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Guide on bill of lading: Meaning and its role in international shipping

Bill of lading is a legal document that works as proof of shipment when the cargo is shipped overseas. Here’s a complete guide for exporters on BOL and how to obtain it.

Documentation is an important step in the process of international shipping, which ensures smooth export of goods and seamless payments. With every shipment that is exported from India, a few export documents are required.

Based on the type of document, authorities are required to approve it before it is sent to the importer or customer. These documents depend on origin and destination countries and the products being exported. Among the list of documents, bill of lading is one such important export document that works as a proof of shipment. It states what products are being shipped, where is the shipment from (origin country) and what is the destination of the shipment (destination country).

What is a bill of lading?

A bill of lading is a legal document that outlines the terms of the contract for the transportation of goods between the shipper and the carrier. The shipper receives these records from the transportation company (carrier). In international trade, this document keeps track of the exchanged items brought on board, just like inland bills of lading for products moved by roads or railroads¹.

What is the purpose and importance of
bill of lading?

Bill of lading is a legal document that plays a crucial role when the cargo (goods) is shipped from India. Here’s why bill of lading is necessary¹:

• Bill of lading acts as the ‘Evidence of Contract’ between the shipper and the carrier, as a proof that there is an agreement between the parties.
• It acts as a ‘Receipt’ handed over by the carrier to the receiver of the products. This states that the goods have been loaded.
• It acts as the ‘Document of the list of goods’, where the importer receives the goods and verifies them using this document.

When your products are shipped, the possession of the shipment is transferred from you – an exporter – to the carrier. To ensure this is done smoothly, BOL is obtained with information on export products, number of products, billing details, payment details, special instructions to be taken care of while storing or during the transit of the products, etc.

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 remains constant in Bill of Lading is²:

• Name and details of the shipping line/shipping partner
• Shipping bill number and date
• Hazardous products, if any, and necessary certification for it
• Name and address of the shipper (consigner), 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

Before signing the Bill of Lading, one must ensure that the details mentioned in the documents are not ambiguous. The terms and conditions must be carefully checked before confirming the document.

Types of bills of lading

To export, following are the different types of bill of lading³:

House bill of lading:

This BOL is issued when the consignor is the actual seller of the product and the consignee is the actual buyer of the product. For example, a buyer from the US receiving a consignment of leather bags purchased from a seller from India. The rest of the details in the documents remain the same.

Straight bill of lading:

Straight bill of lading is issued when the buyer has made complete payment of the shipment in advance. In this case, the importer will receive the consignment directly.

Open bill of lading

An open bill of lading is negotiable, meaning the consignees' signatures can be used to transfer ownership and modify the name of the consignee. There are several ways to transfer this. A switch bill of lading is an example of an open bill of lading.

Master bill of lading

This document is issued by the shipping company and is also known as the carrier bill of lading. In this case, the consignor is the agent of the seller and the consignee is the agent of the importer.

Order bill of lading:

With an order BOL, the buyer can nominate someone else (say third party or a nominee) to receive the goods.

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.

Clean bill of lading:

The carrier inspects the export consignment and then issues a clean bill of lading to state that the shipment received was in good condition without any damage.

Foul/ claused bill of lading:

This document 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.

Inland bill of lading:

BOL for domestic shipments.

Ocean bill of lading:

BOL for international shipments.

Through bill of lading:

This document is issued when the shipment travels through multiple destinations using different modes of transportation.

Multimodal bill of lading:

When the goods move across more than 2 modes of transport.

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.

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.

Container bill of lading

It is a document that provides details on items that are shipped between ports in a secure container from one port to another.

Surrender bill of lading

Surrender bill of lading is an official document provided by exporters that formally recognises importers as the legitimate owners of the items they have transported is known as a surrender bill of lading. This bill works on the principle of import documentary credit, in which the importer is not required to pay the bank until the maturity of the draft of the relative credit^6.

Charter party bill of lading

Charter party bill of lading is an agreement between the charterer and the vessel owner, and the former issues this bill of lading to the shipper⁶.

Forwarder’s bill of lading

A freight forwarder's bill of lading (FBL) is a transportation document employed in sea and multimodal shipments. It is issued and endorsed by a freight forwarder, typically in a format specific to freight forwarders. It serves as proof of the agreed terms and conditions for the shipment of goods as determined by the freight forwarder⁷.

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 lading⁶.

Implications of filing a bill of lading incorrectly

If the bill of lading is not filed as per the requirements, shipping of the goods can be impacted. This is one of the reasons why it is suggested that exporters take assistance from an expert or freight forwarder to complete the paperwork of bill of lading. Shipping and forwarding agents have adequate knowledge about export documents and procedures, thus helping exporters avoid delays in delivery of shipment.

A few points to remember while filing BOL are:
• If the document is inaccurate with information, then the receiver will be able to claim it as damaged or incomplete. In this case, you are liable to compensate the receiver.
• Loss of protection and indemnity insurance
• Possibility of criminal prosecution

Once you have obtained bill of lading and other required documents for your export business, you can sell internationally from India using e-commerce.

Bill of lading vs invoice

Some of the common factors that differentiate BoL and an invoice are⁴:

Bill of lading

• A bill of lading is used as proof of shipment of the goods.
• A shipping company issues a bill of lading.
• A bill of lading provides information about the ownership of goods.
• 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

• An invoice is used to determine the correct value of the imported goods and helps in accessing the number of duties and responsibilities.
• An exporter issues an invoice.
• No such information is offered on an invoice.
• 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.

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More blogs on bills of lading

1. What is a surrender bill of lading?

2. What is a multimodal bill of lading?

3. What is an order bill of lading?

4. What is a claused bill of lading: All you need to know about its meaning and format

5. What is a through bill of lading?

6. House bill of lading: All you need to know about its format and benefits

7. Ocean bill of lading: All you need to know about its types and format

8. What is a clean bill of lading: All you need to know about its meaning and format

9. Master bill of lading vs house bill of lading: Everything you need to know

10. Straight bill of lading: Guide to its meaning and format

11. What is a switch bill of lading: Guide to its meaning and uses

12. What is an inland bill of lading?

Frequently Asked Questions

Who issues a bill of lading?

A bill of lading is a legal document issued by a carrier to a shipper that contains all the details like the type, quantity, and destination of the goods being carried.

What is the main function of a bill of lading?

The bill of lading is regarded as a legal document that gives the shipper and the carrier all the information they need to easily process and properly bill a goods shipment across several maritime nations.

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.

Published on May 20, 2022.

Sources:
1. https://www.investopedia.com/terms/b/billoflading.asp
2. https://www.investopedia.com/terms/b/billoflading.asp#:~:text=A%20bill%20of%20lading%20
3. https://www.marineinsight.com/maritime-law/what-is-bill-of-lading-in-shipping/#Frequently_Asked_Questions
4. https://cleartax.in/s/commercial-invoice-vs-bill-of-lading
5. https://www.standard-club.com/knowledge-news/web-alert-delivering-cargo-against-a-damaged-or-lost-stolen-bill-of-lading-some-guiding-principles-467/
6. https://www.indiafilings.com/learn/types-of-bill-of-lading/
7. https://genxfreight.co.uk/how-does-a-freight-forwarders-bill-of-lading-work-in-

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