8 points to consider before you sign a bill of lading

If you are just about to sign a bill of lading or you already are a bill of lading signatory in your organisation, then you definitely have to read this.. This article references bill of lading as it applies to containerised trades and not to other trades..

Before we go to the main part of the article, here is a refresher to those who may still be unclear about the purpose and roles of a bill of lading..

A bill of lading has 3 basic purposes or roles (in no particular order of importance)..

 

Role 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 incorrect..

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..

 

Role 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..

 

Role 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..

In my previous article, I also discussed that a bill of lading may be issued as a

  • Straight Bill of Lading
  • Negotiable Bill of Lading or a
  • Sea Way Bill of Lading

If the bill of lading is issued as a Straight Bill of Lading or a Negotiable Bill of Lading, then it would be issued with one or many original bills of lading with an original signature..

Over the years there have been several different types of bills of lading (Ahmet Aytoğan from Turkey actually collects the various types bills of lading) used in the different trades such as container, bulk, break-bulk, tankers etc etc, but as mentioned above, the points in this article are about containerised shipments..

There are several technicalities to be considered before signing a bill of lading and if you are the bill of lading signatory, here are 8 points that you need to be aware of..

 

1) Use the correct stationery – First and foremost you need to check that the bill of lading that you are about to issue is the right bill of lading stationery..

Why is this important..??

Sample container bill of lading

Image from Hapag Lloyd

When I mean stationery, I mean the pre-printed bill of lading form that shows the logo of the carrier issuing the bill of lading (sample of Hapag Lloyd Bill shown here) and the various parts of a bill of lading containing the details of the shipment on Page 2 and the Carrier’s terms and conditions on Page 1 (yes the Terms and Conditions page is Page 1)..

These terms and conditions are approved by the carrier, by regulatory authorities, by insurance companies, by government authorities etc..

As shipping is a dynamic business there may be changes in the details required or in the terms and conditions of the bill of lading from time to time..

Some of the carrier’s bills of lading may not be registered with say for example FMC and therefore cannot be used for shipments to USA and if you do issue this bill of lading, then you as a carrier may have problems filing the manifest in USA..

Some of the carrier’s bills of lading have specific sequence numbers for security reasons and if the incorrect stationery is used, it may impact on the carrier’s liability and applicability of the terms and conditions..

So the issuing authority – whether it is the Master of the ship or the agent of the carrier must always ensure that the stationery used is correct and is the latest version of the document..

If you are issuing an Original Bill of Lading, then you need to ensure that the bill of lading issued is not a short form/blank back bill of lading..

Any original bill of lading issued must have the terms and conditions not just to protect the carrier, but also to convey the terms, conditions and liabilities to the merchant..

 

2) Verify the address details – While the details on the bill of lading are submitted by the customer, it is of paramount importance that the carrier also verify the details shown on the bill of lading..

Why is this important..??

While it is not the business of the carrier to figure out if the shipper is consigning the goods to the correct consignee, the signatory must check that at least the consignee or notify mentioned on the bill of lading is from the same country as the destination..

There are several countries like Ethiopia, Brazil etc where the consignee or notify must be based in Ethiopia or Brazil as per their regulations..

If the bill of lading is issued without this check, there is a possibility that the manifest submission at POD may be delayed which could also affect the berthing and operation of the ship on the whole..

You can read more about the importance of these address details in Part 1 of the parts of a bill of lading series..

 

3) Verify the cargo particulars – The cargo particulars of the shipment should also be verified and matched with the details given at the time of booking, before the bill of lading is signed..

Why is this important..??

This is important because there are a lot of unscrupulous customers who may book a cargo that is allowed for carriage by the carrier but end up shipping and declaring something else on the bill of lading..

These customers also work on the fact that this comparison between booking and bill of lading may not be done by all carriers/agents and is often overlooked..

For example, the customer may book cargo as “Trophies” (which could refer to sports trophies) and end up packing, loading and shipping “Hunting Trophies” which may be banned by the POD..

Now you have a container sitting with prohibited goods on board your ship and while you as a carrier may be able to charge the client for the additional costs, you also may go through a lot of unnecessary hassles and service disruptions due to this..

For special cargo such as reefers, hazardous, out of gauge cargo the bill of lading should reflect details such as carrying temperature, dimensions of the out of gauge, hazardous class and UN Nos..

Due care must be taken to ensure that these details on the bill of lading match the details given by the customer at the time of booking, at the time of cargo movement into the port, and also the approvals received from various quarters..

 

4)  Ensure cargo is received for shipment or shipped on board – Always check that the correct vessel information and clause is reflected on the bill of lading…

Why is this important..??

bill of lading stamps

In cases where the shipper is requesting the bill of lading to be claused Received for Shipment the carrier should have received the container(s) under their custody before the bill of lading is issued..

In cases where the shipper is requesting the bill of lading to be claused Shipped on Board, the container(s) should have been definitely loaded on board the ship before the bill of lading is issued..

As explained in Part 2 of the parts of a bill of lading series, there is an area on the bill of lading where the details of the performing ship must be shown..

Whether the bill of lading shows Received for Shipment or Shipped on board, it is important for the signatory to verify that the container(s) listed in the bill of lading are in the port stack allocated to the ship (in the case of Received for Shipment) or actually loaded on board the ship (in the case of Shipped on Board) before the bill of lading can be issued..

Ideally, the signatory must see such proof before signing the bill of lading.. The proof maybe in the form of port print outs or online views..

 

5) Check the protective clauses – Protective clauses such as “shipper’s load, stow and count” , “said to contain” etc are generally pre-printed in the stationery but it would be good to check..

Why is this important..??

Especially in container trade, the carrier is not privy to the actual contents of the container and has to rely on what the customer declares as the containers are packed at the shippers WH or premises and the carrier has no way of knowing what or how much they packed..

These protective clauses safeguard the carrier’s interest in case of any misdeclaration by the customer including any misdeclaration of weights which has been the bane of many carrier’s existence..

Ensure clauses/notations such as CLEAN ON BOARD are not handed out willy/nilly.. There are several implications of issuing Clean on Board Bill of Lading which you need to be aware of..

The person signing the bill of lading acknowledges the description, quantity and quality of the goods loaded and recorded on the bill of lading..

Any bill of lading signed with the knowledge of facts that are misrepresented may be considered to be a fraudulent document and may result in legal consequences for the signatory..

 

6) Non-inclusion of commercial terms – Commercial terms relating to the sales contract etc does not form part of the bill of lading and ideally should not be included in the bill of lading..

Why is this important..??

Incoterms

You may have heard the familiar cry “Help, carrier refuses to show commercial information relating to the cargo on the bill of lading“.. Commercial information includes Cargo Value, IncotermsLetter of Credit details etc..

As per the carriers, this commercial information does not form part of their contract of carriage and therefore it has no place on the bill of lading..

If the bill of lading states a cargo value, it becomes an Ad Valorem bill of lading (According to Value) and as per Standard Club, the purpose of an Ad Valoerm bill of lading is to sidestep the package/unit limitation set out in Article IV Rule 5(a) of the Hague or the Hague Visby Rules (the Rules)..

This article in the Rules limits the amount of damages that the cargo interest can claim from the carrier.. Issuance of an ad valorem bill of lading may allow the customer to break this limitation and deprive the carrier of the right to limitation of liability per package or unit..

But if the customers insist on the value on the bill of lading, then carriers may choose to inform their liability Insurers of the requirement.. The insurers in turn may accept to cover any eventuality of issuing an ad valorem bill of lading in exchange for a sometimes hefty extra premium..

If the customer is willing to pay this extra cost, then the carrier may issue an ad valorem bill of lading..

 

7) Bills of lading originals must be issued in the right numbers and marked appropriately – When bills of lading are issued in originals and copies, due care must be taken to issue the right numbers

Why is this important..??

3 Originals and 6 Copies seems to be the general norm when negotiable bills of lading are issued.. When negotiable bills or straight bills are issued, the number of bills of lading must be reflected correctly in the relevant fields..

Reason why this is important is that all originals issued (especially Straight Bills) must be accounted for as they are like a cashier’s cheque.. For example if the bill of lading says 3 originals, but 4 originals are actually issued and one of these 4 originals falls into the wrong hands or are sent to the receiver along with other documents before they pay the seller..

The receiver could secure release of the goods based on below release clause on the bill of lading..

original bill of lading and release of cargo

Due care must also be taken to ensure that all bills of lading issued are identical and printed at the same time.. Originals and Non-negotiable bills must be stamped as Original and Non-Negotiable if there are no pre-printed markings on the bill of lading stationery to this effect..

 

8)  Ensure monies have been receivedAlways ensure that all monies due have been collected before you sign the bill of lading

Why is this important..??

Money

For starters, everyone is in the business to make money and to get paid for services rendered, so it is natural to ensure that you collect all monies due for the carriage..

Also, in most of the cases, the people signing the bill of lading may be the agents of the carrier and not the carriers themselves..

All agents are obliged to ensure collection of freight and charges for the carriage and duly remit the same to the carrier.. In cases where the agent releases the bill of lading without collection of freights, they may be still obliged to pay the carrier whether they collect it or not..

Furthermore, in case the bill of lading has been released with a FREIGHT PREPAID notation but you as the agent missed to collect the freight or gave customers unauthorised credits (trust me, this has happened), you may not get the chance to collect the freight or stop the release of the cargo without a long legal battle..

 

Apart from the above main points, there might be also some points specific to your company/carrier that needs to be followed by you as the signatory of the bill of lading for container shipments..

In reality, in a lot of the cases the actual signatory of the bill of lading may be a senior person in the organisation and may not have the time to check and verify all of the above points before signing..

But since the liability is on the signatory, they would do well to develop a trustworthy back office staff complement whom they can depend on to check all these details..

What check points do you follow before you sign a bill of lading..

 

 

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  1. with due respect cannot fully agree with above re contract of carriage between carrier and shipper, as seems it refers mostly to containers trade, whereas your article pretends to cover general features of Bill(s) of Lading, and would the attitude proposed being not applicable to any possible situations – it can not be correct.

    for example in dry bulk, where the situation can be much more complicated due to the presence of an unlimited number of Disponent Owners between Head Owners of the vessel and Cargo Charterers:

    – carrier by itself (usually, but not necessary being the Owner of the Vessel) including the master of the vessel particularly – sometimes has no contact with Shippers/Cargo Charterers at all and even do not know their title till the last moment when cargo documents (BL or Mate’s Receipt) are brought for signature, so no contract of carriage can be established without knowing the parties to the contract.

    – till the last moment prior issuance of Original Bill of Lading it is not known which party will act in the quality of Carrier as it can be anyone in CP chain – even in case vessel already completed loading and sailed loadport master/Owners may act as per orders of Time Charter Owners of the vessel as per TimeCharter party being only as bailee of the cargo with no contract of carriage and any obligations under same existing despite the fact that Shipper already passed out its cargo, so once again – no contract of carriage can be established without knowing the parties of the contract.

    – even in case it is H.Owner of the vessel who is going to act as Carrier, booking for loading may be performed by Cargo Charterers (either Shippers or Trader etc) with T/C Owners, there would be no contract of carriage established with Carrier otherwise H.Owners will got a liabilities against Owner of the cargo even prior loading of the same onboard the vessel which is definitely not the case – for example even after arrival loadport and berthing to loadpier H.Owners are in position under some circumstances (for example hire was not paid by T/C Owners) to order the vessel to leave the port and will be free from any obligations to the Owner of the Cargo bearing no responsibilities in front of them for any consequences of such decision, which is not the case would the contract with them be already established.

    summarizing above:

    – the ultimate condition for the contract of carriage to exist is the presence of any qtty of cargo onboard the vessel
    – contract of carriage is established ONLY when Bill of Lading is signed indicating specific party to act as Carrier of goods (in the absence of such nomination it is H.Owners)

    above is confirmed by foll consequences in case of default on its financial obligations of some party in C/P chain :

    – if there was no Bill of lading issued for cargo loaded H.Owners are free from any obligations to carry the cargo to intended discharge port and in order to mitigate their losses can simply come back to loading port and unload all cargo unless another agreement will be reached with Owner of the Cargo to carry the goods to port of destination and Contract of carriage will be finally established.

    – if there was Bill of lading issued for cargo loaded – H.Owners are obliged to proceed to discharging port but then are able to keep the cargo in their custody preventing delivery of same to final receiver until they will be duly paid for carriage of same, using number of legal instruments to get same occurred.

    • Hi Alexey, thanks for your comments and participation.. My article does not “pretends to cover general features of Bill(s) of Lading”.. I had mentioned in the article that the points refers to containerised shipments whereas your comments all refers to non-containerised cargoes.. But for good order’s I have now also added this reference in other places..

      For the non-containerised trades you may also refer to my other article “When does a bill of lading become a contract of carriage“..

    • Hi Hariesh and thanks for your comment, considering that BL issue is more then vital question with a lot of misunderstandings about it still remaining in the industry, assume its indeed worse to mention as much as possible to which particular trade the article refer.

      as to the article for “non-containerised trades” – unfo cannot agree with same as constructions you are using there also may lead to misunderstandings, as, for example:

      “Where charter parties are involved, especially where the shipper charters the entire ship from the owner, the bill of lading issued along with a charter party does not evidence the terms of the contract of carriage between shipowner and cargo owner because in this case, the contract between them is governed solely by the terms of the charter party..”

      is applicable not ‘especially where…’ leaving the room for other applications but instead – strictly ‘ONLY where…’, but even in this case it should be clearly clarified that it refer to specific situation where CP is concluded between vessel Owners and Cargo Shipper with a STRICT condition that title on the cargo will be passed from Shipper ONLY after discharging of the cargo in the port of destination to avoid the situation when after the title of the cargo already passed to Receiver while vessel is still enroute to the port of destination and Shipper as a party of CP contract become in default on its obligation making the existent Charter party with Owner as void.

      same time for general cases, for the reasons mentioned in my previous comment above which i will not repeat here in full due to its length – regret this can lead to serious aberration as ESPECIALLLY when charter partieS are involved – not only the Bill of Lading is evidencing the terms of the contract of carriage between Carrier (whatever party in Charter Parties chain it can be beside of vessel Owner) and cargo Owners (whatever party it can be beside of Shipper, such as Trader, Bank, Receiver of the cargo etc), but the role of same become the key issue in the trade – especially when one party in Charter Parties chain is in default to fulfill its obligation resulting in whole Charter Parties chain to be broken while the cargo is still underway.

      im in much regret if my comments are so legal and strict as such feedback is necessary to improve the qualifications of really interested parties whereas your articles may be addressed to a wide audience just for general information, in which case just let me know.

      🙂

  2. nice article. but the example of B/L shown is Port to Port Bills of lading (usually used for Bulk Cargoes). But in container Multi/door to door/liner b/l typically has four columns. place of receipt/place of loading / Place of discharge / Place of Delivery. Article also covers Unitized cargoes. It would have been more appropriate if you had shown this B/L also. There are varous B/Ls Congen, Heavycon, Liner etc. used for different trades.

    • Thanks Balasubramanian for pointing out the bill of lading sample embedded.. I have changed it.. 🙂 And yes there are several types of bills, but this article relates to only the containerised shipments.. It is too complicated to cover everything in one article.. 🙂

  3. Every article of yours is an eye-opener, especially to those alien to the world of shipping and transportation. Even though I teach now, thanks to your articles my learning process about an area I knew nothing about once upon a time, still continues.

    • 🙂 Glad you find it useful Rupnarayan.. Thanks for the support.. Maybe your students can also join these discussions and post their views etc on the various articles which will also help them..