Should an Issuing Bank Require a Master Bill of Lading?

In practice, many banks and traders get confused between the Master Bill of Lading (MBL) and the House Bill of Lading (HBL). The question is: should an issuing bank insist on receiving an MBL under a Letter of Credit?

QUESTION

Thanks for your valuable trade related write up.

I’m from Pakistan I need your answer to the following question:

Why bank demand for master BL and do not reply upon house BL?

= Mohammad  =

__________

ANSWER

Dear Mohammad,

A Master Bill of Lading (MBL) is normally issued by the shipping line (or carrier) to the freight forwarder or NVOCC who booked the space. In most cases, it is made out “to order” of the forwarder/NVOCC, giving them control of the goods vis-à-vis the carrier. The forwarder then issues a House Bill of Lading (HBL) to the actual exporter/shipper, and it is this HBL that connects to the commercial transaction and, in many cases, the LC.

If the MBL is issued straight (to a named consignee), it is non-negotiable and delivery is made only to that party.

In LC practice, however, the issuing bank should not require a Master BL because:

• The MBL reflects the contract of carriage between the carrier and the forwarder, not between the carrier and the actual exporter/importer.
• The HBL is the document tied to the sales contract, exporter, importer, and the LC. That is the document banks should expect under an LC.
• If the bank mistakenly requires an MBL, it may receive a document naming the forwarder as both shipper and consignee—providing no security or control for the bank or the applicant.

Recommendation:

The LC should simply call for a “Bill of Lading” made out to order of the issuing bank (or as otherwise appropriate), without specifying MBL or HBL. If a forwarder is involved, the exporter will present the HBL, and the bank must accept it provided it complies with UCP 600.

Best regards,

Mr. Old Man