Every consignment involves a third-party operator that sells, transports or holds goods on behalf of another party that retains full ownership of the goods until they are sold.
There are two parties involved in every consignment process: a consignor and a consignee.
Who Is the Consignor?
A consignor is an individual or business that initiates and organizes the process of shipping their goods. A consignor is a seller or exporter and is often referred to as the shipper. The consignor selects the carrier or shipping company for transporting the goods to the importer or buyer. The shipping company issues a bill of lading to the consignor once the carrier receives the goods in an acceptable condition and is ready to ship them to the buyer. The bill of lading contains the details of all parties involved in the transfer of goods, including the consignor, consignee, notify party and the carrier.
Suppose Company X is a processed food manufacturer in the United States that wants to sell its products to Canada and Mexico. To do so, Company X enters into consignment agreements with dealers in Canada and Mexico and arranges to ship the processed foods to these countries. Company X is the consignor in this process, while the dealers are consignees who will sell the products on behalf of the consignor Company X. Company X will give the dealers a commission for every sale.
Why Is the Consignor Important?
The consignor initiates the shipping process once they either receive an order from the importer or enter into an agreement with a third-party vendor to sell their goods. The consignor retains the title or ownership of the shipment until they are received by the buyer.
Duties of the Consignor
The consignor has to fulfill the following obligations so that the buyer receives the shipment on time.
- Ensure proper documentation
The consignor has to secure necessary permissions and certificates for clearing goods at the destination. A certificate of origin may be required, which is issued by the Chamber of Commerce of the exporter’s country. If the consignor is shipping food products, a health certificate issued by the health department might be needed before beginning the shipping process.
- Transport goods to the origin port
The consignor is responsible for arranging the transport of goods from their warehouse to the origin port. This includes the tasks of loading and unloading goods and arrangement of any equipment needed for the same.
- Compile all shipping documents and send them to the consignee
The consignor gets the bill of lading and shipping bill from the carrier. Along with these documents, payment invoice, packing list, any certificates, and other documents for clearing custom duties and taxes are sent to the consignee.
- Arrange insurance cover for the shipment
Depending on the type of Incoterms agreed between the consignor and the buyer, the cost of insurance is covered by either party. If the Incoterms mentioned in the agreement is CIF - Cost, Insurance, and Freight , then the consignor covers the insurance of goods. In the case of CFR Incoterms, the consignee or the end-customer arranges the insurance for the goods during transit.
Other duties of a consignor are ensuring that any warnings for hazardous materials are communicated to the consignee and the buyer, sending timely commissions to the consignee, and solving any complaints and issues from the consignees.
Rights and Liabilities of a Consignor
The consignor retains the rights and title to the goods until they are transferred to the buyer. The consignor is entitled to make a claim against the carrier based on the terms and conditions in the contract of carriage. The contract of carriage defines the rights, liabilities, and duties of parties involved in the contract. In some instances, the contract of carriage and bill of lading are the same. In the event of loss or damage of goods during transit, the consignor has the right to sue the carrier under the contract of carriage.
The consignor will need the duplicate consignment note that they received when they handed over the goods to the carrier to file the claim. They also need to check that the reason for filing is not included in the “Carrier Exclusions to Responsibility” as outlined in the Carmack Agreement for interstate commerce in the United States. The shippers need to consult the Carriage of Goods by Sea Act (COGSA) for contracts of carriage by sea between the United States and foreign ports.
Who Is the Consignee?
A consignee is a party which receives the goods from the consignor. The consignee could be a middleman or the final buyer. Most times, the consignee is the final buyer of the goods. Sometimes, the consignee is not the final buyer of the goods but a ‘middleman’ or an agent who has been nominated by the final buyer to collect the goods on the buyer’s behalf. Typically, this role of middleman or agent, if given, is assigned to a freight forwarder. The consignee collects the goods from the carrier, completes clearance formalities like custom duty payments, and arranges for transport to their warehouse. If the consignee is the final buyer of the goods, then the ownership of the goods is transferred to them. The bill of lading mentions all the details of the consignee and might include a notify party in the document.
A notify party is informed of the arrival of the goods by the carrier so that they can arrange arrival formalities. Usually, the notify party and consignee are the same entities but sometimes, the notify party can be a clearing agent, buyer, or any third party.
Why Is the Consignee Important?
The consignee is the receiver of goods in a shipping transaction. The consignee’s name is specified in the bill of lading to ensure that the goods being shipped are handed over to the correct party. Whether the consigner is the final buyer or not, the ownership and liability of the goods are transferred to them once the goods are received by them.
Who Does a Consignee Interact With?
The consignee interacts with the following parties when processing shipments:
If the consignee is the final buyer, they will interact with the consignor who is an exporter or seller responsible for dispatching the requisite items to the consignee, by entering into an agreement with them.
Once the goods arrive at the port of final destination, the consignee has to present the bill of lading to the carrier to collect the shipment.
3. Notify Party
In some cases, the consignee is not able to be physically present at the destination port to receive the goods. A notify party is an entity that will be notified when the shipment arrives to arrange customs clearance and inspect the shipments.
4. Customs Authorities
The consignee interacts with port customs authorities to pay taxes and custom duties, fees to customs authorities and complete customs clearance at the port.
Duties of the Consignee
The responsibilities of the consignee in the shipping process are as follows:
- Receive and inspect the goods upon arrival at the destination port
- Complete port paperwork and customs clearance
- Verify the labeling of the shipment
- Transport the shipment to their warehouse
- Ensure proper categorization and segregation during storage
Rights and Liabilities of a Consignee
The rights and title to the goods as specified in the contract of carriage are passed from the consignor to the consignee once the consignee completes the payment of goods. The contract of carriage transfers the exclusive right to demand delivery of the goods to the named consignee. The consignee has the right to make a claim under the contract of carriage against the carrier if the goods are not delivered or have been damaged during transit.
A freight forwarder can be listed as the consignee on the bill of lading. In such cases, the rights and liabilities will be transferred to the freight forwarder. But if the freight forwarder has not consented to being listed as the consignee, the carrier cannot enforce the terms of the contract if the freight forwarder does not take or demand the delivery of goods or exercise any of the rights of the consignee.
Difference Between Consignor and Consignee
Consignor and consignee are at the two ends of the shipping process and differ in their definition and duties.
1. Is the Consignor the seller?
The consignor is the seller but the consignor name mentioned in the shipping bill could be different when the seller contracts a third party to arrange the packing and transport of goods. The actual seller that deals with the buyer remains the same. The change in the consignor name is agreed upon before making the sale of contract between the buyer and the seller.
2. Are all Consignees buyers?
In most cases, consignees are buyers of the goods. Sometimes, they are middlemen that facilitate the trade between exporter and importer.
3. Is Notify Party and Consignee the Same?
The consignee can be the notify party, or another third party can be entrusted with the duties of the notify party.
4. Can the Consignee be the Shipper?
The shipper and consignee names can be the same in the bill of lading when the shipment is between two international branches of the same company.