CAN AN AIR WAYBILL BE ISSUED TO ORDER BLANK ENDORSED?

Intro

In documentary credit practice, it is not uncommon to see LC requirements drafted with a strong “bill of lading mindset”, even when the mode of transport is air. One such recurring requirement is the presentation of an air waybill issued “to order” and blank endorsed.

This raises an important question:

Is such a requirement correct, and does it make sense under UCP 600 and air transport practice?

Instead of giving a short yes-or-no answer, Mr. Old Man responds with the following Q&A to clarify the issue.

QUESTION

Dear Mr. Old Man,

I hope you can help me with the following question.

The LC requires the beneficiary (exporter) to present 3/3 original air waybills issued “to order and blank endorsed.”

Is this requirement correct? If not, why?

Thank you very much.

Best regards,

TT

______

ANSWER

Dear TT,

Thank you for your question. This is a classic example of applying sea-transport logic to air transport documents, which often leads to confusion.

An air waybill (AWB) is typically issued in multiple copies. While the first three copies are commonly referred to as “originals,” each copy has a specific purpose for the carrier, the consignee, and the shipper. Unlike bills of lading, however, air waybills are not documents of title.

This distinction is crucial.

A bill of lading is a negotiable document and may be issued:

• “to order”, or
• “to the order of a bank”,

allowing transfer of rights to the goods by endorsement.

An air waybill, by contrast, is a non-negotiable transport document. It does not represent title to the goods and does not function as a document of ownership. Accordingly, it is normally issued to a named consignee, not “to order”.

This principle is also reflected in UCP 600 Article 23, which governs air transport documents. The article does not contemplate an air waybill being issued “to order” or transferred by endorsement in the way a bill of lading is.

In view of the above, an LC requirement calling for presentation of “3/3 original air waybills issued to order and blank endorsed” is not in accordance with standard air transport practice. In normal circumstances, the LC should simply require presentation of an air waybill (typically the original for the shipper) consigned to the applicant.

That said, in real-life practice, some LCs still require air waybills to be issued “to the order of the issuing bank.” When this happens, delivery of the goods is not effected by endorsement of the air waybill, but rather by a letter of authorization issued by the issuing bank in favour of the applicant, authorizing the carrier to release the goods.

In short, while such an LC requirement still appears from time to time, it reflects a misunderstanding of the legal nature of an air waybill rather than accepted air transport practice.

Best regards,

Mr. Old Man