House Bill of Lading (HBL)

Introduction to House Bill of Lading

The House Bill of Lading (HBL) is issued by a NVOCC (non-vessel operating common carrier). You may wonder if it is not a complicated situation, having a NVOCC involved as a middle man instead of just dealing directly with the ocean carrier.

In particular small and middle-sized companies often do not have enough shipments (cargo volume) to negotiate good rates and conditions with the carrier directly. They therefore use a NVOCC who has a large number of customers and therefore can negotiate good freight rates with the ocean carrier (shipping line). Although the NVOCC may add a margin to the freight rate, the customer still obtains a better deal. It becomes a win-win situation.

When a House Bill of Lading (HBL) is issued (a document of title), the NVOCC will only release the goods at destination to the party who can present an original House Bill of Lading that covers the goods. The Bill of Lading (B/L) becomes the ‘key to the cargo’.

When the buyer has paid for the goods, the seller will transfer the original House Bill of Lading (HBL) to the buyer. If the buyer does not pay for the goods, the seller can keep the original House Bills of Lading and in this way control that the buyer does not receive the goods from the NVOCC. (In some cases, the buyer will require to receive the originals before paying).

In cases where the payment for the goods is facilitated by a bank through a Letter of Credit (L/C), the bank at origin may require that they obtain title to the goods in the period between paying the seller and obtaining payment from the buyer or the buyer’s bank. This is why the House Bill of Lading (HBL) is sometimes consigned ‘to order of [bank]’. If it happened that the buyer could not pay for the goods after all, the bank would be able to recover some of their loss by selling the goods.

In other cases, the House Bill of Lading (HBL) is used because goods are sold during transit and there is a need to have a negotiable/transferable document to cover the shipment. The original consignee will endorse the House Bill of Lading (HBL) to the new consignee who can then obtain release of the goods.

It is important to note that although the House Bill of Lading (HBL) is used to facilitate the payment of goods between seller and buyer, the NVOCC does not take part in the change of ownership of goods. This is only a matter between the seller and the buyer. The NVOCC follows the rules and obligations as stated in the House Bill of Lading (HBL) and contract of carriage (ships and releases goods in accordance herewith). 

Functions of House Bill of Lading

Basically, a House Bill of Lading (HBL) has 3 functions: 

A receipt for the cargo

The House Bill of Lading (HBL) is a receipt by the NVOCC that the goods are in his custody. The House Bill of Lading (HBL) acts as a receipt between the shipper and the NVOCC until such time as title has been passed to a third party (the consignee). Then it becomes an independent contract between the NVOCC and the third party. The third party assumes the rights, responsibilities and obligations identical to those of the shipper.

Remember that when the NVOCC delivers the goods to the ocean carrier for shipment, he will in turn receive a carrier Bill of Lading (CBL) or a Sea Waybill (SWB) which will act as his receipt that the cargo is in the custody of the carrier. To the owner of the goods, however, the NVOCC is the party who is responsible for the cargo. 

Evidence of contract of carriage

The contract of carriage is the underlying agreement between the NVOCC and the customer to transport his goods. The House Bill of Lading (HBL) is the evidence of this.

You should note that the House Bill of Lading (HBL) is not evidence of a contract of carriage with the ocean carrier (shipping line). The House Bill of Lading (HBL) is a matter between the NVOCC and the customer.

The contract of carriage with the ocean carrier is a matter between the NVOCC and the ocean carrier and is evidenced by the carrier Bill of Lading (CBL).

This means that the seller or the buyer will not be able to file a claim directly against the ocean carrier (shipping line) for loss or damage to his goods, because they are not party to the contract of carriage. The buyer or seller will file claim against the NVOCC who in turn will file claim against the ocean carrier shipping line).

Nor should the ocean carrier (shipping line) provide shipment details and information to the seller or the buyer directly. The ocean carrier (shipping line) should regard the NVOCC as his customer. The NVOCC must keep his customer (the seller/buyer) informed. 

Document of title

A House Bill of Lading (HBL) is a document of title, and the legal right to the goods covered by the House Bill of Lading (HBL) can therefore pass from one party to another by means of endorsements.

The NVOCC will only release the goods at destination to a rightful holder of a duly endorsed original House Bill Lading (HBL).

The NVOCC will check the endorsements on the original House Bill Lading (HBL) documents before releasing the goods. If he is in doubt of the House Bill of Lading (HBL) holder’s legal right to the cargo, he should check with the shipper, notify party and/or any other intermediate party.

To enable endorsement (transfer of title), the House Bill of Lading (HBL) must be consigned ‘To order’ (of shipper), or ‘To order of [name/company/bank]’.

If the House Bill of Lading (HBL) is consigned to a named individual or company (e.g. the House Bill of Lading is consigned to XYZ Ltd) without the notation ‘To Order’, it becomes a ‘Straight House Bill of Lading’ and cannot be endorsed to another party (unless domestic law or market practice allows this). The carrier Bill of Lading (CBL) works the exact same way. 

Originals and Copies of House Bill of Lading

The NVOCC will normally print a House Bill of Lading (HBL) document in 3 originals and a reasonable number of copies. It is only an Original House Bill of Lading document that can be transferred to another party. The copies may be pre-printed ‘Copy’ or ‘Non-Negotiable’. Both are non-transferable document. 

NVOCC’s Responsibility under House Bill of Lading

The 3 main areas of responsibility of the NVOCC under House Bill of Lading (HBL) are similar to the ocean carrier’s responsibility under a carrier Bill of Lading (CBL): 

Responsibility for correct description of the goods

Any third party buyer may purchase goods by relying on the description of the goods in the House Bill of Lading (quantity, condition, etc.).

The description of the goods on the House Bill of Lading (HBL) is usually supplied by the shipper or his agent. The NVOCC will not know what is inside a container or carton packed by the shipper. It is however essential that if the NVOCC knows that the description of the goods supplied by the shipper is not correct (for example that cartons are damaged), the NVOCC clearly notes the discrepancy on the House Bill of Lading (HBL) or refuses to accept the cargo and issue the House Bill of Lading (HBL).

As the NVOCC will arrange for a carrier Bill of Lading (CBL). The NVOCC should ensure that the description of the goods is the same on the House Bill of Lading (HBL) and the carrier Bill of Lading (CBL).

If the ocean carrier (shipping line) at time of receipt of the goods, notes a discrepancy on the Bill of Lading (HBL) about shortcomings or damages, the NVOCC must ensure that the same discrepancy clause is noted on the House Bill of Lading (HBL). Otherwise, the NVOCC can become liable and have to pay compensation to the consignee, but cannot re-claim the money from the ocean carrier. 

Responsibility to release the goods to the properly entitled party at the proper location

Whoever presents a duly and properly endorsed House Bill of Lading (HBL) at the correct destination is entitled to take delivery of the goods from the NVOCC.

The NVOCC receiving a House Bill of Lading (HBL) and being satisfied that the proper endorsement is in place, when releasing the goods, is relieved of any responsibility should it later appear that the House Bill of Lading (HBL) holder was in fact not the proper receiver.

The NVOCC must of course also ensure that the person who submits the House Bill of Lading (HBL) and take delivery of the goods is a representative of the consignee (e.g. an employee or an agent of the company to whom the House Bill of Lading (HBL) has been consigned).

Release of the cargo without receipt of a properly endorsed House Bill of Lading (HBL) compromises the NVOCC’s responsibility towards the true owner of the goods. This may expose the NVOCC to unlimited liability inclusive of consequential damages.

If the NVOCC is in doubt about who the rightful owner of the House Bill of Lading (HBL) is, e.g. because there has been a chain of endorsements and the NVOCC is not familiar with all signatures and stamps of the intermediate consignees, the NVOCC should in principle contact these parties to check. The NVOCC may also contact the shipper and/or the notify party on the House Bill of Lading (HBL) to hear their views.

In order to effect release of the goods to the consignee, the NVOCC must ensure that he obtains the goods from the carrier (by paying applicable freight and charges and submitting any required documentation). Until the NVOCC has obtained release from the carrier, he cannot release the goods to his own customer.

If the release of the goods is requested at a destination different from the one mentioned on the House Bill of Lading (HBL), the NVOCC should first collect the full set of original House Bills of Lading (HBL) (all originals) for the particular shipment.

It is a critical situation when the full set of original Bills are lost. By releasing the goods without obtaining a duly endorsed original Bill of Lading (HBL), the carrier (in case of a carrier Bill of Lading) or the NVOCC (in case of a House Bill of Lading) expose themselves to unlimited liability, include consequential damages, in case a rightful holder of the Bill of Lading (B/L) later turns up and expects to receive the cargo. On the other hand, the consignee may in fact be the legal owner of the goods after having paid the shipper and the carrier/NVOCC will be under pressure from the consignee to release the goods as soon as possible. In such a situation, the carrier or NVOCC will typically ask both the shipper and the consignee to confirm that they agree to the issuance of a new set of Bills or release of goods without the Bills. In addition, the party who has asked for a new set of Bills (the shipper or the consignee), or has asked to have the goods released (the consignee), is asked to sign a Letter of Indemnity (LOI) and this must be backed up by a first class bank guarantee which is valid for a minimum of 6 years or whatever the Bill of Lading (HBL) filing period is in that country. 

Responsibility to care for the cargo while in the carrier’s custody

When issuing the House Bill of Lading (HBL), the NVOCC takes on the responsibilities, obligations and liabilities as a carrier (shipping line). Even when sub-contracting the carriage to a carrier, the NVOCC is responsible for the goods towards his own customer (the shipper /consignee).

If the goods are damaged or lost during transit, the shipper or consignee can file claim against the NVOCC. The NVOCC may be able to re-claim from the ocean carrier but this is independent from the claim received from the customer. 

Amendment of House Bill of Lading

When a shipper requests an amendment to a House Bill of Lading (HBL) which has already been printed and issued, the NVOCC must make a judgment of the request and decide if the House Bill of Lading (HBL) can be amended accordingly.

The House Bill of Lading (HBL) must ensure that the full set of original Bills of Lading are returned (if 3 originals were issued, 3 originals should be returned for amendment) and ensure that the description of the goods is still correct.

The NVOCC must also ensure that House Bill of Lading (HBL) still corresponds with the carrier Bill of Lading (CBL), and if not, that the carrier Bill of Lading (CBL) is amended accordingly. The House Bill of Lading (HBL) should not be amended if the carrier will not agree to amend the carrier Bill of Lading CBL).

If a shipper requests a completely new set of House Bills of Lading (HBLs), this is considered an amendment and the full set of originals must be surrendered.