The TT Club, in the latest issue of its magazine for members and brokers - House to House - has strongly advised its Members to be constantly alert to offers of new business that come from remote and strange sources. This follows a recent case which led to a freight forwarder facing legal action from a shipper after the discovery of fake letters of credit and other shipping documents.A freight forwarder in Shanghai received a fax from an unknown company in Hong Kong who claimed to be a "consolidator / forwarder" and offered them a new business opportunity involving the arrangement of some shipments from Shanghai to Chittagong. The consolidator alleged that they were introduced by another forwarder in South Korea and would like to nominate the Shanghai forwarder to ship out the goods from China, firstly to Hong Kong for consolidation, with a final destination in Bangladesh or Indonesia.

The shipment was arranged as instructed by the consolidator. The Shanghai forwarder was to issue its own through bill of lading covering the entirety of the intended voyage from Shanghai to Chittagong showing the buyer as the consignee. The forwarder then arranged an ocean voyage from Shanghai to Hong Kong with a shipping line, whilst naming the consolidator as consignee on the ocean bill of lading. The consolidator would take delivery of the cargo in Hong Kong and then arrange transhipment to the ultimate consignee in Chittagong after consolidation. The buyer in Chittagong issued a letter of credit.

This arrangement between the forwarder and consolidator went on smoothly for the first two shipments where all of the cargoes were of low value. The problem arose on the third shipment involving the transport of denim at a value of USD 500,000. The consignee shown on the forwarder's through bill of lading claimed that the cargo had never arrived. The shipper in China, who still held the full set of original house bills of lading, claimed that they had never received payment from the buyer because the letter of credit was a fake.

The Shanghai forwarder is now facing threatened legal action from the shipper for the full cargo value of USD 500,000. The buyer even suspects that the forwarder might have been involved in fraud with the consolidator regarding the particular shipment.

TT Club's Loss Prevention Director and editor of House to House, John Nicholls, makes the following recommendations:

"Never issue any bill of lading assuming responsibility for an entire voyage where you, in fact, have no control over part of the voyage. Carry out a thorough check on all new customers and business partners, including as much of the following as possible:

1) Date of foundation.

2) Parent, subsidiary and affiliate companies.

3) Licence details with renewal dates.

4) Details, and a copy of the company's liability insurance policy.

5) Membership of professional associations or organisations.

6) List of other clients and any letters of recommendation.

7) Directors' names and personal experience of the directors and senior staff.

8) Details of company's trading conditions, bill of lading, etc.

9) Claims record (last five years).

"Be constantly alert to offers of new business that come from a remote and strange source. In this case, the named South Korean forwarder had only a few business contacts with the Shanghai forwarder during 1995, but had had no such contacts during the past few years.

"When you have only limited information about your business partner, avoid issuing your own bill of lading but instead sign as agent on your partner's house bill of lading. If you do not have control over the entire voyage/transit, then do not issue documents that evidence such total control."

The TT Club provides liability and equipment insurance to ship operators, stevedores, terminal and depot operators, port authorities, logistics providers, freight forwarders and other transport operators in more than 80 countries. The Club insures over 2/3 of the world's container fleet, 1150 ports and terminals worldwide as well as 5636 intermodal operators around the globe. The Club's directors are drawn largely from the membership and have significant experience within the transport industry.

Formed in 1970, the TT Club is a mutual insurance association set up and run by the members. The Club's Board of Directors is drawn from the senior management of the world's leading transport operators who are themselves members of the Club. Together with the Club's team of international management staff they bring a wealth of experience to the organisation.

For further information about loss prevention issues please contact John Nicholls on +44 20 7204 2626 or email: john.nicholls@thomasmiller.com. For further information about the TT Club's publications, products and services send and e-mail to: London@ttclub.com.

In Argentina the TT Club representative is: TTMS (Argentina) SA - Paraguay 390 - Floor 9A - 1057 Buenos Aires. Tel: +54 11 4311 3407/09 - Fax: +54 11 4314 1485 - Email: marconie@satlink.com