Publications

Adding a few words to a credit agreement doesn’t turn a sea waybill into a bill of lading.

Sea waybills are replacing bills of lading in more and more international shipments. The consignee named in the sea waybill can take delivery without presenting originals, which reduces delays and costs. However, a sea waybill is not a document of title, and for lenders financing goods on the water, that is a dramatic difference. While the goods are at sea and covered by a sea waybill, 1) there is no perfected, first priority security interest for the lender, 2) the shipper can redirect the cargo mid-voyage, 3) the standard commodities finance intercreditor agreement gets more complicated, and 4) the risk of fraud at the port potentially goes up.

Too often, lenders respond by adding a general reference to “sea waybills” to the definition of Eligible Inventory set forth in the credit agreement and moving on. In Part I of his two-part series for The Banking Law Journal, Partner Peter Lahny explains why that falls short and walks through each risk in detail.

To view a copy of The Banking Law Journal, please click below.