Consignee on a Certificate of Origin When the Bill of Lading Is Endorsed to the Issuing Bank

One of the less obvious issues under ISBP 821 concerns the consignee shown on a certificate of origin when the letter of credit requires a bill of lading to be issued or endorsed to the order of the issuing bank.

Does it matter if the bill of lading is originally issued to the order of the beneficiary and only later endorsed to the issuing bank? Can the certificate of origin still show the beneficiary as consignee?

The following question illustrates this practical issue.

Question

Dear Mr. Old Man,

I hope this message finds you well.

I am reaching out with a technical question regarding an LC transaction, and I would greatly appreciate your insight.

The scenario involves the applicant, G, the beneficiary, T, and the issuing bank, C. The LC requires that the charter party bill of lading be “issued or endorsed to the order of Bank C.” In this case, the B/Ls were originally issued “to the order of T” and subsequently endorsed to the order of Bank C. Meanwhile, the certificate of origin (C/O) shows the consignee as “to the order of T.”

Given these facts, what would be the appropriate consignee to indicate on the certificate of origin? Should it be Bank C, the applicant G, or simply “to order” to comply with the LC, or is it acceptable for “to the order of T” to be shown in this situation?

In addition, does the endorsement of the B/L have any impact on the application of ISBP 821 paragraph L5?

Thank you very much for your time and for sharing your expertise. I look forward to your views.

Best regards,
S. Aprea

Answer

Dear Simone,

Thank you for your question.

Although the credit requires the bill of lading to be issued or endorsed to the order of Bank C, a bill of lading originally issued to the order of T and subsequently endorsed to the order of Bank C is acceptable.

ISBP 821 paragraph L5 provides that, where consignee information is shown on a certificate of origin, it must not conflict with the consignee information in the transport document. However, where the credit requires a transport document to be issued “to order,” “to the order of the shipper,” “to the order of the issuing bank,” “to the order of the nominated (or negotiating) bank,” or “consigned to the issuing bank,” the certificate of origin may show as consignee any entity named in the credit except the beneficiary. Where the credit has been transferred, the first beneficiary may be shown as the consignee.

Accordingly, in your scenario, the certificate of origin may show as consignee:

• the applicant, G; or
• the issuing bank, Bank C.

It would also be acceptable for the certificate of origin to state “to the order of Bank C” as the consignee.

However, showing “to the order of T” would not comply with ISBP 821 paragraph L5 because the beneficiary may not be shown as the consignee in these circumstances, even though the bill of lading was originally issued to the order of T and later endorsed to Bank C. The subsequent endorsement of the bill of lading does not alter the application of paragraph L5.

The determining factor under paragraph L5 is the requirement of the credit, not the sequence of endorsements on the bill of lading. Once the credit requires the transport document to be issued or endorsed to the order of the issuing bank, the beneficiary is excluded from the list of acceptable consignees on the certificate of origin.

Best regards,

Mr. Old Man