Beginner's Guide to Bill of Lading & How to Navigate it

If you have skimmed through our article on the basics of global trade, you might have come across a term called a Bill of Lading. So what does it mean? Simply put, a Bill of Lading (BOL) is a fundamental document in international trade and shipping, serving as a receipt and contract of carriage. It is a document that establishes an agreement between the shipper and the carrier for the transport of goods to the consignee. Moreover, the Bill of Lading is often negotiable, allowing for the transfer of ownership and facilitating trade transactions.

A shipper (also known as the consignor) is an individual or organization that deals with the shipment at the supplier’s end and the carrier (also known as the shipping line) is the organization responsible for the transportation of the cargo. The bill of lading outlines the terms and conditions of transportation, including the agreed-upon freight rate, the nature of the transport service, and any special instructions.

The Bill of Lading is created and issued by the carrier or their freight forwarding agents. A Bill of Lading serves as a receipt for the cargo accepted for transportation. This document also acts as a document of title, signifying ownership of the goods in transit.

It acts as a legally binding document and can serve as a lawful statement in the event of a dispute in the logistics chain, providing clarity, evidence of the contract, and a basis for resolving disputes throughout the shipping process. It plays a crucial role in customs clearance by providing essential information about the cargo. It is presented at the destination during the shipment’s delivery.

Why is Bill of Lading Important

A Bill of Lading is one of the single most important documents required in global shipping. At its simplest, the entity with the Bill of Lading owns the cargo. The Bill of Lading for a shipment usually sums up the agreement made between a carrier and the shipper. The following are eight reasons why a Bill of Lading is important:

1. Document of Title: The Bill of Lading serves as a document of title, indicating ownership of the goods being transported. It can be transferred to others, allowing for the buying and selling of goods while they are in transit. This function facilitates trade by providing a secure and transferable proof of ownership.

2. Receipt of Goods: It serves as a receipt issued by the carrier, confirming that the goods have been received for shipment. This acknowledgment includes details such as the quantity, condition, and packaging of the goods, providing a reference point for both the shipper and the consignee.

3. Contractual Agreement: The Bill of Lading serves as a contract of carriage between the shipper and the carrier. It outlines the terms and conditions of the transportation, including the agreed-upon freight rate, the type of transport service, and any special instructions or requirements.

4. Negotiable Instrument: In many cases, the Bill of Lading is a negotiable instrument, meaning that it can be transferred to others, often through endorsement and delivery. This feature enhances the flexibility of trade transactions and facilitates financing arrangements.

5. Customs Documentation: The Bill of Lading is a crucial component for customs clearance at both the port of origin and the destination. Customs authorities use it to verify the details of the shipment, ensuring compliance with import and export regulations.

6. Cargo Insurance Claims: In the event of damage, loss, or theft during transit, the Bill of Lading acts as evidence. It helps in filing cargo insurance claims by providing a documented account of the condition of the goods when they were entrusted to the carrier.

7. Letter of Credit Compliance: When trade transactions involve letters of credit, the Bill of Lading is often a required document. It ensures that the terms and conditions of the letter of credit are met, facilitating the smooth flow of funds in the international trade process.

8. Carrier's Liability: The Bill of Lading outlines the responsibilities and liabilities of the carrier. It specifies the conditions under which the carrier is accountable for the safe and timely delivery of the goods. This clarity is essential for legal purposes and dispute resolution.

Contents of a Bill of Lading

Bill of Lading contains details on the shipper, carrier, consignee, and the shipment among other details. Here is a full list of what you can expect to find:

1. The Bill of Lading number
2. Date of issue
3. The name and address of the shipper
4. The name and address of the consignee
5. The name and address of the notifying party
6. The name of the vessel
7. Planned travel Route
8. Information on the carrier
9. Information on the freight forwarder (the logistics provider)
10. Payment terms for transportation service
11. Details on the goods (description, units, dimensions, weight, etc.)
12. Port of lading and unlading
13. The date of pick-up
14. The nature of the packaging material
15. Indication of hazardous material and permission to carry the same
16. Instructions for the carrier
17. Signature by the carrier or a legal representative

Overview of Key Bill of Lading Terms and Conditions

It is important to understand the terms and conditions laid out in the bill of lading to understand each parties’ responsibilities and liabilities when any disputes arise. The following are a few key terms and conditions to consider when verifying the contents of a bill of lading.

1. Carriage terms - Defines the the carrier’s responsibilities, routes, and transit times
2. Freight charges - Clarifies whether freight charges are prepaid or to be collected
3. Liability limitations - Specifies the carrier’s liability limits for loss or damage
4. Cargo nature and restrictions - Any limitations on the type of cargo carried
5. Documentation requirements - Necessary documents for compliance and customs
6. Delivery terms - Conditions under which goods will be released to the consignee
7. Governing law - Specifies the legal jurisdiction and law governing the bill of lading
8. Dispute resolution - Procedures for handling disputes, arbitration, and mediation
9. Claims procedure - Outlines the process and time limits for filing claims
10. Demurrage and Detention - Terms regarding charges for delays
11. Force majeure - Conditions under which the carrier is not liable for unforeseen events

How to Navigate a Bill of Lading

A bill of lading can be complicated to understand at first glance. Even there are different types of bills of lading, since the format of them are generally the same, it become easier with time. It is imperative to validate the details in a bill of lading to avoid fraud or legal hassle later. Here are some tips on how to navigate a bill of lading:

1. Identifying the Carrier

• The carrier’s name is at the top of the bill of lading
• The signature on the bottom belongs to a carrier representative or their legal party
• The ‘clause paramount’ at the back of the bill of lading has more information on the carrier

2. Verifying Cargo Details

• Cross-check cargo description with internal records
• Confirm that quantities, weights, and volumes are as expected
• Ensure unique identifiers or marks match the ones listed on the bill of lading

3. Transferring of Ownership

• If ownership of cargo is to be transferred, check if it is a ‘To Order’ bill of lading
• If ownership is not to be changed and the consignment is to be delivered directly to the named consignee, make sure it is a straight bill of lading
• If the consignment is to be delivered in smaller packages to multiple parties, it should be a bearer bill of lading

4. Understanding Clauses

• The ‘said to contain’ clause indicates that the carrier acknowledges the goods based on the shipper’s description without verifying the contents, requiring the need for independent verification and self-reporting when possible for liability purposes when discrepancies arise
• An ‘on deck at shippers’ risk’ clause means the cargo is laden and stowed on deck at the the shipper’s risk and holds minimum liability for the carrier
• The ‘weight, measure, quality, quantity, condition, contents, and value unknown’ clause indicates the carrier does not independently verify these details about the cargo and the shipper has to ensure the accuracy of these themselves

5. Understanding Liability and Risk

• Check and verify incoterms specified in the bill of lading
• Identify clauses detailing risk transfer and carrier liability

6. Confirming Freight and Additional Charges

• Determine if freight is ‘prepaid’ or ‘collect’. Prepaid means the shipper is covering the charges, whereas collect means the consignee has to pay for the freight

7. Ensuring Regulatory Compliance

• Ensure the bill of lading complies to regulations like the Hague-Visby Rules and New Jason Clause
• Verify that all customs and documentation requirements are met

8. Managing e-Bill of Lading

• Be familiar with the e-bill of lading system used
• Check all digital endorsements and if all above mentioned details are valid

9. Filing a Claim

• Document discrepancies and damages immediately
• Follow the bill of lading’s claims procedure within the given timeline

10. Resolving Disputes

• Consult the bill of lading’s dispute resolution or arbitration clauses
• Prepare all relevant documents and evidence for any legal steps

Download your copy of a bill of lading by clicking this link. Learn how Trademo Intel leverages bill of lading information to provide global supply chain intelligence to business around the world to find new opportunities, identify market trends, and monitor competition.