Bill of lading


A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment. Although the term historically related only to carriage by sea, a bill of lading may today be used for any type of carriage of goods.
Bills of lading are one of three crucial documents used in international trade to ensure that exporters receive payment and importers receive the merchandise. The other two documents are a policy of insurance and an invoice. Whereas a bill of lading is negotiable, both a policy and an invoice are assignable. In international trade outside the United States, bills of lading are distinct from waybills in that the latter are not transferable and do not confer title. Nevertheless, the UK Carriage of Goods by Sea Act 1992 grants "all rights of suit under the contract of carriage" to the lawful holder of a bill of lading, or to the consignee under a sea waybill or a ship's delivery order.
A bill of lading must be transferable, and serves three main functions:
Typical export transaction use Incoterms terms such as CIF, FOB or FAS, requiring the exporter/shipper to deliver the goods to the ship, whether onboard or alongside. Nevertheless, the loading itself will usually be done by the carrier himself or by a third party stevedore.

Description

A bill of lading is a standard-form document that is transferable by endorsement. Most shipments by sea are covered by the Hague Rules, the Hague-Visby Rules or the Hamburg Rules, which require the carrier to issue the shipper a bill of lading identifying the nature, quantity, quality and leading marks of the goods.
In the case of Coventry v Gladstone, Lord Justice Blackburn defined a bill of lading as "A writing signed on behalf of the owner of ship in which goods are embarked, acknowledging the receipt of the Goods, and undertaking to deliver them at the end of the voyage, subject to such conditions as may be mentioned in the bill of lading." Therefore, it can be stated that the bill of lading was introduced to provide a receipt to the shipper in the absence of the owners.
Although the term "bill of lading" is well known and well understood, it may become obsolete. Articles 1:15 & 1:16 of the Rotterdam Rules create the new term "transport document"; but it remains to be seen whether shippers, carriers and "maritime performing parties" will abandon the long-established and familiar term, "bill of lading".

History

While there is evidence of the existence of receipts for goods loaded aboard merchant vessels stretching back as far as Roman times, and the practice of recording cargo aboard ship in the ship's log is almost as long-lived as shipping itself, the modern bill of lading only came into use with the growth of international trade in the medieval world.
The growth of mercantilism produced a requirement for a title document that could be traded in much the same way as the goods themselves. It was this new avenue of trade that produced the bill of lading in much the same form as we know today.

Roles and purposes of bill of lading

As cargo receipt

The principal use of the bill of lading is as a receipt issued by the carrier once the goods have been loaded onto the vessel. This receipt can be used as proof of shipment for customs and insurance purposes, and also as commercial proof of completing a contractual obligation, especially under INCOTERMS such as CFR and FOB.
Although the Hague-Visby Rules provide that a bill of lading is only prima facie evidence of receipt, the Carriage of Goods by Sea Act 1992 s.4 declares a BoL "conclusive evidence of receipt".
The bill of lading from carrier to the shipper can be used as an evidence of the contract of carriage by the fact that carrier has received the goods and upon the receipt the carrier would deliver the goods. In this case, the bill of lading would be used as a contract of carriage. In this case, the bill of lading can be used if shipper does not properly ship the goods then the shipper cannot receive the bill of lading from the carrier. Eventually, the shipper would have to deliver the bill of lading to the seller. In this case, the bill of lading is used as a contract of carriage between seller and carrier. However, when the bill of lading is negotiated to a bona fide third party then the bill of lading becomes a conclusive evidence where no contradictory evidence can be introduced. It is because the third party cannot examine the actual shipment and can only pay attention to the document itself, not survey or examination of the shipment itself. However, the bill of lading will rarely be the contract itself, since the cargo space will have been booked previously, perhaps by telephone, email or letter. The preliminary contract will be acknowledged by both the shipper and carrier to incorporate the carrier's standard terms of business. If the Hague-Visby Rules apply, then all of the Rules will be automatically annexed to the bill of lading, thus forming a statutory contract.

As title

When the bill of lading is used as a document of title, it is particularly related to the case of buyer. When the buyer is entitled to received goods from the carrier, bill of lading in this case performs as document of title for the goods. There are two types of bill of lading that can perform as document of title. They are straight bill of lading and order bill of lading. Straight bill of lading is a bill of lading issued to a named consignee that is not negotiable. In this case, the bill of lading should be directed only to one specific consignee indicated on the bill of lading. Order bill of lading is the opposite from a straight bill of lading and there is no specific or named consignee. Therefore, an order bill of lading can be negotiated to a third party.
Simply, the bill of lading confers prima facie title over the goods to the named consignee or lawful holder. Under the "nemo dat quod non habet" rule, a seller cannot pass better title than he himself has; so if the goods are subject to an encumbrance, or even stolen, the bill of lading will not grant full title to the holder.

Types of bills of lading

Bills of lading may take various forms, such as on-board and received-for-shipment.
A charterparty is the contract governing the relationship between the shipowner and the charterer. The bill of lading governs the relationship between the shipper and the carrier. If the exporter is shipping a small amount of cargo, he will arrange for a carrier to carry the goods for him, using a bill of lading. If the exporter needs the whole of the ship's cargo capacity, the exporter may need to charter the vessel, and he will enter into a charterparty agreement with the shipowner.
If the charter party is a time or voyage charterparty, the shipowner will still have control of the ship and its crew. If there is a demise charterparty, the charterer will effectively have a long lease and will have full control of the vessel. When the master issues a B/L to a shipper, he will be acting as an agent for the carrier, who will be either the shipowner or the charterer.
In a time-charterparty or voyage-charterparty, if the charterer is shipping his own cargo he will receive a bill of lading from the master, acting as agent of the shipowner; but that B/L will serve solely as a receipt and document of title, and its terms will be secondary to the terms of the charterparty, which remains the dominant contract.

Sea waybills and electronic data interchange (EDI)

Under Art. III of the Hague-Visby Rules, a carrier must, on demand, provide the shipper with a bill of lading; but if the shipper agrees, a lesser document such as a "sea waybill" may be issued instead. In recent years, the use of bills of lading has declined, and they have tended to be replaced with the sea waybill.
The main difference between these two documents is that the waybill gives the bearer the right to possession of the cargo, but does not confer title in the goods. As a result, there is no need for the physical document to be presented for the goods to be released. The carrier will automatically release the goods to the consignee once the import formalities have been completed. This results in a much smoother flow of trade, and has allowed shipping lines to move towards electronic data interchange which may greatly ease the flow of global trade.
For some time, it has been the case that the cargo may arrive at the destination before the bill of lading; and a practice has arisen for the shipper to send to the consignee a letter of indemnity which can be presented to the carrier in exchange for the cargo. The LOI indemnifies the carrier against any cargo claim, but the document is not transferable and has no established legal status. For letter of credit and documentary collection transactions, it is important to retain title to the goods until the transaction is complete. This means that the bill of lading still remains a vital document within international trade.
Alternatively, to overcome the possibility of the goods reaching the destination ahead of the cargo, majority of the Shipping Lines offer an “Express release” service.
By surrendering the full set of bills of lading issues at the port of loading, the shipping line can instruct the port of discharge to release the cargo without the physical presentation of bills of lading at destination.

Electronic bills of lading

For many years, the industry has sought a solution to the difficulties, costs and inefficiencies associated with paper bills of lading. One answer is to make the bill an electronic document. An electronic bill of lading is the legal and functional equivalent of a paper bill of lading. An electronic bill of lading must replicate the core functions of a paper bill of lading, namely its functions as a receipt, as evidence of or containing the contract of carriage and as a document of title.
The UK Carriage of Goods Act 1992 s.1 enables the trade minister to make regulations for electronic transactions. As yet, no such regulations have been made, as electronic interchange is already lawful. Electronic "clubs" such as BOLERO have been quite successful, but the maritime trade community is traditional and loath to move away from paper transactions, so progress has been very slow. However, in recent times, it has been proposed that Blockchain technology may be the answer to cover the myriad steps in an export trade transaction, thereby enabling electronic transactions and information transfer that is both speedy and reliable.

Name

The word "lading" means "loading", both words being derived from the Old English word hladan. "Lading" specifically refers to the loading of cargo aboard a ship. The Dutch word "lading" has exactly the same meaning as it has in the English "bill of lading", but is not restricted to shipping.
Under English law, the Carriage of Goods by Sea Act 1992 provides that the term "bill of lading" includes a "received-for-shipment" bill of lading issued by, say, a freight forwarder or a storage depot/warehouse. A "combined bill of lading" may be issued by a carrier who, say, collects goods from a factory for subsequent delivery to a ship via multi-modal transport.

How to recognize a valid international bill of lading

The table below explains how to recognize a valid BOL for most international shipping companies, including the SCAC:
CarrierSCAC + Master BOLExamples
Cosco 10 NumbersCCLU1234567890
EvergreenEGLVEGLV123456789012
OOCLOOLUOOLU1234567890
MatsonMATSMATS1234567890
MaerskMAEU or MRKUMAEU123456789
K-LineKKLU AAKKLUAAA123456
MSCMSCU or MEDU A MSCUAA123456
Hapag-LloydHLCU AA HLCUAAA123456789
CMA CGM AAA CMAUAAA1234567
HyundaiHMDU AAAA HMDUAAAA1234567
HyundaiQSWB QSWB6444089
NYKNYKS AAAA NYKSAAAA12345678
Yang MingYMLU YMLUE123456789
UASC LinesUASUAAAAA UASUAAAAA123456
ZIMZIMU or SSPH AAA ZIMUAAA1234567
MOLMOLU AMOLU12345678901A
Hamburg SüdSUDU55555SUDU12345AAAAAAA
APLAPLU APLU012345678
SM Lines + 4letters + 8 NumbersSMLMNJPE70038700
Turkon LinesTRKU + 6 letters + 6 numbersTRKUMERNYC054228
MarubaMRUB + 6 letters + 6 numbers MRUBBUEHKG180001