Bill of Lading

Introduction
A document signed by a carrier (a transporter of goods) or the carrier's re
presentative and issued to a consignor (the shipperof goods) that evidence
s the receipt of goods for shipment to a specified designation and person.
Carriers using all modes of transportation issue bills of lading when they 
undertake the transportation of cargo. A bill oflading is, in addition to a re
ceipt for the delivery of goods, a contract for their carriage and a docume
nt of title to them. Itsterms describe the freight for identification purposes
; state the name of the consignor and the provisions of the contract forshi
pment; and direct the cargo to be delivered to the order or assigns of a par
ticular person, the consignee, at a designatedlocation.
There are two basic types of bills of lading. A straight bill of lading is one 
in which the goods are consigned to a designatedparty. An order bill is on
e in which the goods are consigned to the order of a named party. This dis
tinction is important indetermining whether a bill of lading is negotiable (
capable of transferring title to the goods covered under it by its delivery o
rendorsement). If its terms provide that the freight is to be delivered to the 
bearer (or possessor) of the bill, to the order of anamed party, or, as recog
nized in overseas trade, to a named person or assigns, a bill, as a documen
t of title, is negotiable.In contrast, a straight bill is not negotiable.
State laws, which often include provisions from the Uniform Commercial
Code, regulate the duties and liabilities imposedby bills of lading coverin
g goods shipped within state boundaries. Federal law, embodied in the Int
erstate Commerce (49 U.S.C. [1976 Ed.] § 1 et seq.) Apply to bills of 
lading covering goods traveling in interstate commerce.

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What is a Bill of Lading?

A bill of lading is a legal document between the shipper of goods and the
carrier detailing the type, quantity and destination of the goods being
carried. The bill of lading also serves as a receipt of shipment when the
goods are delivered at the predetermined destination. This document must
accompany the shipped goods, no matter the form of transportation, and
must be signed by an authorized representative from the carrier, shipper
and receiver.
A document issued by a carrier, or its agent, to the shipper as a contract
of carriage of goods. It is also a receipt for cargo accepted for
transportation, and must be presented for taking delivery at the
destination.
Among other items of information, a bill of lading contains:-
Consignor's and consignee's name.
1. Names of the ports of departure and destination.
2. Name of the vessel.
3. Dates of departure and arrival.
4. Itemized list of goods being transported with number of packages
and kind of packaging.
5. Marks and numbers on the packages.
6. Weight and/or volume of the cargo.
7. Freight rate and amount.
It serves as a proof of ownership (title) of the cargo, and may be issued
either in a negotiable or non-negotiable form. In negotiable form, it is
commonly used in letter of credit transactions, and may be bought, sold,
or traded; or used as security for borrowing money. A bill of lading is
required in all claims for compensation for any damage, delay, or loss;
and for the resolution of disputes regarding ownership of the cargo. The
rights, responsibilities, and liabilities of the carrier and the shipper under
a bill of lading (often printed on its back) are governed generally either
by the older Hague rules, or by the more recent Hague-Visby rules.

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TYPES OF BILLS OF LADING

There are several types of bills of lading and these include the following:
1. Shipped bill of lading:
Under the Carriage of Goods by Sea Act 1924, the shipper can
demand that the ship owner supplies bills of lading proving that the
goods have been actually shipped. For this reason most bill of lading
forms are already printed as shipped bills and commence with the
wording: "Shipped in apparent good order and condition". It confirms
that the goods are actually on board the vessel.
This is the most satisfactory type of receipt, and the shipper prefers
such a bill as there is no doubt about the goods being on board and
consequent dispute on this point will not arise with the bankers or
consignee, thereby facilitating earliest financial settlement of the
export sale.

2. Received bill of lading:

This arises where the word "shipped" does not appear on the bill of
lading. It merely confirms that the goods have been handed over to
the ship owner and are in his custody. The cargo may be in his dock
warehouse/transit shed or even inland. The bill has therefore not the
same meaning as a "shipped" bill and the buyer under a C.I.F.
contract need not accept such a bill for ultimate financial settlement
through the bank unless provision has been made in the contract.
Forwarding agents will invariably avoid handling "received bills" for
their clients unless special circumstances obtain.

3. Through bills of lading:

In many cases it is necessary to employ two or, more carriers to get
the goods to their final destination. The on-carriage may be either by
a second vessel (e.g. to the Seychelles Islands via Mombasa or
Bombay) or by a different form of transport (e.g. to destinations in the
interior of Canada). In such cases it would be very complicated and
more expensive if the shipper had to arrange on-carriage himself by
employing an agent at the point of transshipment.

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4. Group age Bill of Lading:
Forwarding agents are permitted to "group" together particular
compatible consignments from individual consignors to various
consignees, situated usually in the same destination country/area, and
dispatch them as one consignment. The ship owner will issue a group
age bill of lading, whilst the forwarding agent, who cannot hand to his
principals the ship owners' bill of lading, will issue to the individual
shippers a Certificate of Shipment sometimes called "house bills of
lading". At the destination, another agent working in close liaison
with the agent forwarding the cargo will break bulk the consignment
and distribute the goods to the various consignees. This practice is on
the increase, usually involving the use of containers and particularly
evident in the continental trade and deep sea container services. It will
doubtless increase with containerization development and is ideal to
the shipper who has small quantities of goods available for export.
Advantages of group age include less packing: lower insurance
premiums; usually quicker transits; less risk of damage and pilferage;
and lower rates when compared with such cargo being dispatched as
an individual parcel/consignment.

5. Transshipment Bill of Lading:

This type is issued usually by shipping companies when there is no
direct service between two ports, but when the ship owner is prepared
to transship the cargo at an intermediate port at his expense.

6. Clean Bills o Lading:

Each bill of lading states "in apparent good order and condition".
which of course refers to the cargo. If this statement is not
modified by the ship owner, the bill of lading is regarded as "clean"
or "uncaused". By issuing clean bills of lading the ship owner
admits his full liability of the cargo described in the bill under the
law and his contract. This type is much favored by banks for
financial settlement purposes.

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7. Claused Bills of Lading:
If the ship owner does not agree with any of the statements made in
the bill of lading he will add a clause to this effect, thereby causing
the bill of lading to be termed as "unclean", "foul", or "claused".
There are many recurring types of such clauses including:
inadequate packaging; "unprotected machinery”; "second-hand
cases”; “wet or stained cartons"; "damaged crates"; "two cartons
missing"; etc. The clause "shipped on deck at owner's risk" may
thus be considered to be a clause under this heading. This type of
bill of lading is usually unacceptable to a bank.

 Undoubtedly, to the shipper, the most useful type of bill of

lading is the clean, negotiable "through bill" as it enables the
goods to be forwarded to the point of destination under one
document, although much international trade is based on free
on board (F.O.B.) or cost, insurance, freight (C.I.F.) contracts
and, with regard to the latter, the seller has no further interest in
the movement of the goods once they reach their port of
destination.

 Both F.O.B. and C.I.F. are two widely used types of contract of
sale. F.O.B. means that the price quoted by the vendor includes
the price of the goods and all expenses up to and including the
cost of loading the goods on to the vessel. It does not include
the cost of sea freight. In the case of C.I.F., the price quoted
includes the cost of the goods, the cost of insuring the goods to
destination, and the freight or cost of transport.

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Responsibilities and liabilities of Shipper in bill of
lading
After the goods are loaded the bill of lading to be issued by the carrier,
master, or agent of the carrier to the shipper shall, if the shipper so
demands, be a “shipped” bill of lading: Provided, That if the shipper shall
have previously taken up any document of title to such goods, he shall
surrender the same as against the issue of the “shipped” bill of lading, but
at the option of the carrier such document of title may be noted at the port
of shipment by the carrier, master, or agent with the name or names of the
ship or ships upon which the goods have been shipped and the date or
dates of shipment, and when so noted the same shall for the purpose of
this section be deemed to constitute a “shipped” bill of lading.

Roles and Purposes of bill of lading

As cargo receipt
The principal use of the bill of lading is as a receipt issued by the carrier
once the goods have been loaded onto the vessel. This receipt can be used
as proof of shipment for customs and insurance purposes, and also as
commercial proof of completing a contractual obligation. Especially
under Inco terms such as CFR (cost and freight) and FOB (free on board).
There are two types where bill of lading can be used as carrier's receipt
for goods. The first is on board bill of lading, also known as clean bill of
lading. Clean bill of lading is used when there is no discrepancy between
description filled by shipper and the actual goods shipped on board. Clean
bill of lading indicates that the goods have been properly loaded on board
the carrier's ship according to the prima facie evidence. If the carrier finds
out that the bill of lading is different from goods on board, one can
provide contradictory evidence on clean bill of lading. It is valid as long
as in the hand of the carrier, but once it is transferred and negotiated to
the third party, it cannot be rebutted and the carrier cannot no longer mark
discrepancy. The second is claused bill of lading. Claused bill of lading is
used when there is some discrepancy between description in the bill of

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lading and the actual goods. For claused bill of lading, one can mark only
when the goods are loaded.

As Evidence of the Contract of Carriage

The bill of lading from carrier to shipper can be used as an evidence of
the contract of carriage by the fact that carrier has received the goods and
upon the receipt the carrier would deliver the goods. In this case, the bill
of lading would be used as a contract of carriage. Also, the bill of lading
can perform as a contract of a carriage. In this case, the bill of lading can
be used if shipper does not properly ship the goods than the shipper
cannot receive the bill of lading from the carrier. Eventually, the shipper
would have to deliver the bill of lading to the seller. In this case, the bill
of lading is used as a contract of carriage between seller and carrier.
However, when the bill of lading is negotiated to a bona fide third party
then the bill of lading becomes conclusive evidence where no
contradictory evidence can be introduced. It is because the third party
cannot examine the actual shipment and can only pay attention to the
document itself, not survey or examination of the shipment
itself. However, the bill of lading will rarely be the contract itself, since
the cargo space will have been booked previously, perhaps by telephone,
email or letter. The preliminary contract will be acknowledged by both
the shipper and carrier to incorporate the carrier's standard terms of
business. If the Hague-Visby Rules apply, then all of the Rules will be
automatically annexed to the bill of lading, thus forming a statutory
contract.

As title
When the bill of lading is used as a document of title, it is particularly
related to the case of buyer. When the buyer is entitled to receive goods
from the carrier, bill of lading in this case performs as document of title
for the goods. There are two types of bill of lading that can perform as
document of title. They are straight bill of lading and order bill of lading.
Straight bill of lading is a bill of lading issued to a named consignee that
is not negotiable. In this case, the bill of lading should be directed only to
one specific consignee indicated on the bill of lading. Order bill of lading

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is the opposite from a straight bill of lading and there is no specific or
named consignee. Therefore, an order bill of lading can be negotiated to a
third party.
Simply, the bill of lading confers prima facie title over the goods to the
named consignee or lawful holder. Under the "nemo dat quod non
habet" rule ("no one gives what he doesn't have"), a seller cannot pass
better title than he himself has; so if the goods are subject to an
encumbrance (such as a mortgage, charge or hypothec), or even stolen,
the bill of lading will not grant full title to the holder.

Letters of Credit and Bills of Lading in Commercial

Transactions

In the beginning there is a seller and a buyer who want to conclude a

business transaction.
They may or may not know each other or may or may not be comfortable
with each other for financial obligations.
Because of the time it takes for cargoes shipped from foreign ports to
reach their destination, importers have to find a way of guaranteeing
payment to exporters before the goods are received.. The answer is a
letter of credit – an instruction by the importer’s bank to an overseas bank
to pay the exporting company in advance.. The banks naturally charge
interest for this service.
The buyer sets a list of terms and conditions under which he would like to
buy and ship the cargo from the seller. This list generally has:

 description of the goods he wants to buy from the seller

 quantity of the goods
 technical description if any
 documentary requirements (bills of lading, commercial invoice,
packing list etc etc)

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  details of the consignee (generally the issuing bank will be shown
as the consignee and they will have control of the cargo until such
time they receive the money from the buyer)
 details of who must be notified of the arrival of the shipment
 latest date of shipment
 sometimes the buyer also nominates the shipping line that is to be
used
 which shipping ports are to be used
 what mode of transport is to be used

This L/C is then issued by the buyers bank (known as issuing bank) and
is generally sent to the seller and his bank (known as the nominated
bank).
The seller than proceeds to prepare his goods and documents based on the
L/C. Once the shipment has been accomplished. The seller will take the
copies of all the documents as per the instructions on the L/C to his bank..
His bank checks the veracity and correctness of the submitted documents
against the L/C specifications.

Once the bank is satisfied that the docs and shipment are in accordance
with the L/C, they pay the seller the money that is due to him as per the
price agreed between him and the buyer.

The nominated bank. Then sends all the docs to the issuing bank who
cross verify the same and once they are satisfied with the conditions, they
reimburse the receiving bank the money that they paid to the seller.

The issuing bank then advises the buyer that the shipment has been
effected and that they are in possession of all the docs.. The buyer then
arranges to pay the issuing bank the money that has been reimbursed by
them to the receiving bank.

Upon receipt of these funds, the issuing bank then endorses the bill of
lading so that the cargo can be released to the buyer.
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So begins and ends the process of a Letter of Credit.

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