Endorse or Authorize? Understanding What Happens When a “To Order” B/L Is Endorsed Straight

In practice, many Bills of Lading start out negotiable — issued “to order” — but later become straight when a bank or shipper endorses them to a named consignee.

This often raises an important question:

 Can the named consignee endorse the bill onward to a new buyer, or must they authorize that new buyer directly?

 Let’s look at a real-life case from Tran Linh Chi.

QUESTION

Dear Mr. Old Man,

We have a Bill of Lading with the details below:

• To order of: Bank A
• Notify Party: B

The Bill of Lading has been endorsed by Bank A to B, and the shipment has already arrived at destination. Now B wants C to be the consignee on the Bill of Lading.

How should B proceed?

1. Should B endorse the bill to C?

If Bank A endorsed it as “Delivery to B,” can B further endorse it to C?

2. Should a switch bill be issued?

Which documents or books should I read to understand more about this issue?

Thank you very much.

Best regards,

Tran Linh Chi

_________

ANSWER

Dear Chi,

Thank you for your question.

When a bill of lading is issued “to order”, the party in whose favor it is issued may endorse it to another party, and that new party may continue the chain of endorsement.

However, once a bill of lading is made out straight, or endorsed straight to a specifically named consignee (for example: “Delivery to ABC Company”), the document becomes non-negotiable. At that moment, the chain of endorsement stops.

A straight bill of lading cannot transfer title by endorsement, regardless of what someone writes on it.

Only the named consignee can instruct the carrier on delivery.

In your specific case

Bank A endorsed the bill of lading with the instruction:

“Delivery to B.”

This endorsement converts the bill into a straight bill of lading.

Therefore:

B cannot endorse the bill of lading to C

Any such endorsement would have no legal effect.

B must authorize C to take delivery

B should issue written authority to the carrier, such as:

• a delivery order, or
• a letter of authorization instructing the carrier to release the goods to C.

This is the legally correct method.

About switch bills

A switch bill may be requested from the carrier, but issuing a switch bill depends on:

• the carrier’s policy,
• the shipper’s consent, and
• the risk of misrepresentation.

It is not required in your situation; authorization from B is normally sufficient.

Where to read more

For further guidance on endorsement and consignee details, please refer to:

• ISBP 821, paragraphs E12 and E13

These sections explain how straight and order bills are interpreted under documentary credit practice.

I hope this clarifies your concern.

Best regards,

Mr. Old Man