What is Bill Of Lading: Definition, Need, and Types Explained
13 min read
Bill Of Lading is one of the essential shipping documents that is a legally recognized record of the goods received by the shipper on board. It serves as an instrument of agreement between the carrier and the shipper regarding the freight shipment along with a carrier. It also acts as a receipt for the carrier from the exporter. It is one of the essential documents used for international shipping, and in this article, we are going to understand its need, types as well as its use in international trade. To know more about Bill Of Lading (BOL), have a look at the article:
The Need For Bill Of Lading
When an exporter hands over the freight to the shipper, it is not necessary that they have received the due payment for the same. This makes it necessary for the exporter to retain some amount of control over the shipment until they receive the due payment. The carrier also requires an official document to testify the condition of the cargo and permission to transport it. The Bill Of Lading (B/L) serves this purpose by allowing the shipper to understand how to handle the shipment, mentioning its conditions and delivery destination. Most importantly, it also contains the payment recovery details as per the mutual agreement between the exporter and the importer along with the shipper. It is not recognized by most international bodies as a document of title. It serves the purpose of facilitating the movement of goods through authorized channels, making it an essential part of the shipping management process.
An estimated $50 billion is lost every year due to the cargo losses. (Source)
Types Of Bill Of Lading
Primarily, there are two types of Bill Of Lading used. In this section, we will have a look at them:
Negotiable Bill Of Lading
The person with an original copy of the bill is eligible to take the delivery of the goods. It acts as the document confirming title and control. The buyer, receiver, or agent has to produce the original bill in order to get the delivery, and failing to do so will prevent them from getting the shipped goods.
Non-negotiable Bill Of Lading
The name of the receiver (consignee) is steed on non-negotiable BoL without serving as the document confirming the ownership of the freight. The receiver/buyer mentioned in the bill needs to produce proof of their identity to get the delivery, and the sole purpose of the bill is to validate the transport of the goods.
Classification Of Bill Of Lading
The BoL is classified into two major categories based either on how the transfer is executed or on the basis of mode of operation. In this section, I am going to discuss their classification so that our audiences can have a better idea of their differences and use. Have a look at them here:
Classification As Per The Method Of Execution
Straight Bill Of Lading
This type of bill is used when the freight is paid for, and there is no need for any further payments. The shipping company will hand over the consignment to the consignee upon producing the proof of identity upon demanding delivery as the transfer of freights is assigned to a particular person on a non-negotiable basis. Since the original bill isn’t needed to accept the delivery, the financial risks make it less attractive for bankers. But it also waives off the possibility of detention as the goods can be accepted directly from the carrier.
Open Bill Of Lading
Open Bill of Lading falls under the category of negotiable type as the consignee can be changed using the assigned party’s signature as required. Generally, it is used when the item is ordered in bulk but redistributed in smaller quantities through multiple buyers and sellers through arrangements like an auction. For instance, agricultural products are shipped in large quantities, and reselling is done to multiple parties.
Bearer Bill Of Lading
The Bearer Bill of Lading allows the delivery to be made to ‘whosoever’ produces the bill. It is a negotiable bill. It is negotiated through the consignor’s stamp and signatures.
Order Bill of Lading
It is a negotiable Bill of Lading and is generally divided into two types: To Order, Blank Endorsed type of BoL states consignee’s name under ‘notify people’ instead of naming any party. The second type is To Order; Bank also assigns consignee under ‘notify people,’ but it can be used for buying, selling, trading, and security purposes. Both of them fall under the category of negotiable bills. If an order bill fails to assign a nominee or has a blank endorsement, it is automatically converted into a Bearer BoL.
Classification As Per The Method Of Operation
Clean Bill of Lading
When the shipper or their agents find the goods to be in good condition and as per the quantity mentioned, they provide a Clean Bill of Lading
Claused Bill of Lading
If the shipper or their agents are not satisfied with either the conditioning of the cargo like torn packaging, physical damage, or the quantity is less, they issue a Claused Bill Of Lading.
Container Bill of Lading
It states that the cargo is being moved from its port of origin towards another port in a secure container.
Master Bill of Lading
It is an extensive document encompassing the terms of transportation, the details of the shipper, consignor, consignee, and the person responsible for possessing the goods.
Received for Shipment Bill of Lading
The carrier acknowledges the validity of the contract before loading the freight into the shift using it.
Stale Bill of Lading
If the date for shipment is missed by at least 21 days, Stale BoL is issued.
Through Bill of Lading
It is issued when the cargo is to be transported across the seaways and inland routes through a multi-route/ multi-mode process.
Multimodal Transport Through Bill of Lading
It is used when the land and oceanic modes of transport are included.
Charter Party Bill of Lading
It serves as a document of agreement between the charterer and shipping vessel owner.
House Bill of Lading
It is also called Forwarder’s Bill of Lading as it is issued by a non-vessel or nonocean transport company that acts as an intermediate firm to be used by suppliers when receiving the shipment.
Blank Back / Short Form Bill of Lading
It is used when the original BoL fails to mention the terms and conditions for shipping.
Surrender Bill of Lading
It is provided to the bank for releasing the documents under a defined term for negotiating the bank’s receipt.
What Information Should A Bill of Lading Contain
The contents of a Bill of Lading are governed by either of these conventions:
One needs to state the convention used on the first page of the bill itself. However, I am stating the common information for your ready reference here:
- The name and contact details as per the official documents of the shipper and the receiver.
- The packaging details and hazardous material designation in case of potentially dangerous goods.
- The purchase order or invoice details for releasing the goods.
- The date of pickup.
- The instructions for handling the consignment i.e. maintain one side at top or handle with care.
Electronic Bills of Lading: The Modern Solution For EXIM Business
The physical BoL posed multiple problems for all the parties involved in export-import as they can be easily forged, putting the cargo under the possible threat of getting acquired illegally. Also, the ships passing through multiple ports would be falsely claimed by fraudulent parties, thus jeopardizing the trade. Lastly, the need to submit the physical documents can also result in delays as without producing them, cargo cannot be delivered by port authorities and agents.
To fight back against these shortfalls of the printed Bol, Electronic BoL is issued in today’s time. It can be transferred instantly, and it is also more suitable for compliance. Further, it allows one to make changes in case of glitch while lowering the risk of getting your fright detained. You can also track it better as compared to the physical bills. One also needs to ensure proper cybersecurity for using electronic BoL.
Summing Up
I hope that you found this article insightful and it clears the fog regarding the various types of Bill of Lading. Let us know about any doubts in the comments section.
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