Bills of Lading (B/L)

A bill of lading is a document of title. A bill of lading acknowledges that the goods have been placed on board a particular vessel [or truck or other conveyance] for delivery to a specific destination. The B/L states the terms in which the goods are to be carried. The bill of lading serves as the contract between the shipper and the carrier. It stipulates where, when, and by whom goods are to be delivered and freight charges paid, and may transfer ownership of the goods.  Thus, the bill of lading acts as a contract defining the terms of transport. 

Straight Bill of Lading

If labeled non-negotiable or "straight," the transportation carrier must deliver the bill of lading only to the consignee named in the B/L. Thus, the bill of lading serves as both as a receipt of the goods and an agreement to transport the goods to a specific destination and consignee in return for payment of transportation charges. A straight bill of lading "short form" may be prepared in several formats. Each of these formats provides the required information for the movement of goods by motor carrier (truck), rail, rail and water, or other combined modes of transportation. Although shippers generally use the simplified short form, carriers file a bill of lading "long form" with the appropriate authorities. The long form has numerous terms and conditions printed on the reverse side. The short form generally has no such terms printed on the reverse side but, by reference, the terms are still binding on the shipper.

"To Order" Bill of Lading

A bill of lading "to order" is made out to the order of the shipper, and endorsed by the shipper either in blank or to a named consignee. The purpose of this type of bill of lading is to protect the shipper against the consignee obtaining possession of the goods before the consignee has paid or accepted the draft. For example, a steamship company will not deliver goods covered by a "to order" bill until ownership is proved by presenting the original endorsed bill of lading.

Problems exist in connection with "to order" bills of lading for Latin American countries, where delivery of incoming cargo is the function of the customs authorities and is not entrusted to steamship lines or their agents. The laws of a few Latin American countries prohibit "to order" bills of lading, and in some other Latin American countries, these bills are not accorded the same protection as in other parts of the world, notably in Europe and the U.S.

In shipping parlance, a distinction is made between a bill of lading made out to the order of the shipper and a bill made out to the order of the consignee. The latter bill does not give the shipper as much protection as a bill drawn to its own order. As a rule, when a bill of lading is to the order of a consignee, the consignee can get the goods from a steamship line by posting a bond without presenting the bill of lading.

Negotiable Bill Of Lading

When a bill of lading "to order" is endorsed in blank (signed on the reverse), it becomes negotiable and the carrier will deliver the goods to the party that presents it. While all original bills of lading (full set) are negotiable, one alone is sufficient to obtain the goods. On the other hand, if bills are drawn to order of the consignee, only their endorsement makes it negotiable. If they are drawn to order of the shipper, then the shipper must endorse it before it can be transferred and, therefore, before the goods it represents can be conveyed to a third party. The endorsement itself can be made to a specific third person or firm, a bank, or in blank.

While one endorsed copy is sufficient, the full set of originals should be endorsed. Along with the original endorsed bills of lading, the remaining copies generally are kept by the shipper and carrier for their records.

Where collection and payment is through banking channels, as under a letter of credit or documentary collection, negotiable bills of lading are required (except for air shipments). The exporter must endorse the bill of lading and deliver it to the bank in order to receive payment.

For customs purposes, the holder of an endorsed bill of lading is considered the owner of all the goods specified on the bill of lading, and the B/L itself is regarded as the best evidence of the right to make entry. Some countries require legalization of the bill of lading by their consul at the place or port of shipment to give official proof of the bill of lading's accuracy regarding:

• The origin of the merchandise,
• The quantity,
• The value, and
• The mode of shipment of the goods.

Ocean Bill of Lading

An ocean bill of lading is a contract between an exporter and an international carrier used when transporting goods overseas by ship. It serves as the receipt for goods delivered to a steamship vessel and specifies the conditions and terms of carriage, and the character, weights, measurements, and destinations of the goods shipped. It also specifies the person or company to whom the goods are consigned or who is to be notified of their arrival. Ocean bills of lading are issued as straight bills of lading or "to order" bills of lading.

An ocean bill of lading does not convey title to the goods until it is properly endorsed. It is created by the shipper and must be based on the dock receipt, which the steamship line issues when it receives the cargo. The dock receipt is then exchanged for the bill of lading. Usually, three (3) bills of lading are signed, although the various shippers may ask for more unsigned (and therefore not negotiable) copies for different purposes.

The ocean bills of lading are of two classes: (1) "received for shipment" and (2) "shipped" or "on board." A "received for shipment" bill is issued for a named steamer in which space has been previously reserved and the goods are in the possession of the steamship company. An "on board" bill is issued only after the goods have been loaded on the vessel. Banks often stipulate "on board" bills of lading when issuing a letter of credit.

The ocean bill of lading may be used as a negotiable document and as the basis of a draft drawn to order of the shipper. Drafts or bills of exchange to which are attached a shipper's invoice, ocean bill of lading, and an insurance policy are commonly used in making foreign-trade financial settlement. A number of copies of the bill of lading may be necessary, of which at least two are negotiable if settlement is by draft. The shipper is usually required to prepay all freight charges before the steamship company surrenders the bill of lading.

While the steamship companies generally require prepayment, some foreign forwarders accept goods for shipment "freight collect," paying the freight for the manufacturer or exporter.

Original Bill Of Lading

In most cases, three (3) original bills of lading are issued, known as the "set" or "full set." The carrier marks the total number originals on each bill issued. When negotiating the originals, the bank will require the full set, although one properly endorsed B/L is sufficient to obtain the goods. If delivery is made against one of the bills of lading, the others are automatically rendered void.

Full Set Bill Of Lading

When more than one negotiable bill of lading is issued, the total number issued is marked on each individual document. Banks generally insist on receiving the total number of bills issued, or the "full set." The Steamship Company and shipper generally keep extra copies.

Foul vs. Clean Bill of Lading

A bill of lading is called "clean" when it does not bear any superimposed clause or annotation expressly declaring the goods or packaging damaged or defective. In contrast, a bill of lading is called foul when it shows by marginal notes, rider, or otherwise that all or part of the shipment to which it refers are in bad condition or damaged. A foul bill of lading creates difficulty with banks when intended as collateral.

Through Bill Of Lading

A through bill of lading covers shipment on one (straight or to order) bill from point of shipment to point of destination, and involves transportation by more than one carrier. It also refers to a bill of lading issued by a steamer from port of shipment to either an out port or to a point inland in the country of destination, including any transshipment.

Air Waybill

An air waybill is a bill of lading that covers both domestic and international flights transporting goods to a specified destination. It establishes the terms between a shipper and an air transportation company for the transport of goods. Included in the document are the conditions, limitations of liability, shipping instructions, description of commodity, and applicable transportation charges. In addition, the air waybill is a non-negotiable document that serves as a receipt for the shipper, indicating that the carrier has accepted the goods listed and obligates itself to carry the consignment to the airport of destination according to specified conditions.

Edited by Michael C. Dennis