Bill of lading
A bill of lading (sometimes abbreviated as B/L or BoL) is a document issued by a carrier (or his agent) to acknowledge receipt of cargo for shipment. In British English the term relates to ship transport only, and in American English to any type of transportation of goods.
A bill of lading must be negotiable, and serves three main functions:
- It is a conclusive receipt, i.e. an acknowledgement that the goods have been loaded; and
- It contains or evidences the terms of the contract of carriage; and
- It serves as a document of title to the goods, subject to the nemo dat
Bills of lading are one of three crucial documents used in international trade to ensure that exporters receive payment and importers receive the merchandise. The other two documents are a policy of insurance and an invoice. Whereas a bill of lading is negotiable, both a policy and an invoice are assignable.
A bill of lading is a standard-form document that is transferable by endorsement (or by lawful transfer of possession). Most shipments by sea are covered by the Hague Rules, the Hague-Visby Rules or the Hamburg Rules, which require that the carrier MUST issue to the shipper a bill of lading identifying the nature, quantity, quality and leading marks of the goods.
In the case of Coventry v Gladstone, Lord Justice Blackburn defined a bill of lading as “A writing signed on behalf of the owner of ship in which goods are embarked, acknowledging the receipt of the Goods, and undertaking to deliver them at the end of the voyage, subject to such conditions as may be mentioned in the bill of lading.” Therefore, it can be stated that the bill of lading was introduced to provide a receipt to the shipper in the absence of the owners.
Types of bills of lading
Bills of lading may take various forms, such as on-board and received-for-shipment.
- An on-board bill of lading denotes that merchandise has been physically loaded onto a shipping vessel, such as a freighter or cargo plane.
- A received-for-shipment bill of lading denotes that merchandise has been received, but is not guaranteed to have already been loaded onto a shipping vessel. (Typically, it will be issued by a freight-forwarder at a port or depot). Such bills can be converted upon being loaded.
- A straight bill of lading is used when payment has been made in advance of shipment and requires a carrier to deliver the merchandise to the appropriate party.
- An order bill of lading is used when shipping merchandise prior to payment, requiring a carrier to deliver the merchandise to the importer, and at the endorsement of the exporter the carrier may transfer title to the importer. Endorsed order bills of lading can be traded as a securityor serve as collateral against debt
“Claused” bills of lading
A bill of lading that denotes that merchandise is in good condition upon being received by the shipping carrier is referred to as a “clean” bill of lading, while a bill of lading that denotes that merchandise has incurred damage prior to being received by the shipping carrier would be known as a “foul” or “claused” bill of lading. A claused bill of lading will have a statement (clause) written onto the bill of lading noting down any damage or other issues. Letters of credit usually will not allow for foul bills of lading, and the buyer is not obliged to accept any bill of lading that is not clean.
Bills of lading and charterparties compared
A charterparty governs the relationship between the shipowner and the charterer. The bill of lading governs the relationship between the shipper and the carrier (who will be either a shipowner or a demise charterer). If the exporter (the shipper) is shipping a small amount of cargo, he will arrange for a carrier to carry the goods for him, using a bill of lading. If the exporter needs the whole (or a very substantial part) of the ship’s cargo capacity, the exporter may need to charter the vessel, and he will enter into a charterparty agreement with the shipowner.
If the charter party is a time or voyage charterparty, the shipowner will still have control of the ship and its crew. If there is a demise (or “bareboat”) charterparty, the charterer will effectively have a long lease and will have full control of the vessel. If the master (the captain) issues a B/L to a shipper, he will be acting as an agent for the carrier, who will be either the shipowner (time or voyage) or the charterer (demise).
In a time-charterparty or voyage-charterparty, if the charterer is shipping his own cargo (rather than the cargo of a third party) he will receive a bill of lading from the master, acting as agent of the shipowner; but that B/L will serve solely as a receipt and document of title, and its terms will (subject to contrary intent) be secondary to the terms of the charterparty, which remains the dominant contract.
Sea waybills and electronic data interchange (EDI)
Under Art. III of the Hague-Visby Rules, a carrier must, on demand, provide the shipper with a bill of lading; but if the shipper agrees, a lesser document such as a “sea waybill” may be issued instead. In recent years, the use of bills of lading has declined, and they have tended to be replaced with the sea waybill.
The main difference between these two documents is that the waybill does not confer title of the goods to the bearer, and as a result there is no need for the physical document to be presented for the goods to be released. The carrier will automatically release the goods to the consignee once the import formalities have been completed. This results in a much smoother flow of trade, and has allowed shipping lines to move towards electronic data interchange which may greatly ease the flow of global trade.
However, for letter of credit and documentary collection transactions, it is important to retain title to the goods until the transaction is complete. This means that the bill of lading still remains a vital document within international trade.
If a so-called bill of lading is declared to be “non-negotiable”, then it is not a true B/L, and instead will be treated as a sea waybill.
Electronic bill of lading
For many years, the industry has sought a solution to the difficulties, costs and inefficiencies associated with paper bills of lading. One answer is to make the bill an electronic document. An electronic bill of lading (or eB/L) is the legal and functional equivalent of a paper bill of lading. An electronic bill of lading must replicate the core functions of a paper bill of lading, namely its functions as a receipt, as evidence of or containing the contract of carriage and as a document of title.
Sea Based Bill of Lading