What is a bill of lading?
We read and see the word bill of lading cited frequently in trade documents; especially when there are cross border transactions.
A bill of lading will set out a list of the cargo which the ship is carrying as a receipt; this is provided by the master of the ship to the person who is consigning the goods. We sometimes see that it is abbreviated to be BoL or B/L. It is issued by a carrier of goods to acknowledge that they are in receipt of a cargo for shipment.
What is the criteria for a bill of lading?
There is the requirement for a bill of lading to be negotiable, and it is widely seen to have three main purposes:
- a definitive receipt (goods are loaded)
- terms of carriage contract
- document of title to goods
Bills of lading are used to make sure that exporters are paid and importers receive goods. We will also usually see a policy of insurance and invoice for the goods. It is important to note that a bill of lading is negotiable, but a policy and invoice are assignable.
How bills of lading transferred?
A bill of lading is transferable by endorsement or by the lawful transfer of possession. A carrier must issue a bill of lading to the shipper which sets out the specification, quantity, nature and quality.
What is a bill of lading used for?
It is a contract with conditions attached which is signed by the owner of the ship when the product is loaded. There is an acknowledgement of the receipt of products, with the undertaking to deliver goods at the end of the shipment.
Bills of lading meaning
We see that the easiest way to understand a bill of lading is that it is a receipt document provided to the shipper. Bills of lading or BLs are title document that can be traded in the same way as goods are.
Tracking and proof of a Bill of lading
Bills of lading come into use when goods are moving and a transfer of title happens. Therefore they are used as a receipt; which is issued by the carrier when the product has been loaded onto a vessel. We constantly see BLs mentioned when looking at proof of shipments; especially in relation to customs and insurance. It is also used as commercial proof to show agreements have been fulfilled.
A bill of lading is used as a carrier’s receipt in relation to the product that is being carried.
There are two types of bill of lading:
- On board bill of lading: this is when there is no discrepancy in what the description of the shipper sets out and the product that is actually on the vessel.
- A clean bill of lading: shows that goods have been loaded on board. However, if the carrier realises that the bill of lading is different from goods on board then evidence can be cited on the clean bill of lading.
Note: That once the bill of lading is transferred to a third party, there is no possible way to mark a discrepancy.
A claused bill of lading: is when one can see a difference between the description in the bill of lading and the product that is presented. Therefore it will only be marked where the product was loaded in this type of bill.
A bill of lading is used as goods are transferred between the carrier and the shipper; so they are used to show that a contract of carriage has been effected and upon receiving the goods they will usually undertake to deliver them.
Bill of lading – document of title
A bill of lading is usually classed as a document of title when the purchaser of goods is receiving product from the carrier.
We usually see bills of lading classed in two areas; being a straight BL and a to order BL. A straight BL is issued in favour of a specific named consignee; which is importantly not negotiable.
Conversely, an order BL is where there is no specific consignee; which is outlined on the document. Thus, this type of BL can be transferred or negotiated to be in favour of another party.
Why are there 3 Bills of lading issued?
It is not always the case that three bills of lading are issued; the number used is stated on the bill. The traditional number is three; as one will be taken by the shipper, the consignee and the other is usually taken by the lender or another party. However, it is preferred to have less BLs; as the increased number creates a higher chance of releasing goods to the wrong party and fraud.
Trade Finance Global along with their partner funders assisted us by clearly explaining how a new financing structure worked. This was when we were working on a shipment of metals travelling from Singapore to India. They clearly set out the documents that were to be sent by the supplier to us (as the buyer). This included the purchase order, packing list and bills of lading. The lender also had to receive these documents and would only make payment upon their receipt. However, in relation to the bills of lading, they would make payment upon receiving the copies of these documents.
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