WHETHER THE ISSUING BANK MUST ENDORSE THE BILL OF LADING WHEN RETURNING THE DISCREPANT DOCUMENTS TO THE PRESENTER?

QUESTION

Dear Mr. Old Man,

I’ve been scouring the internet trying to find the right answer, when I found you blog and believe you may be able to help.

We had shipped some Chrome Ore to China under Sight LC. Due to circumstances beyond our control, we could not submit documents within the presentation period. Though buyer was fully aware and gave their verbal approval, once documents were presented they refused the same and tried to negotiate some unacceptable terms.

The LC has expired today, so we are planning to ask the bank to return our documents so we can cancel and reissue the OBL to a new consignee. The BL is consigned ‘To order Bank of China’. Since the LC applicant has refused the documents, can we ask collecting bank to endorse the BL back to us? Or can they just blank endorse it so we can surrender back to carrier and reissue with new consignee details? What happens if they send it back without endorsing it?

Sorry it may be a shipping rather than banking question, but it seemed like you may know the answer.

Thanks in advance.

Bilal Khan

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ANSWER

Hi,

In LC transactions, if the discrepant documents, including the bill of lading made out to the order of the issuing bank, are to be returned to the presenter, the issuing bank may, but is not obligated to, endorse the bill of lading back to the shipper or to the party that has endorsed the bill of lading to the order of the issuing bank (as per ICC Opinion 214).

It may not be  a problem if the full set of original bills of lading issued to the order of the issuing bank is returned  to the presenter whether or not it is endorsed back to the shipper by the issuing bank. The shipping line may agree to issue a new set of bills of lading at the request of the shipper  once all previously issued original bills of lading are returned to the shipping line. You may consult the shipping line that issued the bill of lading on this matter.

Please note you must also request the buyer to return the bill of lading  if 1/3 of the original bill of lading was sent to the buyer.

Although the ICC opinion is that the issuing bank can return the documents as received without endorsing the bill of lading. I believe that the issuing bank should endorse the bill of lading back to the shipper because the issuing bank has requested the bill of lading to be issued to the order of the issuing bank, it must endorse it back to the shipper if it refuses the documents. This argument is not applicable to documentary collections as the collecting bank does not require bills of lading issued to the order of the collecting bank.

Good luck!

Mr. Old Man