Straight vs negotiable (to-order) bill of lading

The short answer

The difference lies in the consignee box. Under the US Federal Bills of Lading Act (49 U.S.C. § 80103), a bill is negotiable if it states that the goods are to be delivered "to the order of a consignee", and non-negotiable if it states that they are to be delivered to a consignee.^[2] The Rotterdam Rules, adopted by the UN General Assembly on 11 December 2008 and not in force (five parties; twenty needed), use the same test: a negotiable transport document is one whose wording, such as "to order", shows the goods consigned to the order of the shipper or consignee, or to bearer.^[3][6]

A to-order bill passes from holder to holder, each lawful holder acquiring rights against the carrier.^[1][3] A straight bill can reach only the named consignee.^[2] In the United Kingdom, the Carriage of Goods by Sea Act 1992 counts as bills of lading only documents transferable by indorsement or, as bearer bills, by delivery; the Court of Appeal has read a straight bill as a sea waybill under that Act.^[1][5]

Comparison

Consignee. Negotiable bill: to the order of a named party, or to bearer.^[2][7] Straight bill: a named consignee, no "order" wording.^[2][7]

Transferability. Negotiable bill: by endorsement and delivery, or by delivery alone if endorsed in blank or made out to bearer.^[1][3] Straight bill: not transferable by endorsement; under UCC § 7-104 a bill consigned to a named person stays non-negotiable even if goods are released only against that person's signed order.^[2][7]

Delivery. Negotiable bill: under 49 U.S.C. § 80110 the carrier delivers to the holder, who must possess the bill and offer to indorse it; under Rotterdam Rules art. 47 delivery is "upon surrender of the negotiable transport document".^[4][3] Straight bill: under § 80110 the carrier delivers to the named consignee; under the Rotterdam Rules a non-negotiable document that says it must be surrendered is surrendered, otherwise delivery is against identification.^[4][3]

Electronic form. Both: the Rotterdam Rules define negotiable and non-negotiable electronic transport records, and the UNCITRAL Model Law on Electronic Transferable Records (MLETR) says a straight bill's limited transferability should not prevent its electronic issue.^[3][8]

How a negotiable (to-order) bill works

A to-order bill is a document of title that circulates. Under the Rotterdam Rules the holder of an order document transfers its rights by delivering it "duly endorsed either to such other person or in blank"; a bearer or blank-endorsed document passes by delivery alone.^[3] UCC § 7-104 uses the same test, "to bearer or to the order of a named person".^[7]

In the United Kingdom, section 2 of the 1992 Act vests in the lawful holder of a bill of lading "all rights of suit under the contract of carriage as if he had been a party to that contract"; section 5(2) defines the holder as the named consignee in possession, or a person in possession after indorsement or, for a bearer bill, other transfer.^[1]

Delivery therefore depends on the document. Under 49 U.S.C. § 80110 the carrier may deliver to a person holding a bill made out to that person's order, or indorsed to that person or in blank.^[4] Maersk's online transfer service covers original (negotiable) bills, not waybills; a bill "cannot be transferred to the consignee if it is 'to order' of shipper or bank".^[9]

How a straight bill works, and the presentation question

A straight bill names the consignee and stops there. Under 49 U.S.C. § 80103(b) an indorsement does not "make the bill negotiable" or "give the transferee any additional right".^[2] DCSA describes straight bills as not transferring title, with a named consignee that cannot be changed.^[10]

Whether the consignee must still present the paper has been litigated. In The Rafaela S [2003] EWCA Civ 556, the bill named a consignee without "order" wording but its attestation clause said one original "must be surrendered duly endorsed in exchange for the goods or delivery order".^[5] Rix LJ, with whom Peter Gibson LJ agreed, held that the clause applied in straight as well as negotiable form, that a straight bill which must be produced for delivery is a document of title, and that the document was "a bill of lading or similar document of title" under the Hague-Visby Rules, scheduled to the Carriage of Goods by Sea Act 1971.^[5][11] The case reached the House of Lords in 2005; the UK P&I Club's briefing describes the Law Lords as concluding that the document was a bill of lading requiring presentation at the place of delivery.^[12]

The ruling had an insurance consequence. The UK P&I Club states that the International Group clubs amended the Pooling Agreement, with a rule change effective 20 February 2009, restricting cover where cargo is delivered without production of a straight bill, or of a waybill whose express terms or governing law require production at the discharge port.^[12]

In carrier practice the straight bill sits between the two. Ocean Network Express, in a customer notice during the COVID-19 lockdowns, named sea waybills its preferred document because delivery "does not need to be made against production of the Sea Waybill itself", with straight bills as the alternative, originals left at origin and cargo released under its surrender-at-origin or telex release procedure.^[13]

Electronic equivalents

An electronic bill of lading can be either kind. The Rotterdam Rules define a negotiable electronic transport record as one carrying "to order" or "negotiable" wording and used under the article 9(1) procedures; delivery is "upon demonstration by the holder" under those procedures, and rights pass by transferring the record, "whether it be made out to order or to the order of a named person".^[3]

The MLETR, adopted by UNCITRAL on 13 July 2017, treats exclusive control of an electronic transferable record as equivalent to possession, and transfer of control as transfer of possession.^[8][14] Article 15 treats an endorsement requirement as met if the required information is included in the record; the Explanatory Note names straight bills as documents whose transferability "may be limited due to other agreements" and leaves transferability to substantive law.^[8]

In the United Kingdom, the Electronic Trade Documents Act 2023, in force since 20 September 2023, lists the bill of lading among its example trade documents and provides that "A person may possess, indorse and part with possession of an electronic trade document", with the same effect as the paper equivalent; it does not distinguish to-order from straight bills.^[15] It implements the Law Commission's report of 16 March 2022 (Law Com No 405), which tied possession to a reliable system under which one person controls the document at a time and transfer divests the transferor.^[16][17]

DCSA's Bill of Lading standard has two transport document types: a bill of lading, which can be negotiable, and a sea waybill, non-negotiable and issued to a named consignee.^[18][19] See platforms and the legal tracker.

Worked example

A seller in Spain ships machinery to a buyer in the United States under a letter of credit and asks the carrier for a bill to the order of the issuing bank. Once the buyer pays, the bank endorses the bill to the buyer, who presents it, and under 49 U.S.C. § 80110 the carrier delivers to the holder who possesses the bill and offers to indorse it.^[2][4] Had the buyer paid in advance, the seller could instead have named the buyer on a straight bill: the buyer could not pass the goods on by endorsing it, and the carrier would deliver to the named consignee, who must present the paper only if the bill's terms or governing law require it.^{[2][4][5][12]} This describes practice, not legal advice.

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