What is a Bill of Lading (B/L or BoL) in Shipping?

What is a Bill of Lading (B/L or BoL) in Shipping?

What is a Bill of Lading?

The word ‘lading’ means ‘loading’. It refers to the loading of cargo aboard a ship. Simply put, Bill of Lading or BoL or B/L is a receipt.

The document acknowledges that the carrier (or the agent) has received the goods (cargo or shipment). Though the British term refers strictly to shipping, the American definition is not as strict and can be applied to the transportation of any type of good.

To ship any cargo, a BoL is required and acts as a receipt and a contract. A completed BOL legally shows that the carrier (agent) has received the shipment as described and is now contractually bound to deliver the goods in good condition to the consignee.

It is a standard-form document that is transferable by endorsement or by legal transfer of possession.

Bill of lading
Bill of lading

Why is a Bill Of Lading important?

The information in a bill of lading documents the actions of the carrier through out the shipment. Information like where the shipment is going, the piece count, how it has been billed, and also how the freight has to be handled on the dock and trailers. It could be on a prepaid or collect basis.

A BoL serves these purposes:

  1. As cargo receipt: This is the primary purpose of a B/L. It acts as a receipt issued by the carrier (or an agent) when the shipment is fully loaded onto the vessel. A B/L is used as a proof of shipment for customs, insurance and also as a proof of fulfilling a contractual obligation.
  2. As evidence of the contract of carriage: The B/L from the carrier (or the agent) to the shipper can be used as an evidence of the contract of carriage. It is proof that the carrier has received the goods and upon the receipt, the carrier would deliver the goods. In this case, the B/L would be used as a contract of carriage.
  3. As title: When the buyer is entitled to received goods from the carrier of the shipment, the B/L acts as a document of title for the goods.

Different types of bill of lading

1. Bearer BoL

It is a bill stating that delivery shall be made to the party holding the bill. The creation of such a bill may be explicit or if an order bill fails to nominate the consignee then it can be considered as one whether in its original form or through an endorsement in blank. A bearer bill can be negotiated by physical delivery.

2. Straight BoL

This is used when the money for the goods has been paid in advance and so a carrier needs to deliver the correct merchandise to the right party.

3. Order BoL

When shipping merchandise prior to payment, a carrier is required to deliver the merchandise to the importer. Under such a situation order bill lading is used and at the endorsement of the exporter the carrier may transfer title to the importer. These order bills of lading can be traded as a security or they may be used as collateral against pledged loans.

4.  Surrender BoL

Here the importer does not pay the bank until the maturity of the draft under the relative credit which works under a term ‘import documentary credit’. The bank releases the documents on receipt from the negotiating bank but the importer waits till the maturity. This direct liability is called Surrender Bill of Lading. (SBL)

5. A clean BoL

This is one which states that the cargo has been loaded on board the ship in apparent good order and condition.

6. Claused bill of lading

It is also known as a soiled bill of lading. Such a bill of lading bears a clause or notation suggesting that the goods were received by the carrier in poor or damaged condition.

The why of bill of lading

Particularly related to the case of a buyer, the bill of lading is used as a document of title. Suppose a buyer is supposed to receive goods from a carrier. The bill of lading then acts as the document of title for the goods. Two types of bill of lading can be used as a document of title. They are straight bill of lading and order bill of lading.

Legally, a seller cannot sell anything that is not solely entitled to him. So if the goods he is trying to sell turn out to be encumbered, maybe due to mortgage or charge or is stolen property, the bill of lading will prevent him from being granted the full title of the holder.

The bill of lading can also be used as an evidence of a contract of carriage between a carrier and a shipper. Basically, when a bill of lading is used as a cargo receipt, it is issued by the carrier when the goods have been loaded onto the vessel.

Conclusion

So far the maritime industry has been reliant on paper. Despite the inefficiency that comes associated with paper bills of lading the community has shied away from electronic bill of lading (eB/L) which is the legal functional equivalent of a paper bill of lading, due to their traditional nature. However, it has been proposed that Blockchain technology is the answer to the necessity for speedy, hassle-free and reliable trade transaction.

 

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