QUESTION OF THE WEEK: What’s in a Name: Shipper vs. Consignor

.L-R: Abayomi Obadare, Group Head, Internal Control, SIFAX Group; Joshua Idiong, Winner, Season 7, The Next Titan; Barrister Ezekiel Ajewole, Executive Director/Senior Special Assistant to the GEVC, SIFAX Group and Mide Kunle-Akinlaja, Executive Producer, The Next Titan, at The Next Titan appreciation visit to SIFAX Group head office last week at Apapa.

Question:  Bills of lading tend to refer only to the “shipper” of the goods, which I take to mean the consignor — that is, the party who tenders the goods to the carrier for shipment. I think I’m correct in this. But are the two words complete synonyms? Do they necessarily always have the same meaning or is there some legal distinction between them?

Answer: It’s a matter of context.

As a general rule, “shipper” and “consignor” refer to one and the same person/entity, in law and general usage. As to legal matters, I’m unaware of any judicial ruling that’s hinged on drawing a distinction between the terms. Still, there is a difference, and one that occasionally becomes important.

Technically speaking, the “shipper” in transportation, as indicated by the reference to that party in the bill of lading, is the person who contracts with the carrier for the transportation service. It is to the shipper that the carrier will look for its payment — either primarily or, in the case of a collect shipment, secondarily if the carrier is unable to secure payment from the consignee.

The “consignor,” as the word indicates, is specifically the party who physically tenders (“consigns”) the goods to the carrier at origin. This often is the same person who contracts for the transportation, but may in particular cases be somebody else. That distinction may or may not be reflected on the bill of lading, and is often subsumed in an agency relationship between the parties; but sometimes neither will be the case.

Take the situation where the goods are being dispatched from a warehouse or storage facility operated by someone other than their owner. As a general rule, the owner will contract for the transportation and the warehouse operator will be responsible for making the goods available for pickup by the carrier. The B/L ordinarily will reflect this by showing the owner as “shipper,” perhaps with the warehouse name and address below.

But on occasion, the warehouse also may contract with the carrier, and its name will occupy the “shipper” block on the B/L. To protect itself in such a case, the warehouse usually also will furnish the owner’s name as principal and designate itself as acting in an agency capacity. At least, it’s prudent for the warehouse to do so, although often this precaution is overlooked. Such a failure, needless to say, can cause confusion in the event of a claim (of which, of course, the owner is the proper beneficiary), or if the carrier’s bill is designated to be sent direct to the owner.

Apart from the B/L, further confusion can result from the incorrect concatenation of the terms “shipper” and “consignor.” In commercial transactions, “shipper” is often equated to “seller,” which may be inaccurate in the circumstances I’ve been postulating. Notwithstanding that the goods were prepared for transportation and physically “consigned” to the carrier by another party, the buyer is purchasing them from a seller who it supposes will be forwarding them in accordance with the contract of sale. In that context, the distinction between “shipper” and “consignor” is obviously of particular consequence.

If the goods are defective or otherwise unsatisfactory, for example, it perhaps won’t do to simply return them to the consignor at the address shown on the bill of lading. A similar problem may arise if the consignee chooses to refuse the delivery, because the carrier will only be obliged to contact the party identified as shipper on the B/L before disposing of the refused load. Once more, this may not be the party with an ownership interest in the goods.

I could offer many other illustrations of the complications that may arise by treating the terms “shipper” and “consignor” as synonymous for all purposes. As I said, the two terms aren’t necessarily identical even for purposes of the B/L, and further distinctions arise as one reaches beyond the transportation documents to other instruments that may be involved.

Clearly, it’s within the power of the parties to resolve any and all of these complications through careful communication with one another. But a reality of our modern world of commerce is that such communication is too frequently lacking or incomplete. Given that fact, I think it’s best not to rely too heavily on definitions of terms, be they synonymous or not. It’s usually better to spell things out fully, even if it seems basic to do so.