What is a consignee? All you need to know about the consignment process

A consignee is the receiver of the goods or shipment. If you’re the consignee, you pay for the goods, and the fees may also include customs duties and freight taxes (this depends on your arrangement with the consignor).

It’s crucial to understand the role and duties of a consignee. This way, you’ll avoid costly mistakes and help protect yourself from legal liabilities. It’s also crucial to learn about different terms commonly used in the import, export, logistics, and eCommerce businesses.

Table of contents

• What is a consignment?
• What is the difference between consignor and consignee?
• FAQ
• Conclusion

What is a consignment?

In a consignment, the sender (consignor) and receiver (consignee) agree to a transaction. This agreement usually includes:

• Product details (e.g. product type, quality, quantity)

• Delivery information (e.g. date of delivery, name and contact information of the sender and receiver, destination port, packaging, handling instructions)

In other words, a consignment is an arrangement between the sender and receiver regarding the delivery and receiving of goods. For example, if you’re buying products from a manufacturer overseas, you and the manufacturer get into an agreement about your purchase of goods. In this case, you are the consignee (importer), and the manufacturer is the consignor (exporter).

For that transaction to happen, a third party or carrier is also involved. Their role is to transport the goods on behalf of the consignor. This carrier specialises in the transport and handling of products so that the consignor can focus on manufacturing and the consignee can focus on retail sales and distribution.  

What is the difference between consignor and consignee?

In a usual consignment, these are the roles and parties:

• Consignor (seller, sender, shipper, exporter, manufacturer, wholesaler)

• Consignee (buyer, receiver, importer, distributor, retailer)

• Carrier (transporter, logistics company, freight forwarder, forwarding agent)

What happens is that the consignee (buyer) orders products from a consignor (seller). The carrier organises the shipment and transportation (gets the goods from the seller and delivers them to the buyer).

Those parties have different duties (e.g. who pays for what, who is liable, who is in charge). This way, the roles of each one are clear, and the transaction and payment will be properly processed.

Duties of a consignor in trading

If you’re the consignor or seller, your ultimate goal is to help ensure that the consignee or buyer receives the order as agreed. To accomplish that, your roles and duties are:

• Picking of the goods as per the customer order

• Packing and labelling (including handling instructions and hazardous goods)

• Documentation (certificate of origin, health certificates, other permits and certifications)

• Arrangement of labour and transport of goods to the port

• Insurance

• Payment of all freight dues

• Collation of shipping documentation

Let’s talk about those in detail.

Picking of the goods as per the customer order

As the consignor, seller, shipper, exporter, manufacturer, or wholesaler, you’re in charge of picking the goods from the warehouse or storage area. As per the customer order, the product type, quality, and quantity should be accurate. If the customer order doesn’t match what the buyer received, the buyer (consignee) may reject the shipment (as a result, the consignor won’t get the payment).

Packing and labelling

The consignor also has to properly pack and label the goods. The goal here is to help maintain the products’ quality and condition during transport. The cartons, boxes, or containers should adequately protect the goods from exposure and impact.

In addition, the packaging should include product details and handling instructions (and should be properly labelled if they’re hazardous goods). This way, the carrier can properly handle the shipment and ensure that transport conditions are appropriate to the products’ type, quantity, and quality.

A third party might do the packing and labelling if the consignor outsources the task. The consignor should still ensure everything’s done according to instructions before the carrier transports the goods.

Documentation including certifications

The consignor has to secure the required certifications and customs clearance so that the goods can leave the port of origin and get accepted at the destination port. For example, the destination country usually requires a certificate of origin from the exporting country’s Chamber of Commerce or other authorised agencies. Health certificates might also be required, especially if the products are food items.

Arrangement of labour and transport of goods to the destination port

It’s the consignor’s role and duty to arrange for the transport of goods. The consignor may handle all the necessary loading and unloading or outsource it to a third party. The consignor will also choose and coordinate with the carrier or forwarding agent.

Insurance

The consignor or consignee can arrange and pay for the insurance depending on their agreement. This depends on whether the Incoterm® is C&F (either consignor or consignee can arrange the insurance) or CIF (consignor covers the Cost, Insurance, and Freight). Incoterm® means International Commercial Terms that define the roles and responsibilities of the consignor and consignee.

Payment of all freight dues

Before the cargo leaves the port of origin, the consignor must pay the carrier immediately or later, depending on their arrangement. The consignor should settle all the dues for the smooth processing and transport of the shipment.

Collation of shipping documentation

This means the consignor must collect and send the bill of lading, certificates, and other necessary and important shipping documents to the consignee. The consignee or receiver needs those documents to receive the cargo and process payment.

Duties of a consignee

If you’re the consignee, your role is to receive and collect the goods from the carrier. Payment of customs duties, taxes, and other fees depend on the agreed Incoterm®. For instance, if the agreed Incoterm® is DDU (Delivered Duty Unpaid), the buyer, consignee, or receiver must pay the import duties. On the other hand, in DDP (Delivered Duty Paid), the seller, consignor, or sender must pay the duties, taxes, and clearance.

It’s also the consignee’s role to ensure that the goods are received as agreed. The consignee has to inspect the products’ type, quantity, quality, and packaging before the goods leave the destination port and arrive at the buyers’ own premises. This way, any defect or discrepancy can only be traced back to the carrier or original consignee.

FAQ

What is an ultimate consignee?

In an international shipment, for example, multiple and intermediate receivers and carriers might be present. The ultimate consignee is the final receiver of goods.

Why is my supplier asking me about the notify party?

If you’re the consignee or someone else who has to receive the shipped goods (e.g. clearing agent, authorised third party), you are the notify party. Multiple notify parties might be present or required, or only the consignee should be notified, depending on the arrangement.

Adding a notify party can help (but it is not necessary) in the timely receiving and proper processing of the arrived goods. This way, the receiver or consignee can know immediately that the goods have arrived and are ready for pickup.

Is notify party and consignee the same?

Not necessarily. The notify party could be another entity assigned by the consignee to receive the goods on their behalf. It’s also possible that the notify party is an intermediary that has to inform the ultimate consignee about the arrival of the goods (or someone that has to know about it for recording and insurance purposes). In many cases, the consignee and notify party are one and the same.

When should you add a notify party to the bill of lading (BL)?

It’s not necessary to add a notify party to the bill of lading (although the supplier may still ask for it). The field for notify party can be left blank. That’s because most times, the notify party and the consignee are of the same party. A notify party might only be necessary when other entities also need to know about the shipment (e.g. freight forwarder, trader, insurance provider).

Conclusion

As a recap, the consignee is the receiver of the goods (while the consignor is the sender). For your reference:

• Consignee (buyer, receiver, importer, distributor, retailer)

• Consignor (seller, sender, shipper, exporter, manufacturer, wholesaler)

• Carrier (transporter, logistics company, freight forwarder, forwarding agent)

If you’re the consignee or receiver, your role is to receive and collect the goods once they arrive at the agreed destination. You also have to inspect the goods and ensure they arrived according to the agreement (correct product type, quality, quantity, condition, packaging, handling, and other details).

If you’re the consignor, it’s usually your duty to arrange for transport and pay for the fees (this depends on your agreement with the consignee and the agreed Incoterm®). You may outsource some or most of the tasks depending on the availability of your staff and equipment.

With a proper understanding of the different shipping terms, the roles and responsibilities of the consignor and consignee, and relevant information about the consignment, you’re better equipped to handle transactions related to import, export, and eCommerce. And because you know your role, you also know your duties and responsibilities. This will help you better understand your rights, know what you’re paying for, and ensure smooth transactions in the long term.