What is a Bill of Lading in Shipping?

The term ‘Bill of Lading’ (BOL) is of ancient English origin and literally means ‘list of cargo’. It is one of the essential legal documents generated during the shipping of overseas bound cargo and acts both as a contract as well as a receipt between the shipper and the carrier.

Essentially, a BOL serves as a receipt for goods that change hands from the exporter to the carrier. It also acts as a contract between the shipper and the carrier for the carriage of goods, particularly in the absence of a separate contract to that effect.

A bill of lading is issued by the carrier and, in doing so, he acknowledges that the goods have been received from the shipper/exporter in good condition.

Functions of the Bill of Lading

  1. Evidence of contract between shipper and carrier - Proof that there is an agreement between parties.

  2. A receipt that the goods have been loaded - Usually the ship's master/captain verifies the receipt and forwards it to the seller's agent.

  3. Document of the title of goods - The Buyer receives the goods by verifying the title of goods at the port. Due to this function, the document can be used to avail advances/loans from financial institutions

  4. A master bill of lading is also the unique number for the shipping company to identify the given shipment. This number is also used for Tracking the container during shipment.

What is the Purpose or Importance of BL in exports?

Once the goods are shipped, the physical possession shifts from the exporter to the carrier. At this stage, the exporter may not have yet received payment. This makes the BOL a crucial component of the transaction. Bills of Lading in International Trade, allows the exporter to hand over the control of the packages to the carrier, giving the exporter indirect control over the goods during its transportation phase.

The BOL is also important for the shipping of goods because the information it holds influences various activities. This could include the destination of the shipment, the number of packages in the consignment, billing details, payment recovery instructions/details, and special instructions regarding the handling of the packages at the docks or in the trailers.

Who issues the bill of lading?

In a typical trade transaction, there are 2 bills of lading issued. One is issued by the CHA or the freight forwarder or the NVOCC. This is called the House Bill of lading that is typically linked to the Master Bill of Lading but not as legally enforceable

The master bill of lading, on the other hand, is issued by the shipping company, also referred to as the Vessel Operating Common Carrier to the seller or any of their nominees depending on the incoterms under which the product is being exported.

For example, under delivered at place (full article link), the seller is responsible for delivering the goods only till the point of first port, so the buyer is the consignee and vice versa for CIF incoterms full article link as the responsibility for duties, insurance etc lies with the seller.

Negotiable and Non-negotiable BL

Negotiable BL (Signed)

A negotiable bill of lading is transferable to a third party. It instructs the carrier to deliver the goods to whosoever is in possession of the original endorsed bill of lading. If the person receiving the goods does not carry the original document, the cargo won't be released from the port.

Non-Negotiable BL (Copy)

A non-negotiable bill of Lading is marked for for specific buyers, consignees, receivers, and agents or to whomsoever the goods may be shipped. It does not designate the possession of the goods by itself, so it must be accompanied by other documentation procedures.

In order to authenticate the transaction, the person or entity to whom the bill of lading has been assigned have to verify their identity at the time of receiving the goods.

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How much does a Bill of Lading Cost?

The cost is charged by the carrier of the cargo, the charges range from USD 5 to 20 Dollars approx. They are nothing but charges payable by the carrier of goods at the time of releasing BL. It includes all the documentation charges covered under the Bill of Lading.

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Types of BL

Bills of Lading can be of various types, depending on the terms and conditions and circumstantial requirements that it signifies. Here are 15 different types of Bills of Lading (BL):

  1. Clean Bill of Lading is provided by the shipper or its agents and does not bear any attestation regarding the defective nature of the goods on board.

  2. Claused Bill of Lading indicates that there is damage to the consignment or that all or part of it is missing altogether.

  3. Switch Bill Of Lading A switch bill of lading is used when the seller wants to conceal the information of the supplier from the buyer.

  4. Received for Shipment Bill of Lading is an acknowledgement provided by a carrier before the vessel loading with an approved receipt of goods for shipping.

  5. Through Bill of Lading allows the carrier to transport a shipment through multiple modes/ distribution centres and may include an Ocean Bill of Lading and/or an Inland Bill of Lading.

  6. Master Bill of Lading is a document issued by carriers for their shipping companies, indicating the terms of transportation and details of the shipper or consignor, consignee, and the person in possession of the goods.

  7. House Bill of Lading is generated by a non-vessel operating company or ocean transportation intermediary freight forwarder as an assertion of receipt of the goods shipped. Also known as Forwarder’s Bill of Lading, its issuance is meant for the suppliers on receipt of the shipment.

  8. Short Form/ Blank Back Bill of Lading is required when the terms of the shipping contract are not mentioned in the original Bill of Lading.

  9. Straight Bill of Lading The Straight Bill Of Lading does not grant the endorsee with any better rights than those given to the endorser. Also known as a non-negotiable bill of lading, it may be considered unsafe in a banker’s point of view.

  10. Order Bill of Lading is one where the delivery is made in line with a further order from the consignee.

  11. Charter Party Bill of Lading signifies an agreement between a vessel owner and charterer for the shipped goods.

  12. Multimodal Transport Document (also known as Combined Transport Document) is a kind of Through Bill of Lading where land or ocean transportation is involved.

  13. Stale Bill of Lading is provided 21 days after the date of shipment (or other stipulated dates) for negotiation.

  14. Surrender Bill of Lading issues the term where the negotiating bank's receipt will have to provided to the bank to release documents.

  15. Bearer Bill of Lading allows delivery to be made to the holder of the bill; it can easily be negotiated by simply delivering the goods physically.

Contents of Bill of Lading (BL)

The exact contents of a BOL will vary on a case-to-case basis, depending on the type of BOL and/or the shipping and business terms. Some of the data you are likely to find in a typical BOL are:

  • Name and details of the shipping line

  • The Shipping bill number and date

  • Name and address of the shipper as well as the receiver, along with necessary contact details, plus a mention of the date to facilitate tracking of the shipment

  • Purchase order number or similar reference number; this makes it easier to cross-refer the agreed terms and conditions (E.g. the delivery terms, incidence of expense etc.)

  • Special instructions – this is an important section as it has all the extra service requests, terms and conditions, and reminders for the carriers

  • Description of the goods in the shipment, giving details of the units, their dimension, weight, content details etc.

  • Packaging details, which discloses information of the packaging and use of cartons, crates, pallets, and drums used for shipping

  • Freight classification, which determines the cost of the shipment

  • Indication of hazardous shipment, if applicable

  • Signature and initials of the concerned officer

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