Who Is Responsible When an Original Bill of Lading Is Lost, Mislaid, or Destroyed?

(This Q&A is excerpted from a discussion by the Trade Services Update editors (LCM_QUERY 2026-01)

Intro

In documentary credit practice, the loss of an original bill of lading after a complying presentation has been made often gives rise to confusion between payment obligations under a letter of credit and the practical arrangements required to obtain delivery of the goods. Parties may look to Incoterms or the sales contract for answers, while banks focus on UCP rules.

 However, Incoterms govern the transfer of risk in the goods—not responsibility for documents under a documentary credit.

This Q&A, based on practical experience and guided by UCP 600 Article 35 and ICC practice, clarifies:

• who remains responsible for payment under the credit, and
• who may bear responsibility for issuing or applying for issuance of a shipping guarantee or letter of indemnity (LOI) when an original bill of lading is lost, mislaid, or destroyed.

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QUESTION

Dear all,

The following query is circulated for your valuable comments:

QUOTE

If a bill of lading is lost in transit, who would you say is responsible to apply for a shipping guarantee (to guarantee the shipping line for delivery without the original bill of lading)?

I guess it can be both the buyer and the seller – but at the outset the buyer has the “immediate” problem.

However, it may well be determined by the trade terms – and whether the risk (of the goods) has passed to the first carrier (e.g. FOB/CFR). In such case it would logically be the buyer’s responsibility.

Any thoughts from you are highly appreciated.

UNQUOTE

Thanks a lot and kind regards,

Kim

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ANSWER / COMMENT

Dear Kim and all,

This question reminds me of a similar case that occurred at my bank exactly 30 years ago. At that time, letters of credit were subject to UCP 500, which did not contain a provision dealing with the loss of documents in transit between banks.

The case

An LC issued by a Japanese bank was available with any bank by negotiation.

Documents required under the credit included 3/3 original bills of lading made out to order, blank endorsed.

After shipment, the beneficiary presented the documents to our bank. We determined that the presentation was complying and forwarded the documents to the issuing bank by express courier.

After 10 days without receiving payment, we contacted the issuing bank and were informed that they had not received the documents. We then contacted the courier, who confirmed that the documents had been lost in transit.

Through the shipping line, we later learned that the issuing bank had already issued a shipping guarantee in favour of the carrier, enabling the applicant to take delivery of the goods without production of the original bills of lading.

On that basis, we demanded payment from the issuing bank. The issuing bank replied that they would pay only if we issued a letter of indemnity (LOI) in favour of the shipping line, releasing them from their obligations under the shipping guarantee they had issued.

The beneficiary argued that since the documents had been presented to us, and since we had selected the courier, our bank should bear responsibility for issuing the LOI.

Given that the bill of lading was made out to order and blank endorsed, we were concerned about the risks associated with a potential claim by a lawful holder of the bill of lading. Accordingly, we refused to issue the LOI and insisted that the issuing bank honour the credit. Failing that, we indicated that we would refer the matter to the ICC for settlement.

As UCP 500 (1993) contained no article equivalent to Article 35 of UCP 600, we initially lacked a clear UCP provision to rely upon.

Fortunately, during our research we came across an older ICC Opinion issued under UCP 400, which stated, in substance, the same principle now found in Article 35 of UCP 600:

“If a nominated bank determines that a presentation is complying and forwards the documents to the issuing bank or confirming bank, whether or not the nominated bank has honoured or negotiated, an issuing bank or confirming bank must honour or negotiate, or reimburse that nominated bank, even when the documents have been lost in transit between the nominated bank and the issuing bank or confirming bank, or between the confirming bank and the issuing bank.”

We provided this ICC Opinion to the issuing bank. Ultimately, the issuing bank accepted our position and effected payment, although this occurred three months later than usual.

Responsibility for Payment vs. Responsibility for Shipping Guarantee / LOI

1. Responsibility for payment under the credit (UCP 600 Article 35)

Where a complying presentation has been made and the documents are lost in inter-bank transit:

• Loss between the nominated bank and the issuing bank → the issuing bank must honour or reimburse.
• Loss between the nominated bank and the confirming bank → the confirming bank must honour or reimburse.
• Loss between the confirming bank and the issuing bank → the issuing bank must honour or reimburse.

This obligation is mandatory under UCP 600 and is not affected by Incoterms or the sales contract.

2. Responsibility to issue or apply for issuance of a shipping guarantee or LOI

Responsibility for issuing—or applying for the issuance of—a shipping guarantee or letter of indemnity is not mandated by UCP 600. It arises only if delivery of the goods without production of the original bill of lading is sought.

Responsibility in this respect is determined by custody, control, and practical involvement in cargo release, rather than by UCP rules.

Accordingly:

• Where the bill of lading is mislaid or destroyed while in the custody of a nominated bank or any other party, that bank or party bears responsibility for issuing, or applying for issuance of, a shipping guarantee or LOI, if required.
• Where the bill of lading is lost in inter-bank transit, in addition to responsibility for payment under Article 35 of UCP 600, the issuing bank or confirming bank may, depending on the circumstances, also bear responsibility for issuing or applying for the issuance of a shipping guarantee or letter of indemnity in favour of the shipping line, particularly where it has assumed responsibility for enabling the applicant to take delivery of the goods.

Final remark

While Incoterms govern the transfer of risk in the goods between buyer and seller, they do not determine responsibility for lost, mislaid, or destroyed documents under a documentary credit. Responsibility for payment is governed by UCP 600, while responsibility for shipping guarantees and letters of indemnity follows custody, control, and practical involvement, based on general banking and legal principles.

Best regards,

Nguyen Huu Duc

P/s: The above comment reflects my own opinion. Please feel free to share any further comments.