If you’re looking into importing or exporting goods by sea, then you might have come across the term ‘Bill of Lading’ and be wondering what this seemingly important piece of paperwork is exactly. Here’s what you need to know before you arrange that shipment.
What is a Bill of Lading?
The bill of lading is an essential legal document used when shipping goods. In simple terms, it is given to the shipper (the cargo owner or their agent) by the carrier (shipping line) when goods are loaded. On delivery, it is given to the buyer/consignee, to transfer ownership and allow the shipper to release the goods.
Let’s look at a bill of lading’s three primary functions in more detail:
1. It provides evidence of the contract terms of carriage
The bill of lading will detail what is being shipped including the type of shipment, how much of it there is, and the destination. It will sometimes also mention the condition of the shipment. Note that the bill of lading is not an actual contract in itself – just documentation that provides evidence of one.
2. It acts as a receipt
When a bill of lading is issued by the carrier to the shipper, it is confirming that the goods have been loaded onto the transporting vessel. The shipper is usually issued with several original bills of lading, which can be passed to different parties along the route, essentially passing on control of the cargo.
3. It acts as the title of goods (representing ownership)
The bill of lading usually includes the details of the receiving party (buyer/consignee) that the carrier is shipping the goods to. Until the bill of lading has been passed to the receiving party, however, ownership hasn’t been transferred. The shipper may forward a copy of the bill of lading to the receiving party as proof of shipping, but whoever holds the original bill of lading retains ownership of the cargo. The bill of lading is normally only surrendered to the receiving party after full payment has been made.
- The information listed on a bill of lading can include:
- The shipper details
- The recipient (consignee) details
- The carrier details and signature to confirm receipt
- Date of loading
- Port of loading
- Destination port
- Details of goods being shipped
- Terms and conditions of shipping
- Any special shipping requirements (if the shipment is hazardous, for example)
The terms and conditions of shipping are especially important as they detail who is responsible for the cargo at what stage, and who is responsible for paying for the shipping (the Incoterms of the shipment). Note that the bill of lading may not detail all of the terms and conditions of carriage, but it should at least refer to them.
Why is the bill of lading important?
The bill of lading is an important document for the shipper, the carrier, and the consignee. As well as containing vital information about the shipment, the bill of lading represents evidence of the contract between the shipper and the carrier. It’s also essential for the buyer to be able to check that the shipment is correct and assume ownership of it.
Since the bill of lading is used to represent the transfer of ownership to the buyer, the carrier may refuse to release it if the payment for transportation hasn’t been made. It may also be retained by the shipper until full payment has been made for the goods. Conversely, a buyer can refuse a bill of laden if the shipment isn’t delivered as expected.
Note that, to save the buyer from waiting to receive the original bill of lading from the shipper by post, the shipper may instruct the carrier to issue an ‘Express Release’ (or Telex) bill of lading instead. This can be used immediately by the consignee/buyer to arrange clearance through customs (if this is their responsibility) and collect the cargo.
Hopefully, you’re now clearer on what a bill of lading is, and why it’s so important. Things can become even more complicated, however, when it comes to the various types of bill of lading that can be used. A good freight forwarder will be able to advise you on the right kind of bill of lading for your shipment, so ensure you make the most of their specialist expertise and in-depth knowledge of the required documentation for shipping.