What is a Bill of Lading?

What is meant by a bill of lading is a letter signed by the ship owner or his representative to prove that the ship or carrier has received the goods. It functions as a contract of carriage, outlining the details of the shipment. Finally, Cargo can be claimed instead of a bill of lading because it is considered as the title of the goods.

Bill of lading is usually used since sixteen hundred by the Spaniards to describe their cargo and the number of bags accepted by the carrier. By the eighteenth century, merchants had established a refined bill of lading. The bill’s ramifications continued in the nineteenth century and have given rise to the modern Bill of Lading that we use today.

The word “invoice” is a statement of costs for products or services provided by a supplier or service provider to a buyer. Lading means the act of loading container cargo into a ship. Therefore, taken together, the Bill of Lading outlines the agreement between the shipper and the shipping company (or carrier). This includes all information regarding the goods that will enter the ship. These details include the classification of goods, number of cartons, total volume, weight, port of loading and destination, name of carrier, and shipping number. The term Bill of Lading is usually abbreviated as B/L or BOL.

The functions of the Bill of Lading are as follows:

1. Receipt – Acts as a document for receipt of goods by the issuing body.
2. Contract – This outlines the method of delivery to be used for the cargo and acts as proof of a contract of carriage with the carrier.
3. Title of goods – For the designated consignee to take delivery of the goods at the port of release or at the final destination (depending on what has been agreed upon), they must submit the original copy of the B/L.

Why Need to Use Bill of Lading?

Bill of Lading serves as a document of ownership of goods. Therefore, for the named consignee to take delivery of the product from the shipping line (or carrier), at least one original copy must be presented. Original copies are used to avoid theft, which can result in international trade litigation.

The use of the Bill of Lading is not limited to knowing the shipping details; it serves as a legal document that can be used for claims if something goes wrong during the logistics process.

If the buyer decides to take over the arrangements for the carriage of their goods, rather than using a shipping agent or freight forwarder to handle both ends, an original Bill of Lading is required. The process will involve the buyer forwarding a copy of the Bill of Lading to the shipping agent of the destination port of choice. The shipping agent will then issue a Delivery Order to the port for the release of the goods.

The buyer should still have a copy of the Bill of Lading for the shipment arranged by the shipper at both origin and destination. Following this will give the buyer the option to cross-reference the shipping information and to confirm whether they are correct. In addition, the buyer will also have the ability to track the location of the vessel using the vessel information on the documents.

Who Issues the Bill of Lading?

A Bill of Lading document is issued by the carrier or their authorized agent, such as a Non-Vessel-Operating Common Carrier (NVOCC), to shippers to certify that they have received the goods.

There are two types of Bill of Lading: HBL, which is also known as House Bill and MBL, which stands for Master Bill of Lading. NVOCC can only secrete HBL; on the other hand, MBL is issued by the shipping company after receiving the goods from the freight forwarder. Although the NVOCC does not own any ships, it is considered an actual cargo carrier, as it is regulated by local and international laws. Original copies of HBL and MBL are considered legal documents. Freight forwarders are not always NVOCC and vice versa. However, there are also NVOCC licensed freight forwarders.

Buyers usually get a copy of the HBL when using a forwarding company. The buyer will require an original copy of the HBL or MBL from the shipper if shipping under certain Incoterms such as CFR (Cost and Freight) or CIF (Cost, Insurance, & Freight). The original copy is necessary because the buyer will have to take over the shipping responsibilities from the shipper at some point. The original copy of the Bill of lading can be presented to the carrier from the port or destination on the contract to release the cargo. Presentation of the original may be skipped if the sender has hosted a Telex Release.

For shipments with HBL, the shipper can submit a telex release application to the NVOCC or the freight forwarder to request the release of the cargo to the consignee without requiring the original Bill of Lading. The consignee can then set up a Delivery Order upon release of the goods.

The term Telex Release is used by the industry where the carrier gives the go-ahead to the port of destination to release cargo without the presence of the original Bill of Lading. The original Bill of Lading must be submitted by the shipper at the port of origin, at the request of a Telex Release.

What Types of Bill of Lading Are There?

Based on history, Bill of Lading was originally used for sea shipping because it was a common mode of transportation in pre-modern times. However, the Bill of Lading is now used by other shipping methods such as rail and road freight. There are several types of Bill of Ladings, and the use of each depends on whether it is negotiable or non-negotiable or based on the responsibility of the carrier.

The main difference between a negotiable and non-negotiable Bill of Lading is the ability to change the ownership of the consignee or cargo. A negotiable Bill of Lading informs the carrier to ship the goods, depending on the support of the shipper. Non-negotiable B/L defines a specific beneficiary and is non-transferable.

Straight Bill of Lading

This is a standard B/L, used if the shipment goes to a customer who has paid for the delivery. Shipments can only be received by recipients of goods and invoices and are non-transferable.

Order Bill of Lading

This is the type of delivery normally used for shipments. The recipient on the record is deemed to be the owner of the cargo unless the recipient has transferred ownership of the cargo to another entity by validating the Bill of Lading.

Charter Party Bill of Lading

This type of Bill of Lading is used when a shipper, or group of shippers, charters or charters an entire ship to carry cargo.

Switch Party Bill of Lading

This Bill of Lading is considered a duplicate. The consignee can request the carrier to transfer the Bill of Lading when the consignee does not wish to divulge the carrier’s information to a new consignee or buyer.

Air Waybills

This is a non-negotiable document that is only used for cargo transferred by air freight. Unlike an oceanic Bill of Lading, an Air Waybill does not act as a goods title.

Types of Bill of Ladings based on the responsibility of the carrier

Ocean Bill of Lading

This type allows carriers to ship goods domestically or abroad. The responsibility of the carrier starts from the port of origin and usually ends at the port of discharge, which is stated in the documents. This is also known as a port-to-port Bill of Lading.

Inland Bill of Lading

This document shows information on carriers transporting cargo domestically either by road or by rail.

Direct Bill of Lading

This is used if the carrier will be the same carrier that will handle the shipment to the final destination. The responsibility of the carrier in this case is from the receipt of the goods to the final destination.

Multimodal or Combined Transport Bill of Lading

This B/L includes at least two modes of transportation. An example is the combination of sea, rail and road. The carrier may subcontract other modes of delivery to other carriers.

Through Bill of Lading

This type of invoice is very similar to combined or multimodal transportation, where there are different legs of delivery. The only difference is that there is no change in the shipping mode (ocean shipments will remain in the waters) on this Bill of Lading.

Transshipment Bill of Lading

If the carrier does not have direct services between the two ports, the carrier may ship cargo to another port at the carrier’s expense.

Types of Bill of Ladings can be very many; However, as a buyer, who wants to ship cargo, it is not necessary to know all types of Bill of Ladings. However, it is best for buyers to know the Bill of Lading that applies to their business.

What’s on the Freight Bill of Lading?

The Bill of Lading contains important information about the shipment. Buyers are encouraged to know and understand what is in this document. Below are details that can be found on each Bill of Lading, regardless of whether it is a House Bill or a Master Bill.

• Sender : The name and address of the party sending the cargo
• Consignee : Recipient’s name, address and contact details
• Notification Party : Name, address and contact details of the paying party
• Issue date : Bill of Lading Number
• Information Delivery : Port of Loading
  Disposal Port
  Vessel Name and Voyage Number
  Final destination
• Cargo Details : Description of the cargo and packaging used (eg cartons, pallets, etc.)
• Bruto : 
  Number of Volumes
  Number of Total Cartons
  Container Number and container size
• Special Notes or Instructions

The following is an example of how the Ocean Bill of Lading on regular EXW shipments from China to the US.

1. The carrier issues a Bill of Lading in China.
2. Bill of Lading is sent to the buyer or consignee by the shipper.
3. The buyer or consignee will forward the Bill of Lading to the shipping agent in the destination country (USA, in this example).
4. The shipping agent will issue a Delivery Order to the port for cargo release.
5. The shipping agent will arrange delivery of the goods to the buyer or to the final destination.

The steps above are a simple representation of how a Bill of Lading works and how it is transferred. Freight forwarders can help buyers to streamline those steps and arrange everything the buyers need.

Example of Bill of Ladings: Sea Freight and Air Freight

The original Ocean Bill of Lading is a legal document that represents the title of the goods and can be exchanged for the ownership of the cargo. Although the original Air Waybill has similar details and is considered a type of Bill of Lading, it does not act as a goods title.