The issue of transport documents and the documentary shipper under the Rotterdam Rules

1. Introduction
We all know that the bill of lading – the Rotterdam Rules (“RR”) refer to: “negotiable transport document”- is an important document. It confirms the receipt of the goods by the carrier, it evidences the contract of carriage and it is an important data carrier for parties outside the contract of carriage, such as insurers, banks and various authorities.
In this paper, however, the focus will be on the functions of the bill of lading in the context of the sale of goods. The holder of a bill of lading is the exclusive person entitled to exercise the rights embodied in the document, such as the right of control of the goods during the carriage and the right of delivery of the goods at the end of the voyage. Also rights of suit are often connected to holding the bill of lading. In addition, the bill of lading may have property law functions. A holder may pledge the goods or transfer the property therein by transferring the bill of lading to another holder.
As a result, a holder has strong and exclusive rights to the goods. In view of this legal importance of holding a bill of lading, it is remarkable that the rules of becoming a holder, in particular the first holder, are far from clear.
By issuing a bill of lading to a certain person the carrier generates rights for this person. In this paper, I will deal with the generation of these rights.

2. What do the maritime conventions say on the issue of transport documents?
2.1.  Hague and Hague-Visby Rules.
The key provision of the Hague and Hague-Visby Rules (“HR/HVR”) on this matter reads :
“…the carrier shall, on demand of the shipper, issue to the shipper a bill of lading …”.
So, the shipper triggers the issue of the bill of lading and, by doing so, it is determined to whom this document shall be issued: to the shipper itself. But who is the shipper? The HR/HVR do not include a definition of shipper. However, the definition of the ‘carrier’ may be indicative, reading :
 ‘carrier’ includes the owner or the charterer who enters into a contract of carriage with a shipper.”
This definition indicates that the shipper is the contractual counterpart of the carrier. However , it is not justified to conclude from this definition that a shipper is always the contractual counterpart of the carrier. It may be another person as well.
Furthermore, the HR/HVR do not refer to any other transport document than a bill of lading. The application of the convention itself even depends on the issue of a bill of lading. The consequence hereof is that if, for whatever reason, the carrier does not want to issue a bill of lading, but, instead, another document and the shipper refuses to accept this other document, the latter has no option but to withdraw its goods from carriage by this carrier. Then, this shipper must look for another carrier.
2.2. Hamburg Rules.
Like under the HR/HVR, also under the Hamburg Rules (“HambR”) the shipper triggers the issue of a bill of lading. The provision reads :
“… the carrier must, on demand of the shipper, issue to the shipper a bill of lading.”
This bill of lading must be issued to the shipper and if the carrier is unwilling to issue a bill of lading, again, the shipper has no alternative but to withdraw its goods from carriage by this carrier. However, otherwise than the HR/HVR, the HambR include a definition of the shipper :
“Shipper means any person by whom or in whose name or on whose behalf a contract of carriage of goods by sea has been concluded with a carrier or any person by whom or in whose name or on whose behalf the goods are actually delivered to the carrier in relation to the contract of carriage by sea.”
Furthermore, the HambR no longer tie their application to the issue of a bill of lading. When their general scope rules  are satisfied, the HambR apply, also in the case that the parties have agreed to use another transport document, such as a sea waybill.
Chinese law follows the system of the HambR. 
2.3. Rotterdam Rules
These rules expand on the HambR with some notable differences.
Like the HambR, the RR do not tie their application to the issue of a certain type of document. They apply when their general scope rules are satisfied.
The RR refer to various types of transport documents and provide that the shipper triggers the type of transport document, if any, that should be issued by the carrier . If the use of a transport document or a certain type of transport document is unusual in the trade involved, the carrier may refuse to issue such a transport document . However, the practical effect of these provisions of the RR is the same as under the other two conventions: if, eventually, the shipper and carrier disagree on the issue of transport documents, the shipper has no option but to withdraw its goods from carriage by the disagreeing carrier.
Like the HambR and CMC, the RR define the shipper. However, this definition differs substantially from the definition in the HambR and CMC. It reads :
“Shipper” means a person that enters into a contract of carriage with a carrier”
Under the RR, therefore, the shipper is always the contractual counterpart of the carrier. The ‘alternative’ shipper, i.e. the person that actually delivers the goods to the carrier, is not included in the RR definition. Instead, the RR refers to a person called ‘documentary shipper’, which is defined as follows :
“Documentary shipper” means a person other than the shipper, that accepts to be named as “shipper” in the transport document … .
A carrier is allowed to issue a transport document to such documentary shipper if the shipper so consents.
2.4. Conclusion
The HR/HVR leave to national law the matter of whether the carrier is allowed to issue a transport document to another person than that with whom it has concluded the contract of carriage.. 
The HambR and CMC open the possibility that the transport document is issued to such other person, provided it is the actual deliverer of the goods to the carrier.
The RR also provide for this possibility, but put three conditions thereto: the shipper must so consent, the person must be named as shipper in the document and it must accept to be so named.

3. Who needs to obtain the bill of lading from the carrier in the context of the contract of sale?
3.1. Cash against documents
In international sales involving a maritime carriage the standard payment condition is ‘cash against documents’ (“CAD”). It means that the seller of the goods has to present the bill of lading (plus other documents as agreed between seller and buyer in the contract of sale) to the bank nominated by the buyer in order to obtain the purchase price for the goods. Against surrender of the documents, the bank, on the basis of a documentary collection or documentary credit as agreed with the buyer, pays to the seller the purchase price as agreed in the contract of sale.
3.2. To be named as shipper
In the introductory paragraph of this paper I already indicated that a holder of a bill of lading has strong and exclusive rights to the goods. In the event that the purchase price is not forthcoming, the unpaid seller must be able to exercise these rights. In other words, the unpaid seller must become a holder of the bill of lading. Since a holder can only be a person that is legitimated by the document as a holder, the unpaid seller must be named as shipper in the document. 
In addition, banks may be under the instruction of the buyer to accept a bill of lading only if it is surrendered by the seller as a named shipper. In this manner the buyer does not run the risk that the purchase price will be paid to the wrong person.
3.3. Conclusion
In the context of the contract of sale the carrier must issue the bill of lading to the unpaid seller, who, in turn, must be named as shipper in the document.

4. Who gets the bill of lading from the carrier in the context of the contract of carriage?
In the ordinary course of events relating to the conclusion of a contract of carriage by sea, the person who makes the booking instructs the carrier about the particulars to be stated on the bill of lading, including the name of the person to be filled in the shipper’s box of the document. In some countries it is even customary that the shipper (or a forwarder on its behalf) completes the bill of lading; this completion, subsequently, is checked by the carrier and, upon its approval, signed by or on its behalf.
Unless it expressly advises the carrier that it acts on behalf of somebody else, this instructing or completing person may be regarded as the contractual shipper, who determines the type of transport document and to whom this document should be issued, either to itself or to somebody else.
It follows that, in the context of the contract of carriage, the carrier issues the document to the person as designated by the contractual shipper. 

5. Combining the conclusions of paragraphs 3.3 and 4
5.1. Scope of the analysis
5.1.1. Yardstick
From the conclusions drawn in the paragraphs 3.3 and 4, taken together, it results that, systematically, the contractual shipper must designate the unpaid seller as the person to whom the carrier must issue the bill of lading and who must be named as shipper in the document.
Whether and how does this systematical requirement work in practice?
5.1.2. “F” and “C” terms
For this analysis, first, a distinction has to be made between contracts of sale on “F” terms  and “C” terms , .
Under the “F” terms, the seller is required to deliver the goods for carriage as instructed by the buyer, whereas under “C” terms, the seller is required to contract for carriage on usual terms at its own expense. For the sake of simplicity, I will hereafter refer to CIF and FOB contracts only.
Furthermore, FOB contracts have to be distinguished in terms of ‘straight fob’ contracts and ‘classic fob’ contracts . ‘Straight fob’ contracts are contracts of sale in which the buyer arranges for the carriage of goods from the loading port at its own expense and the seller has to deliver the goods at the named port of shipment on board of the vessel nominated by the buyer. In ‘classic fob’ contracts (or variants thereof) the buyer still nominates the vessel, but the seller concludes the contract of carriage for account of the buyer.
In the analysis, it is assumed that all contracts of sale are concluded under the ‘cash against documents’ (CAD) payment condition.
5.2. CIF contract of sale
As referred to earlier, under a CIF contract of sale the seller must contract for the carriage of goods on the usual terms and at its own expense. In such a case, the seller makes the booking with the carrier and is, therefore, the contractual shipper. Under a CIF contract, this shipper is the unpaid seller and will instruct the carrier to name the shipper/unpaid seller as the shipper in the bill of lading and to issue this document to the shipper/unpaid seller. This shipper is also the actual deliverer of the goods to the carrier.
As a result thereof, measured against the yardstick of paragraph 5.1.1, for CIF contracts the provisions on the issue of bills of lading in each of the three conventions, HR/HVR, HambR and RR work satisfactorily, both from the point of view of the seller as well as of the carrier.
5.3. Classic FOB contract of sale
Under the classic FOB contract the buyer nominates the vessel and the seller arranges for the carriage on behalf of the buyer. This type of FOB contract is often seen in the (container) liner trade.
Unless the seller has agreed with the buyer to pay the freight on its behalf, the booking is made on a ‘freight collect’ basis, which is indicative for the carrier of a FOB sale. Although, therefore, the carrier may presume that the goods are carried pursuant to a FOB contract of sale, its relation is with the person that makes a booking, who must be regarded by the carrier as the contractual shipper. Under a classic FOB contract, this shipper is the unpaid seller and will instruct the carrier to name the shipper/unpaid seller as the shipper in the bill of lading and to issue this document to the shipper/unpaid seller. This shipper is also the actual deliverer of the goods to the carrier.
For the purpose of this analysis, the situation under the classic FOB contract of sale does not differ from that under the CIF contract of sale. The fact that the seller acts as an agent is of no relevance to its holdership of the bill of lading. Whether a person, being a holder of a document of title, acts as an agent is irrelevant to the issuer of the document or to a third party. The agency involves only the relation between the holder/agent and its principal. Towards the issuer of the bill of lading and towards third parties, the document legitimates the person named in the shipper’s box as the holder.
The conclusion for the classic FOB contract is, therefore, the same as for the CIF contract of sale: all three conventions work satisfactorily.
It must be noted, however, that under the HambR definition of ‘shipper’, the system of the classic FOB contract of sale does not protect the fob seller against an unfaithful buyer. If the latter discloses the agency relationship to the carrier and, being the principal, claims the bill of lading from the carrier, then, pursuant to the wording of the first part of the HambR definition of ‘shipper’ the carrier has no option but to deny the issue of the bill of lading to the FOB seller/actual deliverer and must issue the bill of lading to the FOB buyer, because indeed the goods are delivered on his behalf. Only through a court intervention might this result be prevented.
The RR do not explicitly refer to agency relationships and, consequently, any effect of agency is left to national law. However, if the FOB buyer discloses the agency relation, most probably, under the applicable national law on agency, the result under the Rotterdam Rules will be the same as under the HambR: no protection against unfaithful FOB buyers.
5.4. Straight FOB contract of sale
5.4.1 Scope of the problem
Here matters become more problematic. Under the straight FOB sale, the buyer arranges for the contract of carriage at its expense and the seller has to deliver the goods at the port of shipment named in the contract of sale on board of the vessel that has been arranged by the buyer as the carrying vessel. This type of FOB contract is common in the non-liner trade.
The buyer will make the booking and, therefore, acts vis-à-vis the carrier as the contractual shipper . This shipper has to instruct the carrier to issue the bill of lading to the unpaid seller, who is the actual deliverer of the goods to the carrier. Also, this shipper must instruct the carrier to nominate the unpaid seller as the person named in the shipper’s box in the bill of lading . This documentary arrangement must be agreed between the seller and buyer in their contract of sale.
The fear of a seller under the straight FOB contract may be that a buyer does not adhere to the agreed documentary arrangement and will misuse the fact that under the maritime transport conventions, it is in a position to nominate itself as the shipper under the bill of lading. Under the CIF and classic FOB contracts, the seller has it in its own hands to become a bill of lading holder and, consequently, to obtain the purchase price of the goods according to the CAD payment condition in the sales contract. Under the straight FOB contract, however, the seller is dependent on the due performance of the buyer in regard to properly instructing the carrier.
5.4.2 The Hamburg Rules ‘double definition’ of shipper
In order to assist the straight FOB seller in overcoming this potential problem, the Hamburg Rules, followed by CMC, include the actual deliverer in the definition of ‘shipper’. The intention here is that the actual deliverer in this manner would have its own right to obtain the bill of lading. Indeed, the shipper triggers the issue of the bill of lading by the carrier and may claim this document to be issued to itself.
However, in my view, this concept of ‘double definition’ of shipper is not a proper solution of the problem of a possible unfaithful buyer. If the buyer really is unfaithful, it will claim the bill of lading from the carrier nevertheless. In such a case, to which of the two must the carrier rightfully issue the bill of lading? Must the carrier check the contract of sale, its payment conditions and whether the purchase price actually has been paid? In my view, if the definition of shipper includes both persons, each of them may be entitled to the bill of lading.
Another objection to this ‘double definition’ concept is that the actual deliverer is not necessarily the unpaid seller. First, there may be more than one FOB sale prior to the shipment. In such case it is probable that there are more unpaid sellers than the actual deliverer and that, systematically, the bill of lading has to be issued to the first unpaid seller in a chain of FOB pre-shipment sales . Second, in this analysis the assumption is a CAD payment condition, but actually there may be another payment condition. It is possible that the FOB seller at the moment of issue of the bill of lading already has been paid, either directly or though set-off. In such case the bill of lading should be issued to the buyer of the goods who is the contractual shipper or to a person nominated by the contractual shipper. In these two examples the actual deliverer may insist on obtaining the bill of lading and may succeed in its attempts, whereas the unpaid seller is a different person, who, systematically, should have obtained the bill of lading.
A further problem that the ‘double definition’ concept creates, is related to the matter of shipper’s liabilities. Are both the contractual shipper and the actual deliverer subject to the shipper’s liabilities, even the one that does not obtain the bill of lading? And if so, is such liability joint and several? And what about rights of the shipper, such as the right of suit? Has the contractual shipper lost its right of suit in the case where the actual deliver becomes the bill of lading holder?
Various other questions can be posed in relation to the ‘double definition’ as well.
With all sympathy for the intention of the introduction of the ‘double definition’, in my view, it is not a well-thought concept. In fact, the ‘double definition’ does not do the job for which it was created, because an unfaithful buyer may still claim the bill of lading under this concept and the actual deliverer may not be the unpaid seller. In addition, it may generate problems in other fields.
My conclusion is that the ‘double definition’ concept may do more harm than good.
5.4.3. The Rotterdam Rules ‘documentary shipper’ concept
The RR define the shipper as the contractual counterpart of the carrier and acknowledges that sometimes the bill of lading must be issued to another person. The conditions for such issue to another person are that the contractual shipper must so consent and the other person must be named as a shipper in the document and must accept to be so named.
It is obvious that this RR concept of documentary shipper does not take away the risk of the unfaithful FOB buyer either. To mitigate this risk somewhat, on purpose, the flexible word ‘consent’ has been chosen in the RR, whereas it is not excluded that consent may be an implied consent .  However, when two parties claim the bill of lading to be issued to it, the contractual shipper, who is the FOB buyer, will eventually have to make the choice and to advise the carrier accordingly.
This is in line with the yardstick of paragraph 5.1.1. The contractual shipper needs the final word in any event, because towards the carrier it is the only party who may have knowledge about the identity of the unpaid seller. This means that, systematically, under FOB sales, the parties have to arrange their business in such a way that the FOB buyer (who will be the contractual shipper towards the carrier) is in a position to provide the carrier with the proper advice on the identity of the party to whom the bill of lading must be issued.
On the identity of the person, other than the contractual shipper, that may need to obtain the bill of lading from the carrier, the RR also follow the yardstick of paragraph 5.1.1. This other person may only be a documentary shipper, which is defined as a person, other than the shipper, that accepts to be named as ‘shipper’ in the transport document. This way, this ‘other person’ has to become a holder who will be able to exercise its rights under the bill of lading. And this ability is what the unpaid seller needs.
Unlike the HambR, the RR make provision for the rights and liabilities issue. They state that the documentary shipper is subject to the obligations and liabilities imposed on the (contractual) shipper and is entitled to the (contractual) shipper’s rights and defences under the RR. These obligations, liabilities, rights and defences do not come instead of those of the (contractual) shipper, but run parallel with them.
This rule on liabilities was practically unavoidable. In view of the nature of the shipper’s liabilities, the person, that functionally has the actual knowledge about the goods, has to assume the corresponding obligations and liabilities as well. Though it can be said that assuming liabilities is ‘part of the system’, the RR prevent an automatism and the fob buyer can never impose liabilities on a documentary shipper.. Only if the documentary shipper ‘accepts’ to become such a shipper, does he assume the liabilities belonging to that role.
It may be concluded that neither the double definition concept, nor the concept of ‘documentary shipper’ provides an adequate solution for the possible unfaithful FOB buyer problem. However, the RR avoid many of the objections against the double definition by sticking as much as possible to the yardstick of paragraph 5.1.1., thereby reflecting the actual requirements of both the contract of sale and the contract of maritime carriage. 

6. Closing remarks.
6.1. The law does not protect against fraud.
Neither the provisions on the issue of bills of lading of the HambR nor those of the RR provide a remedy against fraud. They reflect mercantile usages - the one perhaps better than the other – of which the object is to prevent the risk of insolvency. I cannot better express this view but to quote Lord Justice Bowen in an old English case  in which he said:
"The object of mercantile usages is to prevent the risk of insolvency, not of fraud; and anyone who attempts to follow and understand the law merchant will soon find himself lost if he begins by assuming that merchants conduct their business on the basis of attempting to insure themselves against fraudulent dealing. The contrary is the case. Credit, not distrust, is the basis of commercial dealings; mercantile genius consists principally in knowing whom to trust and with whom to deal, and commercial intercourse and communication is no more based on the supposition of fraud than it is on the supposition of forgery."
The only remedy against fraud by the buyer is for the seller not to sell on FOB basis with a CAD payment condition. If a seller wishes to prevent the type of fraud referred to earlier in this paper, in my view, it should sell either on CIF basis with CAD payment or on FOB basis with advance payment. However, such a seller should be aware that by doing so it does not avoid other possible types of (documentary) fraud in international sales. There are many of such other types.
6.2  The interaction between the contract of sale and the contract of carriage requires a reciprocal understanding by the parties to the one contract of the requirements of the other contract.
A contract of sale must function in the context of a contract of carriage and vice versa. In my view, this means that the parties must act under the one contract in such a manner that the other parties under the other contract can duly perform. This is not too difficult because, normally, the two contracts have one party in common.
This principle applied to the matter of the issue of a bill of lading means that under FOB (string of) sales the parties have to arrange their business in such a way that the FOB buyer (who will be the contractual shipper towards the carrier) is in a position to provide to the carrier the proper advice on the identity of the party to whom the bill of lading must be issued. In other words, the FOB buyer, arranging for the carriage, must be able know the identity of the unpaid seller who, systematically, needs the bill of lading, in order to be able to properly instruct the carrier about the issue of the bill of lading.
6.3. Preference for the documentary shipper concept
On the basis of the paragraphs 5.4, 6.1 and 6.2 it may be concluded that the RR documentary shipper concept the contract of carriage better fits the requirements of the FOB contract than the double definition concept of the HambR does.
Without any doubt, from a certainty of law point of view, the documentary shipper concept is preferred.