Bill of Lading

A Bill of Lading (B/L) is a document in the shipping industry that outlines the agreement between the shipowner (vessel) and the seller of the cargo. It provides all necessary information about the goods being transported, such as quantity, weight, volume, the ports of loading, and the destination port. The B/L serves multiple purposes, including acting as a receipt, a contract, and a financial document for financing the cargo and freight rate.

What is a Bill of Lading?

A Bill of Lading (B/L), abbreviated B/L or BOL, is a document that represents the contract of carriage between the shipper and the carrier. It is a legally binding document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being transported. The B/L must be presented at the destination port for the goods to be released.

Functions of a Bill of Lading

Receipt of Goods

The Bill of Lading acts as a receipt confirming that the goods have been received by the carrier in good order, and match the description listed.

Contract of Carriage

It outlines the shipping method that will be used for the cargo and acts as evidence of the contract of carriage with the carrier. The B/L should also contain a reference to the relevant charter party.

Title of Goods

Because it is considered a title of goods, the B/L can be used as a negotiable instrument and can be traded much in the same way goods may be. The holder of the B/L has the legal rights to claim the goods or arrange the transfer of ownership of the cargo to another party in the supply chain. For a named consignee to take the delivery of the goods in the discharge port they must surrender the original copy of a B/L.

Types of Bill of Lading

Shipped Bill of Lading

The Shipped Bill of Lading has traditionally been the most common one. Usually issued by the master when the goods have been loaded on board the vessel, it marks the transfer of risk from the shipper to the carrier.

Received for Shipment Bill of Lading

This type is issued when the goods have been received by the carrier for loading onto a ship. It may later be stamped “Shipped” or “On board” once the goods are loaded.

Clean Bill of Lading

A clean bill is a B/L that does not contain any remarks regarding the condition and quantity of the goods.

Purpose of a Bill of Lading

In addition to providing the necessary information about the transported goods, the Bill of Lading (B/L) serves as a legal document that can be used for claims if anything undesirable happened during the logistics process. It purposes as a receipt, a contract, a financial document for financing the cargo and freight rate etc.

Without a legally enforceable agreement like a B/L, the carrier could deliver the goods to anyone they see fit. Therefore, it is crucial to have the proper information on the B/L, as it can be used in litigation if the need should arise, and all parties involved will take great pains to ensure the accuracy of the document.

The B/L (when completed in full) also helps the customs broker in matching up the commercial clearance documents to ensure they can make an accurate declaration for all goods to customs.

Who Issues a Bill of Lading?

The Bill of Lading (B/L) is generated by the shipper and issued by the carrier, in three originals that belong together. The carrier must issue the B/L upon receiving the goods for shipment and is responsible for ensuring its accuracy and completeness.

Legally a captain is not permitted to discharge a cargo without showing all the original B/L in the designated port. However, it is seldom possible, so the captain usually keeps one original B/L onboard the vessel and trust the people in port to have the others or he discharges the cargo based on a Letter of Indemnity.

Information Contained in a Bill of Lading

A Bill of Lading typically contains:

  • Name of the shipper
  • Name of the consignee
  • Port of loading and discharge
  • Name of the ship/vessel
  • Description of the cargo
  • Freight amount and payment terms

Common Issues and Solutions Related to Bills of Lading

On occasion there can be issues that arise with Bill of Lading in shipping that require additional documentation, such as a Letter of Indemnity.

A Letter of Indemnity (LOI) is a document that serves as a promise to indemnify (protect) the carrier in respect of any liability incurred under the Bill of Lading due to incorrect or inaccurate information.

In shipping, LOIs are often used when the cargo is not in good condition, and the shipper or charterer offers to give the Master a LOI in return for the Master signing clean Bills of Lading. LOIs are also used for delivery of cargo without production of a Bill of Lading.

The LOI is not necessarily strictly enforceable in maritime law, so the shipowner need to carefully consider, on a case by case basis, whether they should accept a LOI for commercial reasons.  

Difference Between a Charterparty Agreement and a Bill of Lading

While the Charterparty (C/P) documents the vessel’s charter agreement between the shipowner and charterer, the Bill of Lading (B/L) relates to cargo carriage and governs the relationship between the shipowner (vessel) and the seller (owner) of a cargo.

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