Bill Of Lading : Type, Format & Functions

Bill Of Lading : Type, Format & Functions

Table of Contents

What is Bill of Lading?

A bill of lading (B/L) is a document that is issued by the carrier to the consignor or shipper or their appointed agents. It serves 3 main purposes, i.e. it is a receipt for the goods, a document of title, and evidence of the contract of carriage.

Bill of Lading (Ocean)

The origin & development :

During olden times, the merchant accompanied his goods and selected his buyers on the spot. In these circumstances, there was no need for documents that set forth the terms, which determined the transportation of goods from one place to another. 

It was not always possible for the merchant to accompany the goods. Hence the idea of dealing with the agents, who took the place of the merchants, developed around the fourteenth century, and ways of making loans to finance the movement of goods were formulated by the banking families and cities.

The first document to be used as the receipt was provided by the carrier to the consignor, in which possession of the goods was acknowledged, and agreed that delivery would be made only to the person designated by the consignor. 

The next step in the development of the bill of lading was to establish a contract of carriage. When the merchant dispatched his goods, unaccompanied by his representative, he and the carrier had to agree upon the terms under which the cargo would be transported and delivered. 

At first, these terms were those of the trade, but gradually the conditions were written into commercial law codes. As per English common law, the carrier was liable for right and safe delivery unless he could show that he had been prevented from this by an act of God, an act of the King’s enemies, or the inherent vice of the goods.

Though contracting parties were free to negotiate any terms they wished, and the freedom of contract developed to a point where the carrier accepted the goods for transportation when and how he liked. Consignors became dissatisfied with the continuing efforts of the carriers to avoid any liability for damage or loss and agitated successfully for the enactment of legislation to protect themselves and their interests. Today, the laws of carriage of goods by sea clearly defines the responsibilities of both carriers and consignors.

In tracing the gradual growth of the bill of lading in use is appropriate to mention its importance as a document of title by which ownership of cargo can be transferred from one party to another.

In the medieval period, merchants accompanied his goods and sold them in overseas markets, whereas in today’s commerce, the cargo often changes ownership several times while in transit. The bill of lading has become identified with the cargo, and because the document is negotiable, the title may be transferred from one person to another with little difficulty.

The significance of this was not fully appreciated until the advent of fast mail-carrying ships, which made it possible for shipping documents to arrive at a destination well in advance of slow cargo carriers.

Now that airmail has reduced transmission time to a matter of hours, the convenience of the negotiable bill of lading now has a greater value to the traders. The right of possession of the cargo can be transferred from a local seller to a domestic buyer, and from him to the overseas purchaser, without the intermediary seeing the cargo. The clauses of the bill of lading, which affect the insurance coverage as well as the financial aspects of the transactions, therefore became crucially important.

Click here to see Bill of Lading format (CONGENBILL EDITION 1994) : Sample.

Three main Functions of Bill of Lading:

  • Is a receipt for goods either received or shipped on board.
  • Evidence of the existence and terms of a contract between the shipper and a carrier.
  • Is a document of title, signifying that the holder has the legal right to possession of the goods.

 

1.THE BILL OF LADING AS A RECEIPT OF GOODS

As customary shipping practice, in most countries, when the shipper delivers the goods to the carrier, the carrier issues a receipt, usually called Mate’s receipt.

It is an acknowledgment by the carrier that the goods have been received onboard the ship. The Mate’s receipt is the carrier’s record of the exact quantity and condition of the shipment at the time it came into his custody. It is a receipt basis on which the original bill of lading is prepared and issued by the carrier.

The bill of lading is completed by the shipper on forms supplied by the carrier. 

2.THE BILL OF LADING AS EVIDENCE OF CONTRACT OF CARRIAGE

The bill of lading, as a contract of carriage, sets forth the terms of the agreement between carrier and shipper, in which lawful goods are accepted for transportation between named ports in a designated ship, with a stipulated sailing date in exchange for a financial consideration. The contract becomes effective when it has been signed by the Master or his agent as authorized by the Master.

The bill of lading is required to be issued by the carrier as a receipt for the goods and the bill constitutes prima facie evidence of such receipt.

The bill must contain information as to the marks and numbers of the packages, the quantity of packages, or the weight or measurement of bulk cargo, and any exception to the basic statement that the goods were received in apparent good order and condition.

Once the cargo is shipped on board, the carrier must provide a bill of lading to the shipper. The bill of lading must provide all information accurately, including the date of shipment.

3.BILL OF LADING AS DOCUMENT OF TITLE

In earlier days, when the merchant accompanied his goods, the ownership of goods was always known. Later on, when the merchant could not accompany his goods, some methods of transferring title had to be devised. The simplest means of accomplishing this was by sending a copy of the bill of lading issued by the ship to the consignee.

This was done either dispatching through a faster ship, so that consignee has the bill of lading by the time the ship with goods arrives the named port or at times it is given to the Master of the carrier, in a special envelope, which the Master delivers it to the consignee. 

At times, to protect the goods against any illegal possession, the shipper’s agent in the discharge port was the addressee of the bill of lading. The carrier agreed to transport the goods from Port X to Port Y and there to deliver them to the shipper, or to the person designated by the shipper to receive them, or to the consignee’s order.

This way, the bill of lading came to represent the goods in respect to which it had been issued. The possessor of the bill of lading passes the authority to accept delivery to a third party by a statement written on the bill that he transferred his interest to that party. Endorsement and transfer by the owner of the bill of lading actually transferred legal ownership and the bill of lading became a document of title to the goods.

What is a negotiable or Order Bill of Lading?

Now in the world of commerce, bills of lading are issued by carriers to the order of the consignee, which means that the carrier, shipowner, charterer, or Master will deliver the goods at the port of discharge not solely to the named consignee, but to any person designated by him.

By the use of the word ‘order,’ the bill of lading becomes more than a receipt from the ship for the goods, and more than the contract of carriage. The bill, by the insertion of this word ‘order,’ possesses a legal and commercially important characteristic in that it becomes a transferrable document of title. 

The legal ownership can be transferred from the consignee named in the bill to any other party, and by them to other parties, without any of them seeing the goods or having physical possession thereof. This transfer of possession is accomplished initially by the consignee signing his name on the bill of lading, thereby converting the bill into a ‘bearer’ document. The consignee may direct that the goods be delivered to a particular person and then affix his signature to the endorsement.

The bill of lading hence becomes, in practice, a negotiable instrument. The endorsees and holders of the bill are entitled legally to rely upon the tally and the statements in the bill of ‘apparent good order and condition.’

Types of Bill Of Lading:

Mainly there are eight(8) types of bill of lading, they are as follows:

1) A long-form bill of lading has spaces or boxes on its front for typed details and numerous printed conditions of carriage on its back. Most liner shipping companies print their own long-form bills of lading with their company conditions of carriage on the back.

2) A short form bill of lading has only a few standard terms printed on it, avoiding the need for shippers to hold stocks of bills of lading for every carrier they use, so that they can prepare the bill of lading with the required details before presentation for signature.

3) A direct bill of lading is issued when the goods are for carriage from one port to another. Trans-shipment is not anticipated although there may be a clause giving the carrier liberty to transship (in which case the goods may lie at the merchant’s risk whilst in the trans-shipment port). This type of bill of lading has printed clauses on the reverse and is used in liner services.

4) A combined transport BIL covers carriage from door-to-door by several modes of transport, which is common in many liner services. The combined Transport Operator (CTO) takes responsibility for the goods throughout the entire journey and issues the CT bill of lading at its start

5)  A thorough BIL is issued when the carriage will involve both sea and other transport modes, but different carriers will be involved at each stage, e.g. a railway, ships, road transport. The bill of lading is issued by the sea carrier but he states on it that he only accepts responsibility for the goods during the sea passage.

6)  A received shipment BIL or Received BIL is issued for goods received at a  depot or some other place before loading on the ship.

7) A shipped BIL or on board BIL is one that is issued by the carrier after the goods are loaded on the carrying ship.

8) A straight BIL is also known as the Consignment BIL. Straight Bill of Lading is a non-negotiable Bill of Lading, it is used when the goods that are being delivered are already paid for. The carrier of goods releases cargo to the consignee on the production of the identity of the consignee at the port of the final destination.

What is a Standard Shipping Note (SSN)?

It is a shipping document widely used in the liner trades, to accompany a consignment of goods from their place of origin (e.g. a factory) to the place of loading (e.g. an inland container depot) or the port of shipment.

 

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4 Responses

  1. @www.mascotmaritime.com Would like you to please elaborate contract of carriage between the Shipper, Consignee, and Carrier with the terms and conditions of carriage Sir? And is this drafted my a mariner? just asking wrt authenticity….

    1. Thank you, Mr. Jade, for your query.
      Yes, the blog is drafted by a Master Mariner.
      Fyi, as per the Hague-Visby rules(international set of rules governing the carriage of goods where a bill of lading has been issued), the contract of carriage applies only to the contracts of carriage covered by a bill of lading or similar document of title, in so far such documents relates to the carriage of goods by sea, including any bill of lading or similar document issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and the holder of the same (consignor or consignee).

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