Bill of lading is one of the key documents in the world logistics and international trade. When you buy a product overseas, you come across this common document.
In this brief guide, we focus on the definition, types of a bill of lading, what is the purpose and why it is so important in logistics. Also, we cover the contents of a B/L and mention about the telex release process. So, let’s get started by answering some important questions.
Is the bill of lading a contract?
On contrary to common sense, a bill of shipment is neither a contract between the seller and the buyer nor a contract of carriage between the carrier and shipper.
What is the bill of lading?
A bill of lading “B/L” or “BL” is one of the key documents in the supply chain of international trade. It is is a document that legally states the agreement between the shipper and the carrier and governs their relationship when goods are transported.
Also, it shows ownership of the cargo, confirms that the products were received as described on the BL. It also serves as proof of delivery. Respectively, it should be issued once the cargo is on the board of an agreed transport of the carrier which can be a container ship, an airplane, a truck, or a train.
The Purpose of a B/L and why it is important?
A receipt must be published by the shipper to the seller, as a statement of ownership or transport. Also, this bill is proof that a business exists between shipper, carrier and consignee.
The Main types of Bills of Lading
In broad terms bills of lading fall into two groups in terms of title.
Negotiable Bills of Lading
A negotiable B/L is a document of title, which may be used to transfer ownership of the goods from one party to another. The original consignee, by signing the back of the bill, transfers goods to another party. The new consignee may transfer title another party and so on. For a B/L to be negotiable, it must be “Clean” and drawn “to Order” of the consignee.
As a document of title, the bill is in favour of the party to whom it has been endorsed and the carrier should release the cargo to the party who presents the correctly endorsed original bill of lading to the carrier with proof that they are the endorsee or authorised by them.
It is essential that the party receiving the endorsed copy has adequate procedures in place to check the bill’s authenticity and the holder’s authority as an endorsee or authorised agent prior to releasing any cargo.
Non-Negotiable Bills of Lading
A non-negotiable bill does not permit ownership to be transferred from one party to another. Where original bills of lading have been issued the release of the cargo at the destination can only be to the named consignee upon receipt of at least one of the original bills issued. It is also known as “Straight Bill of Lading”.
There are around 37 different types of B/L are commonly used, we will see the main four.
A Combined BL
is a type of bill may also include haulage collection for final delivery. However, under the combined B/L, the carrier accepts liability for the entire journey. Therefore, in the event of a claim for loss or damage the claimant need only hold the carrier responsible.
A House Bill of Lading
These are sometimes referred to as sea or express waybills. They are non-negotiable documents and they are useful where there is no intention to transfer title. The carrier may release cargo to the named consignee without presentation of the original copy via telex release. A waybill fulfils the following two functions, it is a receipt for the goods and evidence of the contract of carriage.
Order bill of lading
is a similar term used for negotiable one. This is the most modern version bill which is widely used all over the world and ensures the safety of delivery of cargo to a genuine holder of B/L.
To prevent future cargo claims and disputes, the consignee or the final buyer is required to surrender the to the ship’s agent at the discharge port who will verify the genuineness of the BL by the endorsed original copy.
As the bill of lading is made to “to order” of the consignee, it is a negotiable instrument of title. This means that the title can be transferred from one person to another by authorising signature and delivery of the bill of lading.
If you have not paid goods in advance, the bill of lading can be categorised into two types:
To Order, Blank Endorsed: not consigned to any named party but “To Order” of the consignor, with the intended – consignee’s name given under “notify party”. The consignor must endorse the B/L in order to transfer the ownership of the goods.
To Order, Bank: consigned to a bank with the intended consignee’s name given under “notify party” The bank endorses the bill to the intended consignee against payment the amount of the accompanying bill of exchange.
“To Order” bills are used commonly in the letter of credit transactions and may be bought, sold, or traded, or served as a letter of guarantee or bonds to banks or other lenders.
Contents of a Bill of Lading (what needs to be on a bill of lading?)
A clear bill of lading contains information in followings,
- The consignee’s name and address, or to the order.
- The shipper’s name and address.
- The name and address of the carrier.
- Date of loading “on board”.
- Information of port of loading and port of discharge. And, the name of the vessel.
- Bill of lading number, container number, subjected invoice details.
- A detailed description of the product such as quantity, packaging details, size, gross weight, and total value.
- Number of original copies published.
- The incoterms.
- if already paid, it will state “pre-paid” and if not, it will state “collect”.
What is telex release?
One of the most asked questions about the B/L procedures is telex release. When an original BL is surrendered at the final port, the carrier will send a release authorization to the port of discharge to release the cargo to the consignee.
In the old times, before the internet, people sent confirmation through telex machines. Telex is an acronym for Telegraph Exchange Service.
Be careful when working with bills
When you send a B/L or giving instructions to the carrier for approval, you must be careful to prevent problems at a later stage.
Never allow blank bills of lading to get into the hands of clients or other unauthorised personnel.
You should instruct the releasing agent properly and ought to send a copy of the original of the bill in good time.
Do not accept photocopies as “evidence” that the customer has an original bill in his possession. Insist on seeing the originals before authorising the release of the cargo.
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