Warning to Freight Forwarders to Ensure Security Before Issuing House Bills of Lading

WORLDWIDE – A warning this week comes from 100% online freight forwarder iContainers regarding yet another fraud risk to shippers, consignees and their agents. This one concerns what are termed 'switch' bills of lading, that is House Bs/L which have been altered from the shipping line issued original set, often to hide the supplier details from the consignee.

The move is designed to protect shippers from their end use customer dealing with their own supplier direct but, as with all House B/L situations, the possibility of fraud is ever present. The WCA, which claims to be the largest network of freight forwarders in the world, has recently advised its members that, should they be repeatedly involved in such situations it may jeopardise their membership.

Switch Bs/L are often issued against the surrender of the original set and may be required by any of the three parties with direct involvement in the sale of the cargo: the cargo owner or seller or an authorised representative, the trading agent, and the end buyer.

Legitimate reasons for requiring a switch B/L are plentiful, from needing to split the parcels indicated on the original bills and having to conceal the original supplier’s information to a sale whilst goods are in transit. There are also many cases whereby switch bills are requested for unlawful motives. These include concealing the cargo’s origins due to sanctions that are in place and modifying the shipment date so that it corresponds with terms stated on a letter of credit.

As the issuing party, freight forwarders put themselves at huge risk when dealing with switch bills of lading, and indeed House Bs/L in general. If the decision is taken to issue, this can only be after the forwarding agent has meticulously worked through the differences and ensured the original Bs/L are safely taken out of circulation. One important point to consider is whether there is information on the switch bill of lading that may mislead a third party about the subject cargo’s origin, date of loading, description, etc. This eliminates the risk of a wrongful delivery claim by the holder of the original bill.

However, as iContainers warns, when all else is considered, issuing a switch bill of lading is a risky strategy and should only be done a last resort. Aliona Yurlova, Agents Developer at iContainers, commented:

”Sometimes, a genuine mistake made on the original bills needs to be corrected. Even then, it is always advisable to amend the originals and pay the amendment fee than issue a switch bill of lading. If production of such a B/L of lading is inevitable, freight forwarders should verify the reliability of the principal party authorising the issuance of the second set and obtain their authority in writing and a signed letter of indemnity and have it countersigned by a bank to indemnify the forwarder against all consequences.

“At iContainers, we analyse switch bill of lading requests thoroughly and on a case-by-case basis and like all other freight forwarders and cargo agents, we work hard to provide all possible solutions to shipping inquiries for customer satisfaction and to secure stable and recurring business. But it’s important to note that it’s common for ocean freight processes and procedures to not go according to plan and we need to have maximum coverage on all fronts to face the possible risks.”