27 July 2021• 8 min read
Bill of Lading | Meaning, Types & Usage for Importers & Exporters
Learn about the Bill of Lading, its meaning, importance, the different types and the information it contains. Understand the risks of not filing a Bill of Lading accurately.
Those in the export or import business will often come across the term Bill of Lading or its abbreviations – BL, BoL or B/L – during the course of their work.
For those new to the business, a Bill of Lading is an important legally-binding document that details the type, quantity, and destination of the goods being carried as well as details of the shipper (consignor), carrier (transporter), and consignee (buyer/receiver) among other things. By spelling out these details, it helps prevent the risk of any miscommunication or communication gap amongst the parties involved in the transaction.
The term “Bill of Lading” comprises two key words. While “bill” refers to a statement – be it hand-written, printed, or digital – containing the cost of items delivered or services offered, “lading” refers to the act of putting cargo on a ship, aircraft or a truck for transport.
In this blog we will talk about the:
- Definition of a Bill of Lading
- Its purpose
- The information it contains
- The different types of Bills of Lading
- The risks of not filing a Bill of Lading accurately
Bill of Lading Meaning
According to the Business Dictionary, a Bill of Lading is:
“A document issued by a carrier, or its agent, to the shipper as a contract of carriage of goods. It is also a receipt for cargo accepted for transportation, and must be presented for taking delivery at the destination.”
What is the purpose of a Bill of Lading?
A Bill of Lading has three primary functions:
- It is a contract of carriage between the carrier and the shipper.
- It is a receipt for shipped goods.
- It serves as a document of title of the goods.
A Bill of Lading ties the sending and the receiving parties by law and, as a result, protects them from false claims and losses. Because it is an agreement whose terms all involved parties have agreed to, it can act as a lawful statement in case of disputes.
What Information Can You Find On A Bill Of Lading?
A Bill of Lading contains detailed information about the shipper (consignor), carrier (transporter), consignee (buyer/receiver) and the goods being carried. These the details that you will find in the document:
- Bill of Lading number
- The complete name and official address of the shipper and the receiver
- Details of the shipping line
- Details of the freight forwarder
- The pick-up date
- Name of the vessel used for transport
- Details of the goods (including the number of units, weight, and dimensions)
- Nature of the goods transported
- The packaging material used such as pallets, crates or drums
- If the items transported are hazardous, the BL must be tagged as such and also have the necessary certification to allow such transport
- Any specific instructions for the carrier
Image Of A Sample Bill Of Lading
Types of Bills of Lading
Here are the primary types of Bills of Lading:
1. Based on the Carrier
- House Bill of Lading
A House Bill of Lading is a document issued by the freight forwarder or NVOCC (Non-Vessel Operating Common Carrier) operator. In this document, the. “consignor” is the actual seller/sender/exporter and the “consignee” is the actual buyer/receiver/importer. Like all Bills of Lading, this also contains details of the cargo, carrier, destination and so on.
- Master Bill of Lading
The Master Bill of Lading is issued by the shipping line or carrier. It is also known as the Ocean or Carrier Bill of Lading.
In the Master BL, details of the cargo and carrier must be identical to that of the House BL barring one crucial difference. The “consignor” in the Master Bill of Lading is the agent, freight forwarder or NVOCC of the actual seller while the “consignee” is the agent freight forwarder or NVOCC of the actual buyer.
But it’s not as straightforward as that.
Shippers can decide if they want to move shipments directly using a Master BL. Whether they opt for this is determined by the trade terms the shipper and the consignee have agreed upon.
Details on the Master BL therefore depend on whether the freight forwarder has introduced a House BL for the shipment or not. If the shipment is being executed directly using a Master BL, the “consignor” is the actual shipper and the “consignee” is the actual receiver. But if a House BL has also been introduced, the “consignor” in the Master BL changes to the agent/freight forwarder/NVOCC as mentioned above.
2. Based on Payment and Consignee
- Straight Bill of Lading
A Straight Bill of Lading is issued when the customer has made the complete payment for the shipment in advance, and gets the right to receive the consignment directly. The consignee must receive the delivery, and has no way to renounce the right to another person. This is why it is known as a non-negotiable instrument.
- Order Bill of Lading
This is the most common kind of Bill of Lading. Unlike the Straight Bill of Lading, it is a negotiable instrument that allows the consignee named in the document to renounce their right to receive the goods to a third party.
- Bearer Bill of Lading
A Bearer Bill of Lading is one that promises delivery to whomsoever holds the document. The name of the consignee in this document may be “bearer”. It is a negotiable instrument allowing a third party to accept the goods on arrival.
- Clean Bill of Lading
This Bill of Lading is issued by the carrier after it inspects the goods. The document declares that the shipment was received in good condition, in the right quantity and packaging and that there was no damage during transport.
- Foul/Dirty or Claused Bill of Lading
This document is a Bill of Lading that contains clauses regarding quality defects or quantity shortcomings in the shipment. The carrier outlines the damages and other discrepancies to the cargo in these clauses or notations on the Bill of Lading, allowing the consignee to refuse to accept it and/or their bank to refuse to release payment.
3. Based on Transportation
- Inland Bill of Lading: For domestic shipments
- Ocean Bill of Lading: For overseas shipments
- Through Bill of Lading: When the carrier moves the goods across several destinations using single or multiple modes of transportation
- Multimodal Bill of Lading: Used when goods will move across at least two modes of transport
4. Other Important Bills of Lading
- Seaway bill
A Seaway bill, also known as the Express Release Bill of Lading or Straight Bill of Lading, is not technically a Bill of Lading. It is similar to the Bill of Lading because it acts as a receipt of the goods as well as a contract of carriage. The key difference, however, is that it is not a document of title.
A Seaway bill is used when there is a high level of trust between the shipper and the owner of goods. The receiver doesn’t need to present it for cargo delivery; they will only have to establish their identity to take possession of the goods once it arrives at the port.
- Received for Shipment Bill of Lading
The carrier issues the RFS or Received for Shipment Bill of Lading to confirm the receipt of the container at the port for loading purposes. It does not indicate that the goods have been placed on board the ship. This document is replaced by a Shipped on Board Bill of Lading when the goods are placed on the ship.
The Received for Shipment BL is generally used for shipments with shorter transit times. Usually, a Bill of Lading is couriered to the consignee so that they can take delivery of the shipment when it arrives at the port. But when transit times are short, sometimes the consignee doesn’t get the Bill of Lading in time to receive the cargo. Carriers usually release a Received for Shipment Bill of Lading to give the shipper more time to courier the document to the consignee.
- Shipped on Board Bill of Lading
The Shipped on Board Bill of Lading is an acceptance from the carrier that it has received the goods and loaded the goods onto the ship. It is released post the sailing of the vessel.
- Switch Bill of Lading
A Switch Bill of Lading helps in the smooth conduct of triangular shipments – a common scenario today, where one transaction can involve three different parties based in three different countries.
It is used when an importer makes an international purchase from a middleman or trader and not from the actual manufacturer. This middleman or trader usually wants to conceal the identity of the manufacturer to prevent the buyer from contacting the manufacturer directly, and eating into their business.
In this scenario, the parties involved create two BL sets. The first BL will contain the details of the first sale between the original consignor/manufacturer and the consignee/middleman. The second BL set – the Switch Bill of Lading – will cover the sale between the middleman and the actual customer/importer. This BL will be an edited version of the first document. Here, the details of the manufacturer will be removed and replaced with the details of the trader. The consignee will be the end customer/importer. Switch BLs are usually issued only when the first set is surrendered to prevent multiple parties from claiming the same cargo.
To know more about the Switch Bill of Lading, read our detailed blog here.
Tips on Filling Up a Bill of Lading Correctly
You must be careful before signing on any legal document, and the Bill of Lading is no different. Here are the details you must double-check before signing it:
- Identity of the shipper
- Port, and the date of loading of goods
- Discharge port
- The present condition of the goods
- Weight and type of cargo
- Freight terms
Ensure there are no ambiguous statements in the document. The terms should be crystal clear and not disadvantageous to you.
Implications of filing a Bill of Lading incorrectly
If you fail to file a Bill of Lading, omit information or file inaccurate information, you may suffer grave consequences. This is why it is advisable to take the help of a freight forwarder to fill out any paperwork regarding Bills of Lading. Here are all the possible implications of filling a bill of lading incompletely or inaccurately:
- Claims from the receiver of goods: A completed Bill of Lading will have details that the goods were delivered in a good condition to the transporter. A document that has incomplete or inaccurate information will leave you vulnerable to claims by the receiver. These can include claims of damage or receipt of a lesser quantity than was agreed upon. If your documentation is inaccurate or incomplete, the transporter will get an opportunity to refute your claims that you had handed over an undamaged consignment to the carrier, making you directly liable to compensate the receiver
- Loss of P&I insurance cover (protection and indemnity insurance)
- Loss of right of indemnity from the charterer
- Possibility of criminal prosecution
- Losing the right to exercise limitation of liability clause
Also read A Complete Guide to Ocean Freight: What Exporters/Importers Need To Know