What is a Switch Bill of Lading? When is a Switch BL used?

What is a Switch Bill of Lading? 

When is a Switch BL used?

The world of shipping and freight is dynamic and several changes happen during the course of a shipment. Ownership of Goods can change, destinations can change, cargo routing can change, cargo release parties can change and even important documents such as a Bill of Lading may be subjected to changes..

Some may be simple amendments, but in some cases, the changes or requirements may necessitate the issuance of a Switch Bill of Lading..

Before we look at what is a switch bill of lading, let’s review the types of bills of lading and how these are issued..

There are 3 ways in which a bill of lading may be issued:

1) When a B/L is issued in Original(s) to a “named” consignee it is referred to as a “Straight B/L” and a straight B/L is a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT..

2) When a B/L is issued to a “named” consignee but without any originals, it may be considered as a “Sea Waybill“.. This B/L is also a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT..

3) When a B/L is issued in Original(s) and consigned “TO ORDER” or “TO ORDER OF SHIPPER” or “TO ORDER OF XYZ BANK” it is termed as “Negotiable B/L or Order Bill“..

A bill of lading has 3 functions as below and each of the above types of bill of lading fulfils one or more of these functions..

1. Evidence of Contract of Carriage

2. Receipt of Goods and

3. Document of Title to the goods

 

Now let us discuss about the Switch Bill of Lading.

A “Switch” bill of lading is NOT another type of Bill of Lading..

A Switch Bill of Lading is simply the second set of bill of lading that may be issued by the carrier or their agent “in exchange of” or “substituting” the first set of bill of lading originally issued when the shipment was effected..

The KEYWORD here is “in exchange of” or “substituting“.. This clearly implies that the second set of bills of lading cannot be issued while the full first set is still in circulation and active..

 

Why do customers require a Switch bill of lading ?

Switch bills may be requested for a few different reasons..

When there has been a change in the original trading conditions ;

Goods have been resold (probably high-seas sale) and the discharge port has now changed to another port ;

The seller (who could be an intending agent) does not wish the name of the actual exporter to be known to the consignee in case the consignee strikes a deal with the exporter directly ;

The seller does not want to know the buyer to know the actual country of origin of the cargo so he requests that the port of loading be shown as some port other than the one the cargo was loaded from..

 

What can and cannot be changed in a Switch Bill of Lading?

Changes are allowed in the switch bill of lading is the shipper, consignee, notify information which is usually displayed in what I term as Part 1 of the bill of lading..

TT Club considers additional elements/information listed below may be changed provided that the new information is true and correct and does not affect the carriage and delivery..

the shipper’s description of the goods;

the name of the ship (if necessary);

the place and date of issue (if not the same as those of shipment);

the freight and the port of discharge

The below details should never be allowed to be changed

place and date of shipment as changing this could affect the terms of delivery based on the sales contract

details of cargo including the number of packages, dimensions, weight and measurement

hazardous cargo information if any (remember cargo is already on board based on original hazardous cargo declaration)

reefer cargo information such as temperature setting, humidity settings etc (remember cargo is already on board based on original cargo declaration)

OOG Cargo information if any (remember cargo is already on board based on original OOG details declared including lost slots calculation etc)

none of the original clauses on the bill of lading

The club further advises that the shipping line/agent should

“obtain written confirmation from your client, setting out in detail his requirements for the new bill of lading. If significant changes are requested to the cargo details, you should consider getting both evidence to support the changes and an indemnity from the client to protect you in the event of a dispute with the consignee.”

 

Where can a bill of lading be switched and who can request shipping line to issue switch bill of lading. ?

Depending on the shipping line and their coverage, a bill of lading may be switched anywhere around the world for shipments from anywhere to anywhere..

For example in a shipment from New York to Antwerp, the bill of lading may be switched in Dubai as long as the shipping line in question has offices in Dubai.. Usually a switch bill of lading happens in a location that may not be on the route of the cargo..

Switch Bill of Lading Fraud - Shipping and Freight ResourceIs the issuance of Switch Bill of Lading legal?

While there is nothing to say specifically that issuance of a switch bill of lading is illegal (unless there is willful intent to commit fraud), it seems to be the concerted view of almost all P&I clubs, that a switch bill of lading issued with any misrepresentation or information contrary to the first set issued, without the express acceptance and understanding of the buyer is a fraudulent document..

In order to protect themselves from any possible claims arising out of issuing switch bills of lading, the shipping line/agent have to ensure that

They are covered by their insurance for the issuance of such switch bills of lading and they provide their insurance company with the exact reason for the issuance of the switch bill of lading ;

They need to ensure that the bill of lading is switched before hand over of cargo and also that the person or entity requesting for the switch bill is authorised to make the request..

If a negotiable bill is issued, generally the shipper on the bill of lading has the right to request for the switch bill of lading, but only before the endorsement to the next party or delivery of the goods ;

All issued originals from the first set of bills must be returned to the carrier, free of any endorsements and cancelled before the bill is switched and a second set is issued..

Point 4 is perhaps the most important point for the carrier to note and ensure as this is the only way to guarantee that there are no other originals floating around for the same shipment.. The dangers of two sets of original bills in circulation for the same cargo are many ;

This is also required to ensure that the party making the request is truly the owner of the cargo and has rights to its further disposal ;

A shipping agent should never issue a switch bill of lading of their own volition based on the request of the customer and must always issue it only with the written authority of the principal (however urgent the situation may be to the customer) ;

The switched set should not contain any information different to that of the first set of bill of lading, (like an incorrect port of loading, or change in the condition and quantity of the cargo)..

If switch bills contain any misrepresentations, the carrier/agent will be at risk of claims from parties who have suffered a loss because of such misrepresentations ;

If the agent has been asked by the principal to issue the switch bill of lading based on an indemnity from the customer, the agent should ensure to get the wording format from the principal and get the completed indemnity approved by the principal before issuing the switch bill of lading.