What is a Bill of Lading..??

What is a Bill of Lading..??

Bill of Lading (abbreviated to B/L) is one of the MOST important documents in the whole shipping and freight chain..

Although I have written several articles under the category of bill of lading, I thought it would be a good idea to dedicate an (rather lengthy) entire post to this document, so here goes..

image for document of titleA bill of lading has 3 basic purposes or roles..

  1. Evidence of Contract of Carriage
  2. Receipt of Goods and
  3. Document of Title to the goods

Let’s examine these roles in more detail..

1) Evidence of Contract of Carriage – emphasis on the term “Evidence“..

Many people think that

  1. a bill of lading is a Contract between the Seller and the Buyer
  2. a bill of lading is a Contract of Carriage between the Carrier and Shipper

Both notions are wrong..

The contract between a buyer and seller was already established when the buyer placed the order with the seller and they both discussed and agreed (verbally or in writing) the what, where, when, how and how much of the transaction in detail..

The contract between a shipper and the carrier was already established when the shipper or his agent made a booking with the carrier (shipping line) to carry the cargo from A to B..

The B/L is the EVIDENCE of the contract of carriage entered into between the “Carrier” and the “Shipper or Cargo Owner” in order to carry out the transportation of the cargo as per the sales contract between the buyer and the seller..


2) Receipt of Goods – emphasis on the term “Receipt“..

A B/L is issued by the carrier or their agent to the shipper or their agent in exchange for the receipt of the cargo.. The issuance of the B/L is proof that the carrier has received the goods from the shipper or their agent in apparent good order and condition, as handed over by the shipper..

3) Document of Title to the goods – emphasis on the term “Title“..

It means that the goods may be transferred to the holder of the B/L which then gives the holder of the B/L, the rights to claim the goods or further transfer it to someone else..

Based on the above roles, there are several variations of the B/L (let’s call it Types), important among which are as below..

1) When a B/L is issued in Original(s) to a “named” consignee it is referred to as a “Straight B/L” and a straight B/L is a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT..

Release of cargo at destination may be issued ONLY to the named consignee and ONLY upon surrender of at least 1 of the original bills issued..

This B/L satisfies roles 1 & 2 above fully and does not satisfy role 3 (Document of Title) as the document is not negotiable or transferable..

2) When a B/L is issued to a “named” consignee but without any originals it maybe considered as a “Seaway B/L“.. This B/L is also a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT..

A Seaway B/L is usually issued

  1. for inter company shipments like from ACME Company Hollywood to ACME Company in the Middle of the Australian Outback or
  2. where the shipment takes place between two different companies but there are no negotiations required between the two either directly or via bank for release of the cargo and
  3. the shipper doesn’t need to submit an original B/L to anyone to secure his payment

Since no originals are issued in the case of a Seaway B/L no surrender is required and the release may also be termed as an Express Release and is mentioned as such on the body of the B/L and manifest..

This B/L satisfies roles 1 & 2 above and does not satisfy role 3 (Document of Title) as the document is not negotiable or transferable..

3) When a B/L issued is in Original(s) and consigned “TO ORDER” or “TO ORDER OF SHIPPER” or “TO ORDER OF XYZ BANK” it is termed as “Negotiable B/L or Order Bill“..

Image of mascot holding bill of ladingOne of the most important aspects of a B/L is that it can be used as a negotiable instrument for payments between a buyer and seller using Letter of Credits.. You can read how a Letter of Credit works here..

A negotiable B/L must be treated like gold and due care must be taken not to lose it.. There are several cumbersome procedures to be followed if an original B/L is lost..

Another notable feature of this type of B/L is that it contains the Terms and Conditions of the Carrier on the 1st Page of the B/L.. The 1st page is what we all commonly refer to as the “back of the B/L”.. Seaway bills issued by some carriers do not have these Terms and Conditions on the back (also known as “blank back short form B/L“)..

Destination port agent may issue release of cargo only after at least 1 of the issued originals are surrendered and after checking the endorsements on the back of the B/L as it is possible for this type of B/L to be endorsed or transferred to another company.. This B/L satisfies all of the above 3 roles.. Read the permutation and combination regarding the consignee in one of my previous articles..

There are also various ways in which the B/L is termed or titled, the purpose of which is to identify the carriers responsibility in terms of the carriage..

Below are some of the ways in which a B/L is termed or titled..

1) Port to Port B/L – When a B/L is issued as a Port to Port B/L (also known as Ocean B/L), the carrier’s responsibility begins at the port of loading and ends at the port of discharge and therefore the Place of Origin/Receipt or Place of Destination/Delivery should not be mentioned in the B/L.. Read – Parts of a B/L – Part 2..

2) Combined Transport B/L – When a B/L is issued as a Combined Transport B/L, it involves multiple modes of transport from the Place of Receipt to Place of Delivery and all these movements are carried out as a single contract by multiple service providers under the employ of the carrier..

Carrier takes responsibility for any loss or damage for the entire transport including the sea and other mode of transport..

When a B/L is released as a Combined transport B/L, the boxes like “Pre-Carriage by”, “Place of receipt by pre-carrier”, “Place of delivery by on-carrier”, “On-Carriage by” etc will be filed in..

Read – Intermodal vs Multimodal – what is the difference..??

3) Multimodal Transport B/L – Same as Combined Transport B/L..

4) Through B/L – Similar to Combined Transport B/L except that in the case of the Through B/L, the carrier is directly responsible only for the sea leg and for the inland movement they act as an agent in arranging the inland movement..

The terms on the Through B/L issued by the carrier will specifically state this, in such a B/L..

When a B/L is released as a Through B/L, the boxes like “Pre-Carriage by”, “Place of receipt by pre-carrier”, “Place of delivery by on-carrier”, “On-Carriage by” etc will be filed in..

Another misconception that most people have is terming a bill as Telex Release B/L.. There is no such term.. Read more about what a Telex Release is by clicking this link..

Do you know of any other document as versatile and varied like a Bill of Lading..!!

What did you think of the above article..?? Comment below..

52 comments on “What is a Bill of Lading..??

  1. Dan says:

    Question regarding CPU. Manufacturer is ‘delivering’ goods to customer at the manufacturers dock FOB Origin. Goods are loaded onto customers transport (either customer truck or independent hauler representing end customer). Manifest / Packing List is generated regarding goods loaded on transport. Customer / Customer Representative signs in acceptance of delivery of goods, legal ownership is transferred at that point. Who is responsible for BOL document?
    If the Manufacturer does provide a BOL (customer courtesy, if you will) what, if any, risks does that imply for the Manufacturer.

  2. muditha kuluppuaratchchi says:

    very good !

  3. valli says:

    Hi,

    Please advice whether the originals should be printed over the liner stationary paper or is there any practice that they print in normal A4 sheet and put a stamp on that.

    1. hassan says:

      Hi Vali

      the paper used for line b/l like money paper . has serial number AND also you can identify if b/l paper is Fraudulent ort not

      THanks

      Hassan

  4. XERMON says:

    HOW TO MAKE A BL?

  5. andy says:

    Hi Hariesh, very good work! One question:
    I’m buying goods in China, and selling directly to a customer. I don’t want my customer to see the name of the factory, so how can I put a different name in the Shipper?
    Thanks,

    1. Hi Andy, shipper on bill of lading need not necessarily be from the country of export, but that of course depends on the country of origin and their regulations.. So if your exporting country’s regulation allows it then you can do so..

  6. James says:

    Hi Hariesh, thank you for this informative piece. i have a question about customs clearance on through BL. If I have booked a container under TBL terms to an inland destination, who is repsonsible for the customs clearance into the final destination country? The carrier or me? Thanks

    1. The customs clearance is the responsibility of the client at the border posts.. On the TBL, the carrier may assist with the clearance using their 3rd party service providers, but the documents and all info must be provided by the client..

  7. Rijal says:

    Hello, i want ask something

    When a shipment sail with a three different ocean shipment (japan – taiwan; taiwan malaysia; malaysia – indonesia)
    Is need a through bl or just ordinary bl
    Thank you

  8. Shahid Reza says:

    Hariesh could you please explain the Advantages of ‘ To Order ‘ B/L over the other B/L’s ?

    1. Sumon says:

      By mentioning “To Order” on B/L, will secure the mutual interest of both seller and buyer through bank channel and if any failure of settling the payment, there will be legal authentic action, if require.

  9. yu130 says:

    May you please further expand on the meaning behind evidence of contract of carriage.

    1. mohamed imchichi says:

      As already highlighted above, this means that a contract is already in place and agreed between sellers/shippers and buyers/receivers and it also means the shippers/chrtrs have already signed a contracy with shipowners (voyage charter party) to transport the goods to the buyers.

  10. Chris says:

    With a straight bill of lading can the shipment change carriers?

    1. Hello Chris, what do you mean by change carriers..?? Pls elaborate..

  11. ridz says:

    What is cargo documentation?

  12. Darrel Silva says:

    The contents here are great teaching resources.

    I have some doubts of ORDER BoL’s. We know that an order bil can be sold to a third party.
    Let say the seller shipped the cargo and then surrendered his bol and collected his money from bank as per letter of credit. Can he now sell the cargo which is on the ship? If so how will he endorse the back of it.

    1. Hello Darrel, in order for cargo covered under a TO ORDER bill of lading to be to be released, the To Order party (either bank, shipper or customer) has to endorse the bill of lading.. Once the OBL has been endorsed and handed over to the endorsee, the title passes to the endorsee and the endorser has no further hold over the cargo so he cannot sell that cargo anymore.. Also remember that even if ONE original of a set of say 3 OBsL has been endorsed and duly discharged, the other two are deemed null and void..

    2. Darrel Silva says:

      Thanks so much Hariesh. But i am still confused. Once the original shipper puts the cargo on board he then surrender his OBL to the bank to get his money. Is that correct in the first instance? If so, Since he has surrendered ( or cancelled) his BL there is no way that he ( the original shipper) can make an endorsement on the back to sell it to another third party Am i right in this Hariesh.

    3. Hi Darrel, a bill of lading is consigned based on what the shipper (or seller) wants to do with the cargo.. Say for example he has a CAD (Cash Against Delivery) arrangement with a buyer and he knows the consignee for many years and they have mutual trust, then the seller can issue a bill of lading showing the buyer as the consignee.. This bill then becomes a Straight Bill of Lading and is not Negotiable or Transferable.. Only the consignee on the bill of lading can take delivery..

      Lets say the seller wants to sell it to a Trader who then wants to sell it to someone else, then the bill of lading may be consigned “To Order of the Trader”.. Once the trader has paid the seller, the seller will give all the issued original bills of lading to the trader.. The trader will then endorse it to whoever he has finally sold the cargo to..

      In the case of an LC involved, the seller will consign it “To order of the Bank” as is indicated in the LC.. Once the vsl has sailed, the seller will hand over all the issued original bills of lading to the bank who will check all documentation as per the LC and if it is fine, will pay the seller and then they will negotiate with the buyer and/or their bank on who the cargo must be released to..

      The shippers endorsement on a bill of lading is required ONLY if the consignee is shown as “To order of Shipper” in which case seller will endorse it to whoever he is finally selling the cargo to.. Once he has a buyer and the buyer has paid him, he will endorse the bill to the buyer and after that the shipper has no hold over the cargo as the title has passed to the buyer.. In this case of “To order of Shipper” normally there is no LC or bank involved..

      Trust this clears your confusion..

      Also if you search for Letter of Credit in my blog, there are several articles that will clarify these things further..

  13. mohammad isa says:

    wow..your article is better than listening to my lecturer..hehe. i am doing an assignment regarding bill of lading and and just happen to visit this blog.simple and informative.

    1. Thank you Mohammad.. I am glad you found it helpful.. Please pass the word around to other students like yourself so everyone can benefit.. 🙂

  14. shaji kommoth says:

    excellent

  15. Yogesh Acharya says:

    This article is really great… Thanks

  16. Jadeja Mihirdev says:

    Nice work will help many, Thank you Hariesh

  17. TSN says:

    Thanks Hariesh for useful information on this blog.
    About B/L, do you think a ship liner can issue Seaway B/L and then Straight B/L without asking Seaway B/L to be surrendered?

    1. Hi TSN, as mentioned in the post, since Seaway bill is not issued in original, there is no question of surrendering it..

  18. Sir,

    Pardon me for the delay due to Hindu New Year celebrations here in Gujarat, India.

    Sir, what you point out is perfectly true, the ‘eMethod’ in no way diminish the importance of documents in international trade and they do have a solid legal foundation.

    However, the ease and speed paperless transactions provide are certainly needed these days particularly when exchange of emails conclude a contract in couple of hours across the globe.

    While digging more on ‘BOLERO’ which stands for “Bill of Lading Electronic Registry Organization’, I found ‘eUCP’ also now in practice since couple of years involving not only advising of LCs but presentation of documents also in electronic form including BOLs which are accepted and payments are released.

    May be this new window is yet not familiar to small business houses, but the prospects of LC documents presentation without their physical journey across continents do suggest a lot of relief from the anxiety of timely submissions or more time available for amending the documents for assured payment.

    I am yet not able to understand how in actual practice ‘eUCP’ works. Kindly explain the salient features in the lucid way only you can do.

    Regards,

    Mahesh

  19. Karthik says:

    Hareish you are doing an excellent work!!! Keep it up!!

  20. steve says:

    OB/L is a very important document, the person who have full set on hand is the legal owner of cargo.
    some forwarder don’t understand what this document represent and think that it is only a “paper” but reality is not that

  21. Hi!

    Can you please share some information on use of electronic paperless BLs in practice now?

    Mahesh

    1. Hi Mahesh, you probably are referring to Seaway Bills that are issued electronically and paperless..Just a copy of the bill of lading generated from the system sent to client and discharge port agents..

      Since a Seaway bill of lading is not negotiable, such practice is accepted..

      There are of course lines that allow clients to print their Original Bills of Lading signed electronically, however for such bills, it is still required for the Originals to be PRINTED and surrendered physically.. For such negotiable, straight or order bills, electronic bills are not yet allowed..

    2. Mahesh says:

      Sir,

      What I am referring to is eBL. There had been a project named ‘BOLERO’ initiated by ICC & SWIFT. However, I found a private organization providing cloud based solutions like eBL. The portal is http://www.bolero.net

      How safe & simple these solutions are?

      Regards,

      Mahesh

    3. Hi Mahesh, so far the only Electronic Bill that I have heard of or has been in the news much, is the one issued for Cargill for their shipment of soyabeans earlier this year from Argentina to Spain.. However I am not sure what type of bill of lading has been issued – a Negotiable Bill or a Seaway Bill..

      It would be interesting to hear how the banks and trade bodies function with the EBL..

      As far as I could see, whoever is involved in the logistics chain relating to that particular shipment has to be registered for handling this EBL.. The site you mentioned also says that they have successfully used the EBL..

      This could well be the future and whether a bill of lading is issued using paper or electronic resource, I personally don’t foresee the importance, role and requirements for the release of the bill of lading change.. Only the method of issue might change..

  22. Rebecca says:

    Hi Hariesh, long time listener, first time caller 🙂

    Thanks for the excellent & informative article. There are a couple of things I wanted to share from my experience in exports (3 years exporting from Australia mainly to southeast Asia). The one thing I’ve found to be consistent across shipping lines and importers is that they are extremely INCONSISTENT with terminology and practices relating to bills. Even employees of the same company may have a different understanding of what a bill of lading actually is and how it is used.

    ‘Telex release’ vs ‘express release’ vs ‘waybill’ is one issue that’s caused our company headaches. Many of our customers and even some shipping lines use express release to refer to telex release. And in the past, customers have insisted that we amend the waybill to an express or telex release so they can collect the cargo – whether this is due to their own unfamiliarity with a waybill or the destination shipping line refusing to deal with waybills is unclear.

    Also worth noting: some lines have additional telex release fees while an express release remains free, and others will charge for a late amendment to a waybill but will telex release the bill at no cost. Or there might be extra paperwork for a telex release, but none for an express release… etc. An express release bill and a telex released bill are functionally identical for our company and for our customers but it’s a very important distinction to the shipping line.

    I suppose the moral of the story is that international trade always keeps you on your toes!

    1. Hi Rebecca and welcome to the blog.. I agree with you with regards to the consistency of issuance of bills and also the terminologies.. All this stems from a lack of understanding of the role of each document.. I hope I was able to clarify the roles of the various types of bills in existence..

      Might be a good idea to forward the link to this article to all those clients and shipping lines that had the confusions.. 🙂

  23. Dan says:

    Another great post!

    1. Thanks Dan, glad it is useful..

  24. Clare says:

    what is a Warsaw waybill or bill of lading ?

    1. Dhiraj Kumar says:

      Good work. Very informative indeed.

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