What Do You Mean by A Bill of Lading?

A Bill of Lading (B/L) is a crucial document in international trade that serves as proof of shipment, receipt of goods, and a title of ownership. It describes the terms & conditions of the transportation contract between the shipper and the carrier. Below are the step-by-step guide to understanding and using a Bill of Lading:

Step 1: Initiating the Shipment

• Shipper: The seller or exporter arranges the transportation of goods with a carrier e.g shipping company or freight forwarder.
• The shipper will arrange the goods for shipment, and a shipment contract is formed between shipper & the carrier.

Step 2: Booking and Preparing the Goods

• Cargo Preparation: The goods are packed as export oriented and ready for shipment.
• Carrier Booking: The shipper provides the all details about the shipment to the carrier, including:
  • Description of goods
  • Quantity and weight of goods
  • Country of Origin and destination of arrival ports
  • Shipping terms like Incoterms

Step 3: Issuance of Bill of Lading

• When the cargo is loaded, the carrier will issue the Bill of Lading to the shipper as a receipt for the goods. This document can be:
  • Negotiable: This is transferable to a third party.
  • Non-negotiable: This is a receipt only for the named consignee e.g buyer.
• The Bill of Lading generally includes:
  • Shipper’s and consignee’s details
  • Vessel name or transportation method
  • Date of shipment
  • Description of the goods like type, quantity, etc.
  • Port of loading and port of discharge
  • Terms and conditions of the shipment 
  • Freight payment terms & conditions

Step 4: Sending the Bill of Lading to the Importer

• When the Bill of Lading is issued, then the shipper sends the original Bill of Lading to the buyer or consignee (importer) through their bank if using a Letter of Credit or via direct delivery.
  • The original Bill of Lading is necessary for the consignee to take authorization of the goods.

Step 5: Goods Arrival and Customs Clearance

• When the goods arrive at the destination port, then the consignee (importer) submits the original Bill of Lading to the carrier.
• After that the customs process begins, and the consignee will need to provide the Bill of Lading for clearing the goods by customs.

Step 6: Delivery of Goods

• After the consignee clears the goods through customs and submits the Bill of Lading to the carrier, the goods are delivered to the consignee or their authorized agent.
• If the Bill of Lading is negotiable, then the consignee can transfer its ownership to another party by legalizing the document.

Step 7: Endorsement (if applicable)

• If the Bill of Lading is negotiable, then the consignee can legalize it to transfer ownership of the goods to the another party, such as a buyer or lender.
  • The endorsement engages in signing the document and providing it to the new owner.

Key Types of Bills of Lading:

1. Straight Bill of Lading: It is Non-negotiable. It is given to a particular consignee and cannot be transferred.
2. Order Bill of Lading: It is Negotiable. The consignee or their authorized agent can transfer the ownership to a third party by legalizing the document.
3. Seaway Bill: It is a simplified version of the Bill of Lading, which is usually non-negotiable, and is often used for domestic or short-distance shipments.
4. Airway Bill: This is used in air freight, serving a similar purpose to the Bill of Lading for sea freight.

Important Notes:

• Legal Proof of Ownership: The Bill of Lading acts as legal proof that the consignee has the right to claim the goods.
• Types of Charges: Freight charges and other costs should be clearly outlined in the Bill of Lading, specifying who is responsible (shipper or consignee).
• Discrepancies: If the goods do not match the description on the Bill of Lading (damage, wrong quantity, etc.), then the consignee can make claims with the carrier.

Common Errors to Avoid:

• Inaccurate Information: Must ensure that the details on the Bill of Lading like quantity, weight, description match the actual shipment to avoid extension period.
• Loss or Damage: The original Bill of Lading is a crucial document. If lost or damaged it can create complications in claiming the goods.