AIRWAY BILL CONSIGNED TO THE ISSUING BANK

QUESTION

Dear Mr. Old Man,

We signed a contract to import goods from USA with the following terms:

CIP Noi Bai, Vietnam

Goods shipped by air

Payment by LC

We are preparing an application for issuance of LC and our bank (ABC Bank) requests us to include, among other documents required for presentation, an airway bill worded as follows:

ORIGINAL OF CLEAN AIRWAY BILL ORIGINAL NO 3 (FOR SHIPPER/CONSIGNOR) CONSIGNED TO ABC BANK MARKED ”FREIGHT PREPAID” AND NOTIFY APPLICANT WITH FULL NAME AND ADDRESS.

As far as I know, airway bill is not a document of title, hence, it cannot be transferred by endorsement.  Please let me know if ABC Bank’s requirement is correct.

I appreciate your early answer.

Best regards,

TC

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ANSWER

Hi,

It is true that an airway bill is not a document of title, hence, unlike bill of lading, it is not transferable by endorsement.

If an airway bill is consigned to the issuing bank, the issuing bank will not endorse the airway bill but issue a delivery authorization to enable the applicant take delivery of the cargo once the applicant has fulfilled his obligation under the contract for issuance of LC, i.e., to deposit funds (in case the import transaction is self-financed) or to provide signed promissory note to the issuing bank (in case the import transaction is financed by the issuing bank) to cover the payment.

If at the time of applying for issuance of LC the applicant deposits funds 100% to secure the LC payment, the applicant can require an airway bill to be consigned to itself,

So now you can answer your question yourself.

Kind regards,

Mr. Old Man