When the LC Calls for a Delivery Order under Ex-Works — What’s the Catch?

Intro:

Some LCs can look perfectly fine on paper — until you notice a small but crucial detail that could turn the whole deal upside down. In this case, it’s an Ex-Works shipment tied to a Delivery Order (D/O) instead of a Bill of Lading. Sounds harmless? Not quite. Let’s unpack it.

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Question:

Dear Mr. Old Man,

Greetings. Hope this email finds you well.

Applicant is in Turkey.

Beneficiary is in Singapore.

Usance term: 90 days from shipment date.

LC terms:

• Ex-Works Incoterms
• Delivery Order
• Fields for Port of Loading and Port of Discharge

Please advise if the D/O is acceptable as a mode of transport document and whether there’s any risk of non-payment by the applicant.

Since the D/O is required instead of a Bill of Lading, should the LC fields for port of loading and discharge be removed by the issuing bank?

Regards,

Cham Tau

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Answer:

Dear Cham Tau,

1. Why Delivery Order (D/O)?

Under Ex-Works, the seller (beneficiary) only needs to make the goods available at their own premises, ready for pickup by the buyer (applicant). So, the LC would normally not require a transport document such as a Bill of Lading.

In practice, however, there are two possible scenarios:

• The seller may, at the buyer’s request, help arrange shipment with freight for account of the buyer. In that case, a Bill of Lading may still be available and required under the LC.
• But if the buyer or the buyer’s forwarder collects the goods and arranges shipment directly, the seller will not have access to the Bill of Lading, since the transport contract is between the forwarder (or buyer) and the carrier.

In the latter situation, a Delivery Order (D/O) may be issued by the carrier or forwarder to the consignee — but a D/O is not recognized as a transport document under UCP 600, and therefore should not be required or accepted as one under the LC.

In your case, the buyer may have authorized a freight forwarder to collect the goods and handle the shipping — including signing the carriage contract with the carrier.

Note: A Bill of Lading may show any party as the shipper, not necessarily the seller. So even if the beneficiary’s name does not appear as shipper, the Bill of Lading can still be acceptable under UCP 600, provided it otherwise complies with the LC terms.

2. Nature of the Delivery Order

A D/O is a release document, not a transport document. It simply authorizes the consignee to take delivery after the carrier has received the Bill of Lading and completed transport. Under UCP 600 Articles 19–25, a D/O is not recognized as a transport document.

There are two common types:

• D/O issued by the shipping line:

The shipping line issues it to the forwarder, who may then issue another D/O to the consignee. When the consignee receives both the D/O and the original Bill of Lading, they can take delivery of the goods.

• D/O issued by the forwarder:

If the forwarder issues the D/O but isn’t the one who issued the Bill of Lading, the consignee can’t take delivery with that D/O alone — other supporting documents are required.

3. LC terms

Since the D/O is not a transport document covered under UCP 600 Articles 19–25, it shouldn’t be accepted as one under the LC.

There’s also no need to remove the “Port of Loading” and “Port of Discharge” fields, as they help define the transport route for the forwarder’s contract with the carrier.

4. Risk of non-payment

Under an LC, it’s the issuing bank — not the applicant — that must honour payment if the documents comply. The beneficiary’s risk arises only if their presentation is non-complying.

Once the goods leave the seller’s premises under Ex-Works, they have little control left.

If you’re the beneficiary, better take a close look at this LC — or maybe even think about switching to a safer method of payment before shipping anything.

Best regards,

Mr. Old Man