. Hague-Visby Rules, article III.3: What if there is no charterparty, or the charterparty makes no mention of switch bills, and the contract of carriage is governed by the Hague-Visby Rules? Article III Rule 3 of those Rules requires the carrier to issue a bill of lading “[a]fter receiving the goods into his charge … on demand.” Is this a one-off duty, forever discharged once the original bill is issued, and never to be repeated through a subsequent demand for a switch bill? Or does the shipper have a right to demand, and then to demand again? There does not appear, at any rate in English law, to be any authority answering this question. A literal constructionof the Article would suggest that it is a one-off duty: the duty arises on receipt of the goods by the carrier (which happens only once) and the singular “demand” is used, rather than “any” demand. Does this literal interpretation, however, make commercial sense? Given the frequency with which bills of lading are switched, and often (but not always) for good commercial reasons, are we sure this is what we want the Article to mean? In the absence of a court decision on the point, the practical solution (while we watch this space) is for the contract of carriage itself (as opposed to the bill of lading) to make express provision for switching, and/or for the carrier to switch against an LOI.
   18. What should the switch bill say about the goods shipped? The original bill of lading will have been completed, stating the goods to have been shipped in a given quantity, say 10,000 metric tons; or in less than apparent good order and condition, i.e. claused. The shipper now needs two switchbills, each for 5,000 metric tons; or one clean bill of lading. Must the switch bill say exactly what the original bill said about the goods, or can these statements about the goods be replaced in the switch bill? Intuitively one feels that these two examples require different answers, the first example requiring less scrutiny than the second – and this is because the second example may well carry more than a whiff of fraud.
   19. Clean for claused: contract or tort? A consignee or an endorsee taken in by a clean switch bill “covering” for a claused original will have paid the seller/shipper for clean goods against tender of a clean bill of lading. The shortfall between the price paid and the value of the damaged goods will be the measure of its loss, incurred because the clean switch bill falsely reassured the buyer about the value of the goods shipped. What would the buyer’s cause of action be? Does the buyer have title to sue and, if so, what is its cause of action?
   20. There seems little doubt that the aggrieved buyer has title to sue. If it holds the switch bill, that would make it the lawful holder of a bill of lading with rights of suit under the Carriage of Goods by Sea Act 1992 (in the UK).
   21. But where is the carrier’s breach? Is it in the fact of switching itself? Or is it in the falsehood contained in the clean statement as to the apparent condition of the goods on shipment? In the absence of an express clause prohibiting switching, it would be difficult, given the frequency of switching in the trade, to imply a term that bills of lading were simply not to be switched. The real mischief which the cargo claimant seeks to rectify here through a recovery of damages is the misrepresentation on the face of the switch bill of lading rather than very switching of the bill. It would therefore be safer to base the action for damages on the tort of misrepresentation, whether fraudulent or negligent, depending on the requirements for either type of tort in the jurisdiction where the action is brought.
   22. The carrier is somewhat between a rock and a hard place: a blunt refusal to switch may cause trouble with the shipper, commercial, legal or both. On the other hand, switching at the cost of telling an untruth about the goods may expose the carrier to tortious liability to third party claimant interests, that liability being possibly unlimited by the package/unit limits of the Hague-Visby Rule (if misrepresentation is regarded as a type of deviation) and possibly uncovered by its Club (if, as is common, cover is excluded in the case of mis-statements about the goods.)
   23. A practical way out of this conundrum may be for the carrier to switch the bill as requested, but to cover its back by requiring a letter of undertaking or indemnity holding it harmless against any losses resulting from the switch. This may not, however, be as simple an expedient as it sounds. The usual mantra applies, of course: a letter of undertaking is only as good as the undertaker – is the LOI backed by a first class bank under an on-demand bond? Moreover, if it can be shown that the carrier knew the switch bill to be telling an untruth about the goods on shipment, would the LOI be enforceable or would it be tainted by fraud – and therefore unenforceable? Finally, what date (dates?) of issue is the switch bill to carry? What place (places?) of issue and of shipment will the switch bill record? Giving the party requesting the switch all the details (and no more than) it wants on the switch bill might open the carrier to liability for misrepresentation. On the other hand, too much transparency, too many dates and places might end up cluttering the switch bill with too much detail, some of it possibly conflicting, increasing the chances of rejection of the switch bill by a befuddled documents clerk in a bank examining the document when presented under a letter of credit.
   24. Illegality Matters become even more difficult for a carrier if the switch bill is requested in order to conceal an illegality. Examples can be found aplenty: a change of shipment port to conceal breach of an embargo; a change of shipment date for the same reason; a change of consignor or consignee to avoid a breach of sanctions; or a mis-description of the goods shipped in the shipment port that is subject to an embargo; or a mis-description of the goods in order to conceal a prohibited cargo like explosives or munitions.
   25. A duty of due diligence? Why do you want a switch bill? While a switch would oblige the cargo-interest requesting it, the switch does not, of course, free the carrier of any liabilities it may incur in breach of national or international legislation regarding sanctions or the movement of dangerous goods. If the requesting party’s purpose in requesting the switch was to evade such restrictions, then how much of that illegal purpose taints the actual issuer of the switch bill, namely the carrier? Can the carrier simply plead, as it were, the superior orders of the requesting cargo-interest, of whose nefarious purposes the carrier knew little – and wanted to know less? That raises a corresponding question: when faced with a request to switch, is the carrier bound to exercise some degree of due diligence before agreeing to switch? And if so, how zealous need the carrier be? If the duty to ask Why? is pressed too far, would that make the carrier the shipper’s guarantor of good faith or accuracy? Or is the duty to ask, insofar as there is such a duty, lower than that, a duty simply to ask the right questions, rather than keenly to pursue the right answers? 

       IV. Switching and the sale contract

   26. If the carriage contract is the first home of the switch bill, the sale contract is the context within which the switch bill will live, the environment within which the bill will be used, tendered and paid for as a commercial contract between seller and buyer. Indeed, there is a sense in which, although the switch bill is created in the carriage contract, by the carrier on the shipper’s request, the sale contract frequently provides the reason for that request. More often than not, it is the needs of sellers and/or buyers that spawn the demand for the switch bill in the first place.
   27. Once the seller has obtained its switch bill from an obliging carrier, can he tender the switch bill for payment under the sale contract? Is a switch bill “good tender”?
   28. Where the original reason for the request for a switch bill from the carrier was the buyer’s, the question is of course quite academic: a buyer who has asked its seller, say, to switch one bill of lading covering 10,000 metric tons of a commodity for two new bills for 5,000 metric tons, each to satisfy two on-buyers of 5,000 metric tons apiece, is hardly likely to object to the tender of the two switch bills so long, at any rate, as the switch bills comply in all other requests with any documentary requirements under the contract of sale.
   29. Where it is the seller/shipper who needs a switch bill, then the fact that the bill tendered to the buyer is a switch bill does not, in and of itself, make tender a bad tender. Whether it can constitute good tender will depend on the same criteria which would have applied to the original bill of lading: does the switch tender comply with any requirements in the sale contract? So, for example, if the original bill of lading did not contain a reference of a numbered phytosanitary certificate, and the sale contract required the tender of a bill of lading containing such a reference, then the tender of a switch bill containing such a reference would be a good tender, whereas the tender of the original bill would be a bad tender. What matters is not which was the original bill and which the switch bill. What matters is what did the sale contract say about the bill of lading to be tendered, typically in the“Documents” or “Payment” clause in the sale contract – and does the tendered bill comply?
   30. There is, however, one aspect of switch bills which is quite likely to cause difficulties in the context of sale contracts – and that is the date of issue.
   31. The date of issue is, in the absence of clear evidence to the contrary, deemed to be the date of shipment of the goods. Now if the switch bill bears the true date of issue, a date necessarily later than the date of issue of the original bill, what happens if the later date on the switch bill lies outside the shipment period agreed in the sale contract? Would the tender of the switch bill put the seller in breach, a dangerous place to be against a falling market, tempting the buyer to threaten termination for breach of a condition of the contract of sale?
   32. It must be right that such a switch bill, issued as it is after the contractual shipment period under sale contract, constitutes a bad tender, exposing the seller to the risk of rejection. 
   33. A seller requesting the issue of a switch bill would be well-advised, therefore, in order to avoid such exposure, to ensure that the switch bill bears not only the date of issue but also the date of actual shipment, such that the document show on its face that the seller has complied with its duty to ship the goods within the shipment period agreed in the sale contract. Most modern bills of lading do, in any event, particularly in the container trades, carry two separate boxes, one for the date of issue and the other for the date of shipment – in which case the problem does not arise. In the bulk trades, where separate boxes for issue and shipment may not be printed, the seller requesting the switch should ask the carrier for a countersigned date of shipment to be stamped onto the switch bill. 

       V. Switching and the letter of credit

   34. Letters of credit famously perform three functions – and which of them is the most significant will vary according to the credit relationship between the respective banks and the applicant/buyer. At the most basic, the letter of credit simply provides a cross-border conduit for the exchange of money and shipping and other commercial documents. The “credit” part of the mechanism, however, can also facilitate international trade by allowing banks to extend lines of credit to their customer applicants where that applicant does not have ready funds with which to pay the seller before the goods arrive at destination or are sold on to third buyers. The commercial risk is, in effect, borne by the banks rather than the buyer: that risk attracts a premium, of course, through the actual cost to the applicant of the LC. The banks will, however, want to guard themselves against the risk of non-payment – and this is where the bill of lading comes into its own as a security instrument, a document of title which the bank will look to in case its applicant does not make good the sum due under the letter of credit. Conduit, credit and security – these are the three functions performed by a letter of credit and it is through that prism that we now need to examine switch bills: can a switch bill be tendered under an LC; and does a switch bill provide as good as security to the banks as the original bill?
   35. Compliant presentation? The answer to the first question is that a switch bill can validly be tendered for payment so long as it complies with the requirements of the LC and with the UCP600. Given that the document checker is and can only be concerned with whether a bill of lading presented is compliant with the LC and the UCP600, the document checker will not – and cannot – lift the veil, as it were, of the bill of lading presented in order to discover whether it was the original bill or a switch one.
   36. Security? So far, so simple. It is when we come to the second question, security, that things become rather more nuanced – and it is here that banks need to exercise caution lest they lose the security they thought they had in the switch bill accepted on compliant tender. The context in which the problem arises is where the goods are delivered to someone without presentation of the switch bill which is safely held by the bank. The goods may have been delivered to the buyer/applicant or, worse, a to a third party; they could have been delivered against an LOI or, again worse still, against tender of the original bill. If the goods are delivered to the buyer/applicant, there will doubtless be remedies available to the bank under the LC itself. Again, if the goods are delivered by the carriera gainst an LOI, then the bank will have remedies for mis-delivery which the carrier can (hopefully) pass on to the receiver of the goods, if that receiver is traceable, solvent and with assets in an easy jurisdiction. Neither of these paths is easy – and of course both involve the bank in the cost and effort involved in litigation outside the bank’s comfort zone, i.e. an action for misdelivery under a contract of carriage.
   37. Those problems, costly and troublesome as they may be, pale into insignificance, however, when compared to the situation where the goods are delivered to someone against presentation of the original bill of lading. Where that happens, the security the bank thought it had in the switch bill evaporates. This is not so much because a switch bill is somehow a “weaker” document of title because it is a switch bill. The bank’s security evaporates because, in the circumstances here envisaged there simply are simply too many documents of title floating around – and the early bird, the receiver presenting the original bill, has truly managed to get the worm. This is what happened in The Jeil Crystal [2024] SGHC 74, [2025] 2 Lloyd’s Law Rep 299. The claimant bank there, fully aware that a switch bill was to be issued, endorsed the original bill (which had safely been made out to its own order) to the order of its client, the applicant for the LC. The switch bill was issued after that endorsement; the goods were delivered on presentation to the carrier of the original bill,and the bank then sued the carrier for misdelivery, initially as lawful holder of the switch bill, and then by amendment of the pleadings, for breach of an implied duty not to switch without its permission.Justice S Mohan rejected both arguments, which is hardly surprising given that the bank was in effect the author of its own loss: by endorsing the original bill away, it had effectively annihilated the security interest of the switch bill. A salutary lesson, the takeaway from which is that when a bill is switched, all three originals of the first set need either to be surrendered to the carrier on switching, or where the originals are with a bank, to the bank. 

       VI. Conclusion

   38. Switching bills is something most carriers do quite a lot of the time. The justifications are more clearly commercial than they are legal. The practice does involve legal risks, some of which may be guarded against by rigorous tracking of who holds which bill, original or switch, and when, and also through carefully drafted LOIs. The bottom line clearly has to be commercial common sense buttressed by a degree of caution in creating sufficiently strong safety nets against unintended liabilities.