Switch B/L: When Do You Issue One in Triangle Trade?

A switch bill of lading is a second set of bills issued by the carrier, or by an agent it has authorised, in place of the original set after that whole set has been surrendered and cancelled. Traders use it in triangle (intermediary) deals so the end buyer does not see the factory’s name, or when cargo is resold in transit and the consignee must change. If an original stays in circulation, two valid sets exist for the same cargo and delivery disputes can follow.

Key takeaways

• Issue a switch B/L only after the complete original set has been surrendered for cancellation (ITIC circular).
• Only the carrier, or a ship agent or forwarder the carrier has authorised, can issue it; the Supreme Court held that a switch B/L issued without that authority is not a valid bill of lading (Supreme Court, 11 June 2020, 2018Da249018).
• Misstating facts such as the port of loading, the loading date or the cargo condition exposes the carrier and its agent to claims.

What is a switch bill of lading?

A switch bill of lading replaces the bill of lading the carrier first issued for the same shipment. The Supreme Court of Korea described it as a document issued for purposes the original set cannot serve, such as changing the consignee or quantities after shipment, or splitting one bill into several or merging several into one.

It is still a bill of lading, so it keeps the same functions: receipt for the goods, evidence of the contract of carriage and document of title. For that reason the court held that a switch bill must meet every requirement for issuing a bill of lading.

When is a switch bill of lading issued?

It is issued when the trade has changed after shipment and the original set no longer works for payment or delivery. ITIC, the mutual insurer for transport intermediaries, lists a changed discharge port after resale, a seller who does not want the original shipper named, and splitting or merging bills.

• An intermediary in a triangle trade does not want the end buyer to see the factory, so the shipper becomes the intermediary.
• The goods are resold afloat and the consignee, notify party or discharge port must change.
• Several small parcels are combined under one bill, or one bulk bill is split into several.

None of these reasons allows a bill that misstates the actual carriage.

How do you get a switch bill of lading issued?

The full original set is surrendered and cancelled first, the carrier’s written authority is obtained, and only then is the new set issued. ITIC advises agents never to issue a second set at a customer’s request alone but to refer it to their principal, the carrier.

1. The requester shows it holds the complete original set.
2. The full set is surrendered to the carrier or its agent and cancelled.
3. The requested changes and the commercial reason are put in writing, with a letter of indemnity if the carrier asks for one.
4. Written authority from the carrier is obtained for the switch and for every change.
5. The new set is issued.

Requests to issue a second set without collecting the first are especially risky. ITIC warns that traders have in the past obtained two sets for the same cargo, raised money on both and then disappeared, leaving shippers, banks and agents with heavy losses.

What did the Korean Supreme Court decide about switch bills?

The court held that a switch bill issued by a forwarder without authority from the original carrier is not a valid bill of lading. Because that issuer was not the carrier, it was not liable as carrier for damage in transit, nor liable as issuer to a good-faith holder of the bill (Supreme Court, 11 June 2020, 2018Da249018).

The case involved an intermediary sale of steel coils shipped from Shanghai to Bangkok. The lower court had held the issuer liable as carrier; the Supreme Court reversed and sent the case back. In practice, check that whoever issues your switch bill is the original carrier or acts on its authority.

What can and cannot change on a switch bill?

Party details such as shipper, consignee and notify party can change with the carrier’s approval. Facts of the actual carriage, such as the port of loading, the loading date and the cargo condition, cannot, and stating them falsely is a misrepresentation.

Field	Can change?	Note
Shipper	Yes	Usually to the intermediary
Consignee	Yes	To the final buyer or its bank’s order
Notify party	Yes
Port of discharge	Only if it really changed	Resale changes the destination and the carrier agrees
Split or merge bills	Yes	Quantities across the bills must add up to the real cargo
Vessel / voyage	No	Actual facts of carriage
Port and date of loading	No	Changing them to fit a letter of credit is a misrepresentation
Cargo condition, actual quantity, weight, container numbers	No	Must match the real cargo

How is a switch bill used in a triangle trade?

When goods are sold factory to intermediary to buyer but shipped straight from factory to buyer, the switch bill replaces the factory with the intermediary as shipper. The example below is hypothetical.

Factory A in China sells to trader B in Hong Kong, and B resells to buyer C in Germany. The containers go directly from Shanghai to Hamburg. The first bill shows shipper A and consignee B. Once B surrenders all three originals, the carrier (or its authorised agent) issues a switch bill showing shipper B and consignee C. Vessel, port and date of loading, quantity, weight and container numbers stay the same. B must also align the commercial invoice and packing list it sends to C with the new bill.

What are the common mistakes with switch bills?

The most common mistakes are accepting a new set before every original is returned and letting a forwarder issue the switch without the carrier’s authority. Both can leave two sets in circulation for one cargo, or a bill that is not valid at all.

• Accepting a new set before every original has been returned.
• Asking for a different loading date or vessel name to fit a letter of credit.
• Letting a forwarder issue the switch without the original carrier’s authority.
• Letting the original and the switch set circulate at the same time.

For another way to release cargo without originals, see Telex Release: Can You Get Cargo Without the Original B/L?. For forwarder versus carrier bills, see HBL vs MBL.

FAQ

Can a switch B/L be issued without surrendering every original?

As a rule, no. ITIC advises that the second set be issued only once the complete first set has been surrendered for cancellation. While any original remains, two sets can be presented for the same cargo.

Can the port of loading or the vessel name be changed?

No. Those are facts of the actual carriage. Changing them is a misrepresentation, and parties who suffer a loss can claim against the carrier and the agent that issued the bill.

Can a switch B/L be used under a letter of credit?

Only if the new bill still complies with the credit. Banks examine presented documents strictly, so a wording mismatch can be refused as a discrepancy. Confirm the wording with the issuing bank in advance.

What makes a switch B/L valid under Korean law?

It must be issued by the carrier that actually received or loaded the goods, or by someone that carrier has authorised. The Supreme Court has held that a switch bill issued without that authority is not a valid bill of lading.

Sources

• Supreme Court of Korea, judgment of 11 June 2020, 2018Da249018 (court case bulletin and National Law Information Center full text)
• ITIC, Issuance of Switch Bill of Lading