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Bill of lading: Meaning, importance, types, example, and format
A bill of lading is a document that works as proof of shipment when the cargo is shipped overseas. Learn more about its types and examples in the blog.
In international shipping, compliance documentation is crucial for ensuring smooth transactions and protecting the interests of all parties involved. Among these documents, the bill of lading stands out as a key instrument for exporters. Ensuring accurate and compliant bills of lading can help exporters avoid legal disputes, ensure timely payments, and streamline the logistics process. In this blog post, we will discuss what a bill of lading is, and its types, uses, and importance in exports.
What is a bill of lading?
A bill of lading is a legal document issued by the carrier to the shipper. It outlines various details about the goods being shipped from one destination to another. It also serves as a shipment receipt when the goods are delivered to their final destination. A bill of lading is a mandatory document for all exports from India, and must be signed by the carrier, shipper, and buyer.1
What is the purpose of a bill of lading?
In international shipping, a bill of lading serves the following key functions:
● It serves as evidence of a carriage contract between the carrier and the shipper.
● It serves as a receipt for shipped goods.
● It serves as a title document to the goods described in the bill of lading.2
● It serves as evidence of a carriage contract between the carrier and the shipper.
● It serves as a receipt for shipped goods.
● It serves as a title document to the goods described in the bill of lading.2
What is the importance of a bill of lading in international shipping?
The following are some of the ways in which a bill of lading is used in international shipping:
1. Ensures payment and delivery
A BoL guarantees that importers receive their goods and exporters get paid on time.
2. Assists with insurance coverage
Bills of lading provide insurance companies with necessary details to set coverage conditions and premiums.
3. Aligns with Incoterms
Bills of lading can be used to finalize trade agreements and Incoterms such as CFR (Cost and Freight) and FOB (Free on Board), which are used to determine customs and insurance obligations.
4. Connects middlemen
Bills of lading are essential for establishing a link between middlemen engaged in the international transport of goods.3
Contents of a bill of lading
A bill of lading may vary depending on the type of contract between the buying and selling parties and depending on the business terms of the buyer and exporter. A few details that remain constant in a bill of lading are:
• Name and details of the shipping line/shipping partner.
• Shipping bill number and date.
• Details of hazardous products, if any, and necessary certification for it.
• Name and address of the shipper (consigner), and receiver (consignee), along with other contact details and date of dispatch.
• Purchase order number to cross-check terms and conditions agreed upon by the buyer and seller.
• Any specific instructions or reminders for the carrier about the shipment.
• Complete details about consignment like the number of units, weight, dimensions of the products, etc.
• Information about packaging used in the shipment, like cartons, crates, pallets, drums, etc.
• Freight classification.
• Signature of the concerned officer.4
• Name and details of the shipping line/shipping partner.
• Shipping bill number and date.
• Details of hazardous products, if any, and necessary certification for it.
• Name and address of the shipper (consigner), and receiver (consignee), along with other contact details and date of dispatch.
• Purchase order number to cross-check terms and conditions agreed upon by the buyer and seller.
• Any specific instructions or reminders for the carrier about the shipment.
• Complete details about consignment like the number of units, weight, dimensions of the products, etc.
• Information about packaging used in the shipment, like cartons, crates, pallets, drums, etc.
• Freight classification.
• Signature of the concerned officer.4
Types of bills of lading
To export, the following are the different types of Bills of Lading:
1. House bill of lading:
A house bill of lading, issued by a freight forwarder or non-vessel operating company, acknowledges receipt of goods from the supplier. This document, also called the forwarder’s bill of lading, is generated when the cargo is received
2. Straight bill of lading:
A straight bill of lading is also called a non-negotiable bill of lading. It is a contract in which a seller promises to ship goods to a specified location and assigns the bill to a specific consignee. It cannot be allocated to anybody except the designated consignee due to its non-negotiable character.
3. Open bill of lading:
An open bill of lading is negotiable, meaning the consignees' signature can be used to transfer ownership and modify the name of the consignee. A switch bill of lading is an example of an open bill of lading.
4. Master bill of lading
A master bill of lading is issued by a carrier as a contract of carriage for goods. After receiving the goods, the carrier provides the MBL to the freight forwarder or shipper who booked the freight.
5. Order bill of lading:
An order bill of lading states 'to order' or 'to order of [name of the party]' in the consignee box. This allows the legal title of the cargo to transfer from the original holder to a third party through endorsement of the bill.
6. Bearer bill of lading:
In this type of BoL, the name of the consignee is ‘bearer’. This bill allows the delivery of the consignment to whoever holds the document.
7. Clean bill of lading:
A clean bill of lading is issued by a carrier after they inspect the cargo. It confirms that the shipment received was in good condition without any damage.
8. Foul/ claused bill of lading:
A foul or claused bill of lading contains clauses about the quality and defects of the consignment. It mentions that the bill of lading did not provide delivery as stated in the contract. This bill allows the consignee to reject the consignment and the bank to refuse to release the payment.
9. Inland bill of lading:
Inland bill of lading is used when goods are transported over land.
10. Ocean bill of lading:
Ocean bill of lading is used for shipment of goods via ocean transport.
11. Through bill of lading:
A through bill of lading is issued when the shipment travels through multiple destinations using different modes of transportation.
12. Multimodal bill of lading:
A multimodal bill of lading is a type of through bill of lading where a minimum of two modes of transport are used to carry goods.
13. Shipped bill of lading
This bill of lading is issued as soon as the cargo is placed onto the ship. It immediately ties the shipowner and shipper together.
14. Received bill of lading
This bill is forwarded by the agent/charterer to the shipper. Although it guarantees that the carrier has received the cargo, the endorsement of this bill does not guarantee that they are sailing on the designated vessel.
15. Container bill of lading
A container bill of lading provides details on the contents of a shipping container.
16. Surrender bill of lading
A surrender bill of lading is an official document that formally recognises importers as the legitimate owners of the items they have transported. The party responsible for storing the bill of lading should not release it until the importer has paid.
17. Charter party bill of lading
A charter party bill of lading is an agreement between the charterer and the vessel owner. These are typically used for commodity or bulk shipment cargoes.
18. Short-term bill of lading:
It is provided when the specific terms and conditions of the transport agreement are not included within the main content of the bill of lading.5
Bill of lading example
Consider an apparel store in the US which imports products from India every month. The store manager lists and fills a purchase order, which is mailed to the vendor in India. The vendor gathers the products and hands it over to the carrier. The vendor also signs a bill of lading. The carrier delivers the order to the store in the US and hands over a copy of the bill of lading to the store manager. The store manager matches the bill of lading’s information with the purchase order. If the information matches, the purchase order and the bill of lading are sent to the store owner, who reviews all documents and pays the vendor.
Implications of filing a bill of lading incorrectly
A bill of lading is a crucial shipping document and must be filed accurately to protect the exporter and ensure that they receive payment on time and in full. Some of the implications of incorrectly filing a bill of lading are as follows:
● Claims from the receiver: Inaccurate or incomplete information leaves exporters vulnerable to claims of damage or short delivery. Transporters can refute the exporter’s claim that goods were handed over in good condition, making the exporter liable.
● Loss of insurance cover: Inaccurate documentation can result in the loss of protection and indemnity insurance coverage.
● Loss of indemnity rights: Exporters may lose the right to indemnity from the charterer.
● Loss of liability limitation: Exporters may lose the right to exercise the limitation of liability clause.6
● Loss of insurance cover: Inaccurate documentation can result in the loss of protection and indemnity insurance coverage.
● Loss of indemnity rights: Exporters may lose the right to indemnity from the charterer.
● Loss of liability limitation: Exporters may lose the right to exercise the limitation of liability clause.6
Bill of lading vs invoice
Some of the key factors that differentiate BoL and an invoice are:
Bill of lading
1. A bill of lading is used as proof of shipment of the goods.
2. A shipping company issues a bill of lading.
3. A bill of lading provides information about the ownership of goods.
4. The purpose of issuing a bill of lading is to maintain a record of the physical condition of the goods, and it is often used in resolving disputes among buyers, shipping companies, or customs departments.
2. A shipping company issues a bill of lading.
3. A bill of lading provides information about the ownership of goods.
4. The purpose of issuing a bill of lading is to maintain a record of the physical condition of the goods, and it is often used in resolving disputes among buyers, shipping companies, or customs departments.
Invoice
1. An invoice is used to determine the correct value of the imported goods and helps in accessing the number of duties and responsibilities.
2. An exporter issues an invoice.
3. No such information is offered on an invoice.
4. An invoice contains details of the financial transactions carried out during the sales of the goods and is used as a reference for the payment of duties and taxes.7
2. An exporter issues an invoice.
3. No such information is offered on an invoice.
4. An invoice contains details of the financial transactions carried out during the sales of the goods and is used as a reference for the payment of duties and taxes.7
In summary, the bill of lading is essential for ensuring the secure and efficient transport of goods in international trade. Its multifaceted role as a receipt, contract, and title document underscores its importance. Understanding the nuances of compliance documents like bills of lading is essential for e-commerce exporters as it can help them avoid disruptions, protect their interests, and succeed in the global market. For more assistance on compliance or other aspects of e-commerce exports, exporters can leverage the tools and services offered by e-commerce export programs like Amazon Global Selling.
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Frequently Asked Questions
Who issues a bill of lading?
A bill of lading is a legal document issued by a carrier to a shipper. It contains details such as the type, quantity, and destination of the goods being carried.
What is the main function of a bill of lading?
The main function of a bill of lading is to serve as a receipt for the shipped goods, a contract of carriage between the shipper and carrier, and a document of title that can be transferred to a third party. This ensures the proper handling, delivery, and legal transfer of the cargo.
Who needs a bill of lading?
A shipper needs a bill of lading to establish the contract between the shipper and the carrier.
What are the consequences of lost or damaged bills of lading?
If the bill of lading is lost or damaged for a certain reason, a formal court order is required before the cargo can be delivered. In order to obtain an order for delivery from a court, the importer will have to provide an indemnity or security to the carrier that will protect the carrier from any possible claims of missing delivery that may arise due to the delivery of the cargo without the original bill of lading.8
What are the uses of a bill of lading?
A bill of lading is a crucial document that provides information about the goods being shipped, the destination, the shipper and carrier, and other relevant details. It is used to confirm receipt of goods, determine ownership, release payment, and for other purposes such as securing insurance coverage.
Published on May 20, 2022.
Sources:
1. https://www.investopedia.com/terms/b/billoflading.asp
2. https://www.maersk.com/logistics-explained/shipping-documentation/2023/10/02/what-is-bill-of-lading
3. https://www.lotus-containers.com/en/what-is-the-importance-of-the-bill-of-lading/
4. https://dclcorp.com/blog/shipping/bill-of-lading/
5. https://www.indiafilings.com/learn/types-of-bill-of-lading/
6. https://www.cogoport.com/en-IN/blogs/types-and-usage-of-bill-of-lading-meaning
7. https://cleartax.in/s/commercial-invoice-vs-bill-of-lading
8. https://www.standard-club.com/knowledge-news/web-alert-delivering-cargo-against-a-damaged-or-lost-stolen-bill-of-lading-some-guiding-principles-467/
Sources:
1. https://www.investopedia.com/terms/b/billoflading.asp
2. https://www.maersk.com/logistics-explained/shipping-documentation/2023/10/02/what-is-bill-of-lading
3. https://www.lotus-containers.com/en/what-is-the-importance-of-the-bill-of-lading/
4. https://dclcorp.com/blog/shipping/bill-of-lading/
5. https://www.indiafilings.com/learn/types-of-bill-of-lading/
6. https://www.cogoport.com/en-IN/blogs/types-and-usage-of-bill-of-lading-meaning
7. https://cleartax.in/s/commercial-invoice-vs-bill-of-lading
8. https://www.standard-club.com/knowledge-news/web-alert-delivering-cargo-against-a-damaged-or-lost-stolen-bill-of-lading-some-guiding-principles-467/
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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
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