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Bill of Lading

In to-days overseas business transaction, the growing use of “Bill of Lading” as an effective instrument is a reality. Now execution of an export or import consignment between two countries or two continents cannot be imagined without the use of Bill of Lading. A bill of Lading is a classic document generated by a shipping line or its agent which serves as an evidence of contract between the person (shipper/exporter) shipping the goods, the carrier and the receiver of goods (buyer). B/L contains details of merchandise shipped onboard the vessel which is acknowledged and duly signed by the Master of the vessel on behalf of the owner. The B/L certifies the condition of goods loaded onto the vessel with some notation/endorsement, assigns title to the goods and makes carrier responsible to release the merchandise to the holder of the title or a named party at the destination port. The functionality of B/L signifies the importance of B/L in the overall shipping & freight chain. B/L is considered as a unique document in the international trade because of its three important characteristics / functions viz i) It acts as an evidence of very good contract of carriage of goods by sea ii) It is a proof of receipt of goods on board the vessel including its quantity and condition iii) B/L acts as a legal document of title to the goods without which goods cannot be delivered at the final destination port.

The bill of lading has to be prepared exactly in accordance with what has been described in the letter of credit. It is the responsibility of the shipper/seller to ensure that the shipping company issues bill of lading as per exact requirements of letter of credit immediately after completion of shipment. Once the job is done, shipper submits the B/L along with other documents as stipulated in the credit, to the negotiating bank for collection of fund from issuing bank (buyer’s bank). If the complying presentation of documents is found all right by the issuing bank, then the payment is made.

Classification of Bill of Lading

Based on the above mentioned functions / characteristics, there are various types of Bill of Ladings in the market, which are described as under:

Ocean Bill of Lading
In shipping the most commonly used and familiar document for transportation of goods across the international water, is an Ocean Bill of Lading. International trade now a day cannot function without this vital document. An ocean bill of lading serves as a legally binding document between the shipper and carrier with regard to it’s role as a contract of carriage and receipt of goods as well. It also serves as a proof of ownership (Title) of goods and may be used either in a negotiable or non-negotiable form. An ocean bill of lading is commonly used in negotiable form in the letter of credit transaction (L/C), which may be bought, sold or traded before the goods are received by the original consignee or remain in transit. It also severs as valuable supporting document for settlement of claims for compensation against damage, delay or loss of cargo. The rights, responsibilities, and liabilities of the carrier and the shipper under an ocean bill of lading (normally printed on its back) are governed generally either by the older Hague rules, or by the subsequently adopted Hague-Visby rules. The term Marine Bill of Lading is also used in the international trade as a substitute of Ocean Bill of Lading.

Straight Bill of Lading
Straight bill of lading is a special type of B/L in which goods are consigned to a designated party. That means there is no scope to transfer the title or ownership of the goods through endorsement to any other party. Due this special characteristic, it serves as a “Non-negotiable & Non-transferable” document. The carrier is under obligation to deliver to goods only to the named consignee mentioned in the B/L at the destination port, upon surrender of all the original Bills of Lading issued. This kind of B/L is widely used in shipping industry.

An Order Bill of Lading
Contrary to straight bill of lading, an order bill of lading is one in which goods are consigned to the order of a named party or order of consignee. That means ownership of goods covered under this type of B/L, can be transferred from one party to another by endorsement. This kind of B/L is also termed as ‘Negotiable Bill of Lading’. Generally goods are shipped under ‘To order B/L’, where payments have not been received in advance from buyer. Carrier’s destination agent may release the goods to the actual holder, against surrender of at least one of the issued originals and after thoroughly checking the endorsements on the back of the bill of lading.

Seaway Bill of Lading
A seaway bill of lading has similarity with straight bill of lading as the seaway bill does not confer title of the goods to the bearer. As such it is also considered as a non-negotiable document. But seaway B/L is different from straight B/L on following grounds.

  • A seaway bill is issued to facilitate overseas movement of goods between the two offices of the same company located in two different countries. For example a pharmaceutical company in USA may request for issuance of a seaway B/L for shipment of medicines to their overseas sale office in Europe.
  • Even if shipment takes place between two different companies, no negotiation is required between the two either directly or via bank for release of the cargo.
  • The carrier automatically releases cargo to the consignee, once the import formalities are duly completed.
  • No original B/Ls are issued in this case and therefore no surrender is required.
  • The shipper is not required to submit original B/L to anyone to secure/realise his payment.
  • Since no originals are issued in this type of B/L, the release of the same is termed as ‘Express release’ and embodied in the body of the B/L.

Seaway B/L fulfils the first two roles but does not satisfy the third role i.e. document of title, as the document is non-negotiable.

Multimodal Transport Bill of Lading
When a multimodal transport bill of lading is issued, it involves multiple modes of transport from the Place of Receipt to the final Place of Delivery (aircraft, rail, ships, trucks etc). In other words, this kind of B/L covers door to door shipment of containerized cargo using different means of transportation from origin to the destination.

Through Bill of Lading
A ‘Through bill of lading’ has resemblance with ‘Multimodal transport bill of lading’, as the shipment of cargo under such B/L, uses different means of transportation from origin to destination & ensures door to door shipments. But the main difference between a Through B/L and a Multimodal B/L is that the principal carrier under Through B/L is only liable for its own phase or leg of journey. The carrier acts as an agent on behalf of the service providers who arranges inland movement of the cargo for ‘Pre-carriage’ & On-carriage’ phase of the total journey. So the carrier is liable for any damage or loss of cargo for his particular leg of journey.

Port to Port Bill of Lading
When a B/L is issued as a Port to Port B/L (also known as Ocean Bill of Lading), the carrier’s responsibility begins at the port of loading and ends at the port discharge. Therefore it is not necessary to fill-up the boxes like Place of Origin / Receipt and Place of Destination / Delivery in order to avoid carrier’s liability.

Received for shipment bill of lading
Bill of lading of this type, if issued by carrier only server as a receipt of goods accepted for shipment on a named vessel and does not certify their placement onboard the vessel. This is a situation where goods have arrived at the port of loading before arrival of the vessel. This kind of B/L is not considered as perfect B/L and is replaced by ‘shipped on board bill of lading’, when goods are actually loaded on board.

Clean Bill of Lading & Claused B/L
When merchandise is received by the carrier or shipping line in good condition for loading onboard the vessel, then the carrier denotes the B/L as ‘Clean bill of lading’. Generally goods are loaded into container by shipper either at shipper’s premise or at inland container depot (ICD) under the supervision of custom and port authority and Master are not at all involved in the loading process. That’s why Master of vessel accept cargo with comments that the goods have been received in apparently good condition & use / stamp notations “SAID TO CONTAIN” & “SHIPPER’S LOAD-STOW AND COUNT” in B/L to safeguard their interest. If B/L is issued without any adverse comment about the condition of cargo, it means that it is a ‘Clean B/L’. On the other hand, if the carrier detects some missing item or damage of goods before loading, then they record the information on the face of the B/L in terms of statement. Recording such statement (clause) on the body of B/L turns it into a ‘Claused bill of lading’ and it is not normally accepted by the ‘Letters of credit’ as a valid negotiable document.