Bill of Lading

A bill of lading is a legal document between the shipper of goods and the carrier. The carrier is the company responsible for transporting the goods, such as a shipping line, airline, trucking company or railroad. The bill of lading serves as:

• A receipt, confirming the carrier has received the goods
• A contract of carriage, outlining the carrier’s responsibilities
• A document of title, acting as proof of ownership of the goods

The bill of lading has all the important details about the shipment. This includes the type and quantity of goods, their destination, and any special instructions for handling and delivery.

Key Information on a Bill of Lading

You can find the following key facts on a typical bill of lading:

• Shipper’s name and address
• Consignee’s name and address (the person or company receiving the goods)
• Description of the goods, including weight, dimensions, and packaging
• Special handling instructions, like “fragile” or “refrigerate”
• Port of loading and port of discharge
• Name of the carrier and the ship, if transport is by sea
• Date the goods were loaded onto the ship or other transport

The bill of lading is signed by the carrier or their agent. This confirms they have received the goods as described in the bill.

Types of Bills of Lading

There are a few different kinds of bills of lading. The type depends on how the goods will be released to the consignee.

Straight Bill of Lading

A straight bill of lading is used when payment has already been made for the goods. The carrier can deliver the goods to the consignee without needing any other documents.

Order Bill of Lading

An order bill of lading requires the consignee to show an original copy of the bill before the carrier will release the goods. This type is used when payment still needs to be made or confirmed.

The order bill can be negotiable or non-negotiable:

• A negotiable bill can be traded or sold to a third party while the goods are in transit. The consignee might do this to get paid faster.
• A non-negotiable bill specifies an exact consignee. It can’t be traded to someone else.

Bearer Bill of Lading

A bearer bill of lading allows anyone holding the bill to take possession of the goods. This type is very rare today, as it’s quite risky for the shipper.

The Role of Bills of Lading in Trade Finance

The bill of lading plays a key role in trade finance transactions. Exporters often use the bill to get paid before the goods reach the buyer.

Here’s how it typically works:

1. The exporter arranges for a shipment and gets a bill of lading from the carrier.
2. The exporter presents the bill of lading, along with other documents, to their bank.
3. The bank pays the exporter, then sends the bill of lading to the importer’s bank.
4. The importer pays their bank to get the bill of lading.
5. The importer presents the bill of lading to the carrier to claim the goods.

This whole process is based on the bill of lading. The banks and importer rely on the bill as proof that the exporter has shipped the right goods.

Documents Presented with the Bill of Lading

The bill of lading is often presented together with other key shipping and finance documents:

• The commercial invoice, showing the value of the goods
• The packing list, with details on the shipment packaging
• A certificate of origin, stating where the goods were made
• An inspection certificate, confirming the goods meet specifications
• An insurance certificate, covering loss or damage in transit

The exact documents needed depend on the terms of the trade finance deal and the countries involved.

Bills of Lading and Insurance Claims

The bill of lading is also an important document if there is an insurance claim on a shipment. Most exports are covered by marine cargo insurance against loss or damage.

To make a claim, the owner of the goods needs to submit:

• The insurance certificate
• The bill of lading
• The commercial invoice
• A survey report showing the goods were damaged

The insurer uses the bill of lading to confirm the goods were loaded and shipped as described in the policy. Without a bill of lading, it’s very hard to make a successful claim.

Challenges with Bills of Lading

While bills of lading are a key part of global trade, they do have some challenges in our modern world.

Reliance on Paper Documents

Many trade finance transactions still rely on physical paper bills of lading. The original signed copies must be couriered between banks, which takes time and money.

There’s a big push in the industry to digitize bills of lading using blockchain and other technologies. An electronic bill of lading could be securely sent and authenticated much faster.

Some countries have started to allow digital bills, but paper is still common because laws and industry practices change slowly.

Errors and Fraud

A bill of lading is a legal document, so it’s important all the details are correct. Innocent mistakes can delay shipments and payments.

There have also been cases of fraud, with fake bills of lading used to get payment for goods that don’t exist. Banks and insurers have to be careful to validate bills before releasing funds.

Liability Risks for Carriers

The bill of lading is a contract between the shipper and carrier. If something goes wrong with the shipment, the carrier can be held responsible based on what the bill of lading says.

Carriers have to be very clear on their terms and conditions on the bill. They often cap their liability at a certain amount per package or weight.

If the carrier signs a bill without properly checking the goods, they might be held responsible for shortages or damage discovered later. That’s why many carriers are very careful during the receiving and documentation process.