HomeInternational TradeIs Switch BL a Fraud?

Is Switch BL a Fraud?

What is Switch BL?

A switch BL is a second set of BLs issued by the carrier upon the request of the consignee. The second set of BLs issued with different supplier name, consignee name, notify party, and destination. These 2nd sets of BLs are always issued in exchange of the 1st set of issued BLs. It is the carrier’s responsibility to make sure that the consignee returns the 1st issued BLs to the carrier in order to issue the second set of BLs.

Generally, a switch BL is issued upon the request of the trader replacing the shipper name, and consignee name with the ultimate buyer or with “To Order”’. Cargo should be either at transit or at storage for a BL to be switched.

There should be no endorsements on negotiable BLs if the shipper requests to switch a negotiable BL.

Once a switch BL is issued, a new set of international trade documents has to be issued (Commercial Invoice, Packing List etc. ) Thus, the country of origin of the goods should not be changed.

You should not get confused Switch BL with “Duplicated BL”.  Duplicated BLs issued when the original set of BLs are missed placed. The details in the duplicated BL are same as in the original BL. Switch BL is issued after cancelling the 1st set of original BLs with changes to the details in the BL.

Is Switch BL a Fraud?

A switch BL is not a fraud as long as the intention of requesting/issuing a switch BL is not a misrepresentation.  A carrier is not obliged to issue a switch BL and has the right to say “NO” to a switch BL.

Prior to issuing the switch BL, the issuer can check whether there is a valid commercial reason for switching BL with the trader. The trader has to make the switch BL request in writing with the new details.

The original shipper or the consignee may request the issuer to issue a set of Switch BL against a Letter of Indemnity without submitting the 1st set of BLs. The issuer should not say “YES” to this as a letter of Indemnity is null and void against law for such a situation. And issuer is at fault for issuing two sets of BLs allowing two authorised owners to claim the same cargo parcel.

Why Switch BL?

Bill of Ladings are switched due to various reasons including below:

There are sellers who do the buying and selling. They only act as an intermediary party between the actual seller and the buyer. Thus act as the shipper of the buyer. The main reason for switching BL under this is to provide no clue of the actual shipper/exporter to the consignee. By exposing the actual shipper, there is a high probability of the consignee and original shipper builds a relationship to do the business directly ignoring the intermediary party. With switch BL such possibilities are minimised safeguarding the intermediate sellers. This business model is quite similar to dropshipping done by intermediary companies.

If the consignee re-sales goods while they are on high-sea, a switch BL is to be issued. There could be situations where due to delivery delays/changes of policy in the country the buyer may no longer need the procured goods. Then the buyer looks for a party to sell the goods while cargo is onboard and re-sale the goods. As such, the shipping line has to re-route the cargo route. The line may discharge the cargo at a hub port and load it to another vessel if the new destination is not included in the vessel’s passage.  

Similarly, there are parties whose job is to procure goods and re-sale where they sell the goods while they are on the high seas.

Furthermore, there could be changes to the agreed terms and conditions between the seller and the buyer, where the requirement of a switch BL arise.

If we look from another aspect, imagine the buyer has a few factories in the USA,  and in India. Originally the goods are ordered to the USA factory from China. While cargo onboard, the buyer’s production requirement has changed and the USA factory sells the products to the factory in India. Here, the buyer has no intention to hide the original seller’s details from the new buyer. Thus, BL has to be switched for the 2nd transaction to take place.

There are situations where countries have sanctions. For example, Country A has banned imports from country B. The buyer in country A buy from the seller in country C. And the seller in country C originally buys from country A. Here the party in country C who plays dual roles as the buyer and the seller use a switch BL to hide the original seller of the product.

What is changed in Switch BL?

It is the utmost responsibility of the BL issuer to make sure not to change every detail when issuing switch BL.

The below details can be changed in the second set of BLs.

  • Shipper’s name and the address
  • Consignee’s name and the address
  • Notify party’s name and the address
  • Destination port

Which Details should not be Changed in a Switch BL?

Do not change the below details when switch BL

  • Cargo Information: Quantity and Quality description of the goods
  • Hazardous conditions
  • Temperature control requirements
  • Terms and the conditions of BL
  • Special handling requirements
  • Original date and place of shipment

What to Remember When Issuing a Switch BL

  • All the originals of 1st set of BLs should be returned to the issuer
  • If the BL is a negotiable BL, there should not be any endorsement
  • Cargo are not discharged at the original destination port
  • Cargo are not delivered/ Delivery Order is issued to the original cargo owner

Do remember, the BL issuer has no coverage before the law by issuing a switch BL without making sure that 1st set of BLs are duly cancelled!!.

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