The Bill of Lading is a legal document in shipping that records the traded goods received onboard. It establishes an agreement between a shipper and the transportation company (carrier). The carrier issues a Bill of Lading to the shipper, which has details about the goods being shipped, the starting point and destination of the shipment, and information about the shipper, carrier, and consignee, sources Marine Insight.
Importance of Bill of Lading
Bill of Lading is significant as it allows the person having it to rightfully claim the ownership of the cargo. It also serves as proof of a carriage contract, which mentions the responsibilities of the carrier towards the other parties involved in the transportation of cargo.
It is a contract between a carrier and shipper for the transportation of goods and also serves as a receipt issued by a carrier to the shipper.
The carrier need not require all originals to be submitted before delivery. Therefore, the exporter must retain control over the complete set of the originals until payment is effected, a bill of exchange is accepted, or some other assurance for payment has been made.
Hence, the bill of lading is considered a legal document that provides all the vital details to the shipper and the carrier to conveniently process the freight shipment through different maritime countries and invoice it correctly.
The carrier has an original copy of the bill of lading, and a copy should also be ascribed to the packaged freight.
What Details Are in the Bill of Lading?
- Name and official address of the receiver and the shipper.
- The Purchase order numbers, special reference/ invoice or reference numbers
- Instructions to help the shipper and the Consignee release the goods for pickup or are accepted at delivery.
- The date of the pickup to track the freight.
- Number of units being shipped, the NMFC freight class, the weight and dimensions of the products, and the nature of the cargo being carried.
- If the goods are hazardous, the Department of Transportation hazardous material designation is tagged, and it is cited on the bill to follow particular rules and requirements when shipping.
- The packaging details include crates, pallets, cartons, pills, drums, etc.
- Special notes or instructions for the carrier.
Negotiable and Non-negotiable Bill of lading
Negotiable bill of lading: In this type of bill, explicit instruction is provided to deliver the goods to anyone possessing the original copy of the bill, which signifies the title and control of the freight. In this type of bill, the buyer/ receiver or their agent has to acquire and present an original copy of the bill of lading at the discharge port. Without an original bill copy, the freight will not be released.
Non-negotiable bill: This type of bill of lading fixes a specific consignee/name of the receiver to whom the freights will be shipped and delivered. It, however, does not itself serve the owner of the goods. Under this bill, the assigned receiver/ buyers can claim the cargo by confirming their identity.
Different Types
There are different types of bills of lading depending on your shipping destination, type of cargo, and requirements. They can be classified based on execution and method of operation.
Based on execution
- A straight bill of lading reveals that the goods are consigned to a specified person, which is not negotiable, free from existing equities. It means any endorsee acquires no better rights than those the endorser holds. This type of bill is also known as a non-negotiable bill of lading, and from the banker’s point of view, this type of bill of lading is not safe. This type of bill is prominently used for military cargo.
- Open bill of lading —This is a negotiable bill of lading in which the name of the Consignee can be changed with the consignee’s signature and thus transferred multiple times. A switch bill of lading is a type of open bill of lading.
- A bearer bill of lading states that delivery shall be made to whosoever holds the bill. Such a bill may be created explicitly or an order bill that fails to nominate the Consignee, whether in its original form or through an endorsement in blank. A bearer bill can be negotiated by physical delivery. They are used for bulk cargo that is turned over in small amounts.
- Order bill of lading is a bill that uses express words to make the bill negotiable. This means that delivery is to be made to the further order of the Consignee using words such as “delivery to A Ltd. or to order or assigns. The cargo is only delivered to the bona fide holder of the lading bill, which must be verified by an agent who issues the delivery order and the verified bill of lading. The order bill of lading:
Based on the Method of Operation
- Received for shipment bill of lading–This bill is sent from the agent /charterer to the shipper. The endorsement of this bill ensures that the carrier has received goods but does not confirm it is onboard the assigned vessel.
- Shipped B/L – This bill of lading is Issued when cargo is loaded on board. It binds the shipowner and the shipper directly.
- A clean bill of lading states that the cargo has been loaded on board the ship in apparent good order and condition. Such a bill of lading will not bear a clause or notation that expressively declares a defective condition of goods and/or the packaging. The opposite term is a soiled bill of lading. It reflects that the carrier received the goods in anything but good condition.
- Through B/L – This bill of lading is a legal document allowing direct cargo delivery from point A to point B. The bill provides transportation of goods both within domestic borders and through international shipment as it serves as a receipt of the cargo, a contract of carriage, and sometimes title for the products as well
- Combined transport B/L – This bill gives information about cargo transported in large containers by sea and land, i.e. through multi-model transport.
- Dirty bill of lading: If the shipowner objects to “the condition of the cargo being in good order,” they can include a clause thereby causing the bill of lading to be “claused or dirty” along with the remarks as per the finding of the cargo condition, e.g., torn packing, broken cargo, shortage in the quantity of the goods, etc.
Advantages of Electronic Bill of Lading
- As there are no papers involved, it saves paper costs as well as the cost involved in sending the paper to a different destination by courier
- The electronic bill of lading can be transmitted instantaneously worldwide through an internet connection, enabling quick trade and ease of multiple ownership transfers during the cargo carriage.
- If any modifications are required in the bill, they can be made quickly and cost-effectively compared to the bill of lading paper system.
- If the electronic bill of lading system is drawn correctly, such as introducing audit trials, PIN, electronic signature, etc., it will be difficult to commit fraud.
Disadvantages of Electronic Bill of Lading
It is possible to negotiate and transfer possession of the paper bill, as it is evidence of the title of the goods. However, this is not automatically the case with the e-bill.
If the electronic bill system is not secured, it can be hacked, and the details can be manipulated at the hacker’s convenience, leading to fraud and loss of cargo.
Implementation of an electronic bill system across the industry needs consent from all the stakeholders, which will take time.
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Source: Marine Insight
