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NOTIFY PARTY in Shipping – Everything You Wanted To Know

Who is a notify party and what significance does the field of notify party on a sea transport bill have?

Isn’t the notify party the one and same as the consignee or the buyer?

Since the notify party field is left blank in most bills, is it important to have this field at all?

Let us take a look at these commonly asked questions.

Notify Party in a Trading Transaction

Global trade involves the transfer of goods and services for a financial consideration between two parties. Any transfer of goods involves shipment by land, sea, or air.

In the trade of goods, the seller and buyer enter into an agreement or contract for the sale of goods as well as for the transfer of these goods from the buyer to the seller.

When goods are transported by sea, a bill of lading or a seaway bill is involved.

Who are the parties to these bills? One can find four different parties mentioned on these bills.

They are the consignor, the carrier, the consignee, and the notify party. The notify party can be either the buyer, the buyer’s agent, or a third party.

As we have seen, trade between two parties involves a contract to this effect. This contract normally has two components to it –

  • the contract to sell (contract of sale) and
  • the contract to transport the goods sold to the buyer (contract of carriage).

The contract of sale would include the amount to be paid for the goods, the mode of payment, etc.

Details on arrangements for the transport of these goods and who pays the transport charges, whether it is to be borne part by the seller and part by the buyer, or completely by one party, mode of payment for the transport, all these come under the contract of carriage.

One notable feature of both these contracts is that while the contract of sale refers to the two parties as seller and buyer, the contract of carriage would refer to these two parties as a consignor and the consignee.

The contracts may be prepared separately or clubbed together under one contract.

Who is the Notify Party?

Normally the consignee and the notify party will be the same, but there are occasions when these two are different parties.

The notify party can be the consignee, the clearing agent at the destination port, or it could a third party who has been promised the goods by the original buyer or consignee.

It could also be the consignee’s customer to whom the goods have been sold during the transit of the cargo from origin to destination. In general terms, the consignee is the party who makes payment to the seller towards the purchase of cargo. But the same consignee need not always be the one receiving it.

Ultimately, the consignee whose name and address are shown on the bill of lading or seaway bill under the field of the consignee is the address to which the consignment will be delivered.

The field of the consignee on the bill will show the name, address, and contact phone numbers of the owner of the goods.

When the notify party is different from the consignee on the bill, the notify party is only to be informed of the ETA (expected time of arrival of the vessel) so that he may fulfill his actions to clear and deliver the goods to the consignee on time.

The ocean carrier would go by valid instructions from the shipper and show the notify party accordingly on its carriage documents such as the bill of lading or seaway bill.

It is the shipper’s duty to provide complete and correct details of the notify party to the carrier’s office. Most countries allow multiple notify parties to be shown on a bill.

There may be more than one ‘notify party’ on the bill in cases where the party receiving the goods and the clearing agent are different. This may be the case with letters of credit where the beneficiary and the clearing agent are both mentioned under the notify party field.

Notify party on the bill may also show the contact details of an indenting agent or buying agent. These are normally agencies who operate on a commission-basis where they offer to sell the customer’s goods or source it on their behalf.

Notify Party, Modes of Payment, and Incoterms

Payment may be made in-advance or upon-delivery (COD – Cash on Delivery). It could be in installments as agreed between the shipper and buyer.

There may be the involvement of financial institutions like banks whereby one bank gives a guarantee for payment by the buyer, to another bank upon the fulfilling of certain conditions. This is known as a Letter of Credit.

There are several other methods of payment that come under the Incoterms. Incoterms are a set of terms and rules published by the International Chamber of Commerce (ICC) once every ten years to regularize international trading rules and terminology. The most recent set of incoterms was published by the ICC this year (2020).

Once these formalities are completed, the buyer or the party who is legally entitled to the goods has to receive the goods on time and in good condition as agreed.

The notify party mentioned on the transport bill is usually the one who is entrusted with clearing the cargo upon its arrival at the destination port.

Sometimes the consignee or the notify party will require information regarding the cargo right from the moment the goods leave the premises of the seller for purposes of planning.

The bill usually refers to the shipper as a consignor and the buyer as a consignee. The bill of lading is issued by the ocean carrier to the shipper and it serves as a receipt of the cargo onboard the ship as well as gives ownership of the cargo to the consignee.

The consignee may be changed during the transit of goods by the necessary endorsement of the bill by the consignor or original consignee. The bill of lading or seaway bill is a legal document that is signed by the authorized signatory of the ocean carrier.

Unlike the bill of lading, the seaway bill does not allow for the transfer of the ownership of cargo to another party, once it is prepared. In the case of a seaway bill, the ocean carrier is bound to deliver the cargo only to the consignee mentioned on it.

What does the field of notify party show in the shipping document?

Since this is the party who needs to be informed upon the cargo reaching its destination, it would show the name, address, and contact phone numbers of the notify party.

Sometimes the notify party is informed as soon as the vessel leaves its point of origin with the cargo.

In a bill of lading or seaway bill, it is not mandatory to fill the field of notify party if the consignee and notify party are the same.

Hence, this field can sometimes be found blank on such bills. In the case of a seaway bill, the notify party field is usually left blank or the consignee’s name, address, and contact details are repeated in this field.

Responsibilities of the Notify Party

Notify party is usually responsible for all formalities that would help with the timely clearance of the cargo upon its arrival at the destination port.

Normally the shipper or ocean carrier or their agent will inform the consignee and the notify party of the location of the shipment, its ETA, and other relevant details.

However, one point to be noted here is that the ocean carrier, in most cases, will not accept responsibility for this though it is done by them usually in good faith.

This cannot mean that the notify party can wait complacently without following up with the carrier. It is one of its main duties to follow-up on the arrival, check on the release of clearance documents from the bank if terms of trade are by letter of credit, etc.

Failure to inform the notify party can lead to several unintended consequences for all the parties involved – especially the customer at the receiving end.

In certain cases, the notify party is given access to the ocean carrier’s cargo tracking system that would track and show the specific cargo position from the moment it is loaded onboard the carrier, till the authorized customer takes receipt of it.

Repercussions of Information Failure

A smooth and clear flow of information is an important factor in the shipping of any consignment. Failure to inform relevant parties or failure to stay informed can result in delays and problems. The points given here can have a compounding effect with one failure resulting in another and so on.

Delay in Clearance

When the notify party is different from the consignor or consignee and these parties fail to inform the notify party about a carrier’s ETA, it may not be able to complete port customs formalities and other arrangements on time. This can often lead to clearance delays. Undue delay in clearance can result in storage charges or damage to the cargo.

This is where the role of a pro-active clearing agent comes in handy. They will follow up regarding a shipment with the ocean carrier or its agent at the destination port and complete the necessary documentation and make arrangements in advance to facilitate the timely clearance of the consignment.

Delay in Arrangement of Inland Haulage

The inland transport is usually arranged by the notify party or the clearing agent. If the notify party does not receive information on the vessel arrival and the discharge of cargo, it may not be able to make arrangements for transporting the consignment from the port to the consignee’s premises.

Breakage in Supply Chain

When warehouse storage space is at a premium, storage is calculated and planned according to cargo arrivals and also based on their movement out of the warehouse.

Unusual delays in clearance as a result of failure to inform notify party can adversely affect these calculations and planning, throwing the company’s supply chain out of gear.

Lean supply chains and JIT (Just-in-Time) operations are the most affected by delayed deliveries.

Out of Stock Situations and Failure to Deliver on Time to Customers
Failure to inform notify party and delay in subsequent clearance of consignment causes out-of-stock situations both for seller/distributor and his customer. Unless a robust forecasting method that takes into account healthy buffer stocks, is in place, delays can have a serious effect on business.

Overstock Situation

When the notify party does not clear and deliver cargo promptly to the customer, other than creating an out-of-stock situation, it can also result in a situation of overstocking at a later point in time.

This is caused especially when the gap between shipments is short and the next shipment in the pipeline arrives. In such cases, both shipments have to be cleared one after the other to avoid storage or other charges.

Damage to Cargo

Cargo may be of different types. Some of them have an unlimited shelf-life while others may have a long or short shelf-life. Shelf-life is calculated as the number of days from the product’s date of manufacture till its expiry.

It is the life of the product calculated in the number of days. It is sometimes shown as BBD (best before date) or UBD (use-by date) on the product label. Delays to clear such cargo by the notify party can result in shortened shelf-life or even expiry of the product.

Cargo that is susceptible to damage due to temperature fluctuations and humidity should be stored under the correct, specified conditions. It is therefore important that the notify party clears or arranges to clear the cargo on time using the proper equipment and transport as specified by the consignee.

These days most of the shipping companies, consolidators, and even clearing agents provide online tracking facilities to their customers. It shows the movement of the customer’s cargo handled by them.

The shipper, consignee, and notify party are given access to this online tracking based on their specific shipments and their requirements.

Most of the major companies also have customer service desks that operate 24×7 to help the customer with their queries on cargo shipments. Lack of information can no longer be held as an excuse for performance failure.

Source: Marine Insight

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