What is a Switch Bill of Lading and when and why is it used..??

In the normal course of business you might have come across the term Switch Bill of Lading.. A “Switch” bill of lading is the second set of bill of lading that may be issued by the carrier (or agent) in exchange for the first set of bill of lading originally issued when the shipment was effected.. Image for article regarding who can request for switch bill of lading

Why does one ask for or require a Switch bill of lading..?? Switch bills are requested generally when there has been a change in the original trading conditions..  Some of the reasons could be :

  • Goods could have been resold and the discharge port has now been changed to another port and this could have occurred as a high-seas sale..
  • 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..

The practice of issuance of switch bills of lading is considered by many, including TT Clubs and insurance companies, to be dubious or fraudulent depending upon the reasons why the switch bill of lading is required to be issued..

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 issuance of such switch bills of lading
  • They should provide their insurance company with the exact reason for the issuance of the switch bill of lading..
  • They must have the written authority of the principal before issuing the switch bill of lading, if the issuing party is acting as agents for a shipping line or principal..
  • They must issue the switched bill only after collecting the first set of bills, as the dangers of two sets of original bills in circulation for the same cargo are many..
  • The switched set should not contain any information different to that of the original bill of lading, (like incorrect port of loading, or change in the condition and quantity of the cargo).. If switch bills contains 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..

It seems to be the concerted view of almost all insurance companies covering exports, 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..

Switch Bills of Lading – Revisited – an article by NAU Pte Ltd., might shed some more light on the matter from a claims company perspective

Have you had any experiences of issuing/requesting for switch bill of lading..??



You can share your views about above article here..

82 comments on “What is a Switch Bill of Lading and when and why is it used..??

  1. Alex says:

    Hi!
    My company brought a goods from China on FOB basic and selling it on CIF basic to our customer. We would like to shipped the goods directly to our customer at Italy. We understand that we should apply for switch BL in order to hide the detail of both buyer and seller. Could you explain us how is the procedures in details? Should we arrange the shipping line by ourselves since we plan the freight charges will prepaid in Singapore? We understand that we should surrender the first BL and ask the shipping line to reissue with second set of BL, but can we change the POL, POD, Shipping Marks and Description of Goods in the switch BL?

  2. bassem_e_f says:

    I am an agent (intermediary), who bought the cargo from the manufacturer on FOB basis. I have received original B/L from the manufacturer. While the vessel is in the sea, I need to switch B/L to have my company as the shipper and the end client as the consignee and notify party? Would you kindly tell me the procedures in details

    1. Hello Bassem, this is a classic switch bill of lading scenario.. Basically you can surrender the first set of original bills to the shipping line and ask them to reissue the second set as per your new sh/cn/no details..

  3. Mayur says:

    Hello Hariesh

    Thank you for this article, it is very helpful.

    I have a question regarding switching BL. Goods will be exported from China and going to USA. My company is in Hong Kong and I want to show my Hong Kong company as the exporter. The sales contract exists between my Hong Kong company and USA client. Can I simply switch BL at sea rather than importing into Hong Kong and then exporting again to USA?

    1. Hello Mayur, you can show Shipper on a bill of lading as anyone.. If your requirement is only to show the shipper as based in HK but shipping out of China, then you might not need to switch the bill at all, you can issue same bill of lading directly.. However, if China as a country has any ruling that the shipper has to be shown as from China, then you may have to switch.. Also since now HK is part of China, don’t think that would be an issue.. Suggest you clarify that with your Chinese agent..

  4. Larry says:

    Hi Hariesh,

    I am working on a project for which I wanted to use a Switch B/L but I am confused on how it works in detail even after reading your article.

    Situation is as follows:

    My company (AGENT) buys FOB from a factory in China (FACTORY) and sells FOB to a client in Germany (CLIENT).
    Agent does not want Client to know Factory.
    Agent wants to get the money from Client first against Copy B/L, then pay Factory against Copy B/L not having to pre-finance the order.

    I thought the process is as follows:

    Factory delivers the product FOB China.
    My thought was factory delivers the goods FOB to forwarder nominated by agent.
    Factory then gets original B/L from forwarder nominated by agent.
    Factory sends Copy B/L to agent to pay factory, only if agent pays factory, factory will release the original B/L to agent.

    Question 1:
    How can agent now issue a copy B/L to the client if agent does not have the original B/L yet?
    Factory would not want to send the original B/L before being paid in full.
    Agent would not want to pay the factory before being paid in full by client.
    But client would need a Copy B/L as a proof the product is on the ship in order to release the payment.

    This is a pretty urgent topic unfortunately and any help would be highly appreciated 

    Thanks,

    Larry

    1. Hi Larry, in any transaction, the commercial trade terms used (Incoterms) will play a very vital role in the process of who pays who and at what stage.. If you follow the Incoterms between the various parties involved, you would be able to ascertain who should pay first..

  5. Gary Ching says:

    Dear Hariesh,

    Referring to this point ” They must have the written authority of the principal before issuing the switch bill of lading, if the issuing party is acting as agents for a shipping line or principal”, i would like to clarify who is the principal referring to?

    Thanks.
    Gary Ching

    1. Hello Gary, principal is anyone that an agent is acting on behalf of.. This could be an NVOCC operator or a Shipping Line..

  6. Sumit Chaudhary says:

    Hello aptrans impex

    If on OBL consignee is Indian Company & you wants to sell to your indian buyer. So there are two options.

    1. You can go ahead with the switch bill of lading
    2. You can sell the consignment to your indian buyer on high seas sale basis & there is no need to change obl. You have to make a contract with your buyer on 100 INR stamp paper. & date of stamp paper should be between ETD & ETA of the vessel.

  7. Imran says:

    Hi, i haev a questions to ask regarding switch bill, i have a shipment for Chille from Pakistan. I’ll be using this switch B/L from Dubai. Now in Pakistan we are bound to consign shipment to local bank in D/P payment terms so in this case the payment will be secure. Now what i wanted to know that is there any kind of possibility / system from Dubai where we can consign switch B/L in favor of Dubai local bank, in such case where there is no pre-shipping docs as shipment is moving directly from Pakistan to Chille. Will Dubai bank can come up in such cases and give security for payment…… OR any other better solution where i can use switch B/L and get payment security.

  8. Sya Ngema says:

    Hi, can you please brief me with the possible risk associated with the Switch Bill of Lading?

    1. Hi Sya, it is outlined in the article that you have commented on.. Please go through it..

  9. Venkatesh says:

    Can we switch the B/L at Dubai if the shipment is routed to Karachi via Colombo???

    1. Venkatesh, as long as the shipping line involved has an office and allows the bill of lading to be switched, you can switch it anywhere..

  10. Incase customer( consignee ) is asking to change discreption on H B/L and to be notm matching the descreption metioned on L/C ( LETTER OF CREDIT) is the Switch Bill is applicable ?

  11. Yasir Khan says:

    Hello,

    Can anyone help me out by explaining if there is a time limit as to when a BL should be switched? We have a consignment shipped and will arrive at the destination Port in 15 days time. Originals are with me and state me as ‘consignee’ but I don’t want to switch them until I receive 100% payment from the Importer. I am not based in the Importing country of the consignment and neither in the Exporting country.

    1. Hello Yasir, if bill of lading is directly consigned to you and all released original bills are still with you, then you are the only party that can authorise release further.. Once you have 100% payment, then you can surrender the OBL to the shipping line and ask them to release cargo to whoever you wish to release it to.. You don’t need a Switch bill then unless you have any other reason for switching the bill..??

      While there is no specific time limit as such for switching the bill, obviously it has to be done before the cargo is released and also within the free days at port and with the line so you/your new buyer doesn’t incur additional charges towards storage/demurrage etc..

  12. aptrans impex says:

    Hi
    I am importing from Mauritius to India and selling the goods to my buyer in India by High Seas Agreement. Can I Switch BL such that my company name is in the seller on BL ? Basically my question is if I am in India and my buyer is also in India is it still possible to switch BL in same county?? Kindly advise. Thank you.

    1. Hello, there is no limitation on where the switch bill can be done.. However, there are some shipping lines who might not allow it in certain countries.. So best option would be to check with the shipping line concerned if they will accept or not..

  13. Prasanna. says:

    Hi, We are in India and one of our customer have a shipment from HK to CMB, an LC shipment, firstly our customer need to open an LC on HK Supplier and the shipment will travel from HK to CMB, the BL should be to the order of Bank in India and Notifying Our customer . Our Customer now want to obtain Swift BL and follow the LC instructions as per Srilankan Client.

    Please clarify in such scenario, on what grounds Bank in India can send the Foreign exchange , wherein the goods never came to India.

  14. aaron says:

    hi,we have a shipment from China to Beirut and the customer is in Dubai and he want to show Dubai company address in all documents and in Bill of lading also.Can you tell me how to make bill of lading details,because we are Dubai customer agent.

    1. Hi Aaron, I am not sure of the other documents that maybe used at the load port or discharge port for clearance purposes because each country has their own procedures.. But on the bill of lading you can show your Dubai customer in the shipper column if he show wishes..

    2. Leo says:

      Hi Aaron, you can issue the 2nd set of B/L from Dubai provided that you have an agent in Dubai to issue the exchange upon surrendering the 1st set of B/L.