Bill of Lading Blank Endorsed by the Shipper but Subsequently Endorsed by the Presenting Bank: Is It LC Compliant?

Letters of credit frequently require a bill of lading (B/L) consigned “To order” and blank endorsed. But what happens if, after the shipper has blank endorsed the B/L, the presenting bank subsequently endorses it “To order of DEF Bank”? Is such an endorsement legally valid? More importantly, does the document still comply with the LC requirement?

The following question explores the distinction between the legal validity of an endorsement under commercial law and documentary compliance under UCP 600.

Question

Dear Mr. Old Man,

Sorry to trouble you with a query. I would appreciate your advice.

An LC requires the bill of lading to be consigned “To order” and blank endorsed.

The bill of lading presented shows the following:

• Shipper: ABC CO. LTD.
• The B/L was blank endorsed by ABC CO. LTD.
• Elsewhere on the back of the B/L, the presenting bank from India had stamped and signed stating “To order of DEF Bank.”

Does the endorsement by the presenting bank have any validity? Can the issuing bank raise a discrepancy on the ground that the B/L is not blank endorsed?

Do we have any ICC Opinions in this regard?

Best regards,
Bibin Benedict

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Answer

Dear Bibin,

Thank you for your question.

Under commercial and maritime law, a bill of lading carrying a blank endorsement becomes a bearer document. This means that physical possession constitutes prima facie evidence of ownership, giving any legitimate (bona fide) holder the right to transfer it.

To transfer ownership to another party, the current bona fide holder generally has two options:

1. Physical delivery: Because it operates as bearer paper, simply delivering the original blank-endorsed B/L is sufficient to transfer title.
2. Further endorsement: The holder may endorse the B/L to the order of a specific party.

Accordingly, the endorsement made by the presenting bank to the order of DEF Bank may be legally valid under the applicable commercial and maritime law.

However, this is a separate issue from documentary compliance under the letter of credit.

In your case, the credit requires a bill of lading consigned “To order” and blank endorsed. Although the B/L was initially blank endorsed by ABC CO. LTD., it was subsequently specially endorsed by the presenting bank to the order of DEF Bank. Consequently, the document presented is no longer a bill of lading that is blank endorsed, as required by the credit.

Accordingly, the endorsement appearing on the B/L conflicts with the requirement of the credit, and the issuing bank would be justified in determining that the presentation is discrepant under sub-article 14(d) of UCP 600.

I am not aware of any ICC Opinion that specifically addresses this scenario.

Best regards,
Mr. Old Man