Bill Of Lading Explained: The Complete Beginner’s Guide
October 28, 2022 Beginners Guides, Documentation
In the world of business, the Bill of Lading (BoL or B/L) is one of the main documents used to execute transportation transactions by sea, air, or road.
What Is A Bill Of Lading (BoL)?
A Bill of Lading is a document issued by a Carrier (somebody who transports and delivers goods) to a Shipper (someone who supplies and/or owns the goods – also known as a Consignor), confirming goods were received in an acceptable condition and are ready to be shipped. Those goods will then be delivered by the carrier to a Consignee (meaning the person who bought the goods in the first place). A Bill of Lading (BoL) means essentially a contract of carriage between the Shipper, Consignee, and Carrier stating the terms and conditions of carriage.
What Are Bill of Ladings Used For?
A bill of lading can represent a receipt of goods.
Shipments cannot be executed without a Bill of Lading. BoLs must be issued for goods to travel from Point A to Point B. They are legally binding documents, and they often serve as proof of ownership over the goods being carried.
A bill of lading also covers its role as the title to goods.
Once the goods have arrived at their destination, the Bill of Lading acts as a title to the goods. The consignee* listed will need to present the Bill of Lading in order to secure the release of the shipment by the carrier and claim ownership. In this sense, it is evidence of the confirmation of delivery.
*Only the consignee listed on the Bill of Lading has contractual rights to request for the release of the cargo.
Bills of lading also make sure that the shipper is paid
In some cases, the shipper can hold the original bill until they receive payment. By doing this, the consignee is unable to access their goods until payment has been made and the Bill of Lading released.
Who Uses A Bill Of Lading?
Usually, all companies that sell transportation services generate bills of lading. They can include owner-drivers, freight forwarders, steamship lines, third-party logistics companies and others. They include companies transporting goods by any means, whether it be through air, sea, rail or road.
They can be used for both domestic and international deliveries.
What Is Contained In A Bill Of Lading?
- Details of the transportation company (i.e. the carrier), the shipper and/or consignee;
- The place where the goods were loaded;
- Transportation mode (i.e. road, rail, air, sea, etc.);
- The terms of the shipment (incoterms); and
- A description of the goods being carried (including their weight, dimensions, classification, etc).
Accuracy Is Critical
We cannot stress the importance of providing accurate information on a Bill of Lading.
Mistakes in preparing bills of lading have led to disasters for transportation companies. For example, in 2017, a freight forwarder was ordered by a court in NSW to pay over $800,000 in damages for ‘misleading and deceptive conduct’ because the bills of lading gave the impression that they were ocean carriers’ bills (when they were not).
Extreme caution must be taken when generating these bills.
Who Issues A Bill Of Lading?
The ‘Carrier’ is the only company that can issue the Bill of Lading. When transporting by sea freight, the carrier can refer to the Shipping Line (Vessel Operating Common Carrier) or an NVOCC (Non-Vessel Operating Common Carrier) also known as a Freight Forwarder (although not all Freight Forwarders are NVOCC’s).
Who Receives A Bill Of Lading?
Bills of lading are normally provided to:
- The shipper;
- A broker, freight forwarder or a third party managing customs; and
- The consignee – this is the person who purchased the goods in the first place.
For example: if the goods are being imported through a freight forwarder on EXW terms (refer to incoterms again), this is the journey of a Bill of Lading:
If the goods are being exported, this bill of lading journey is as follows:
Is there a bill of lading without a consignee?
The consignee is mandatory on a bill of lading.
The only situation in which this occurs is when someone other than the receiving party or their nominated address is when a shipment is arranged on a Letter of Credit (L/C) which will sometimes require the bill of lading to be consigned ‘To Order’.
Even when this exception occurs, the L/C has been known to require the following varying options:
- To order of the Shipper
- To order of the Bank
- In all these situations the Notify Party is usually the buyer/consignee.
How long does the consignee need to keep a bill of lading?
For the Australian Border Force (a.k.a Customs), records must be kept for 5 Years.
Different Types Of Bills Of Lading
There are many different types of Bills of Lading. They differ based on many factors such as the issuer of the BoL, the purpose of the BoL, its form of transmission, the relationship between buyer and seller, and the protection it offers to the buyer.
The main types of Bill of Lading dealt with for international transport are Ocean Bill of Lading, Seaway Bill of Lading, House Bill of Lading, Master Air Way Bill of Lading, House Air Way Bill of Lading and occasionally Switch Bill of Lading. We will cover each one of them below. But first, there are two main categories that bills of ladings fall into that you need to know: negotiable and non-negotiable.
Negotiable And Non Negotiable BoL
An Original Bill of Lading is a negotiable and legal document as it represents the title of the goods. Non-negotiable Bills are in effect copies of the originals but have no power over the title of the goods.
Originals Bills of Lading (negotiable) must be endorsed by the consignee (buyer) when being transferred to a third party such as a freight forwarder and much like a cheque that is made out to a specific party.
When cargo moves under a Negotiable status, it is the forwarder’s responsibility to ensure it is surrendered to the appropriate authority to obtain possession. When cargo moves through the forwarder’s NVOCC services (Non Vessel Owning Common Carrier) on Negotiable Bills, the forwarder too must ensure that the Original Bill (Negotiable) is surrendered to them prior to releasing the consignee or their agent.
Failure to follow this process would hold the carrier responsible for the value of the cargo in the event that the contract between the shipper/consignee is not honoured.
Note that both terms only apply to sea freight. For airfreight, terms are Master Air Way Bill (MAWB) and House Air Way Bill (HAWB). However, unlike sea freight, Air Way Bills are classed as Non-Negotiable Documents unless they are consigned through a bank.
Bill of Lading Samples
Ocean Bill Of Lading
This is generated by the Shipping Lines as the Carrier in this instance for containers transiting by sea and is generally used when the shipper would like to retain control of payment by a consignee (buyer) for the goods. The original bill of lading will be utilized to make sure payment is made before the goods are released to the consignee.
Once payment is receipted the document can be actioned in several ways, dependent on what the carrier makes available.
- Original Bill of Lading can be surrendered to the carrier for a Telex Release (a digital version of the BoL)
- Original Bill of Lading is couriered to the consignee to present to the reciprocating carrier at the destination to obtain release.
Sea WayBill of Lading
It is a Non Negotiable document issued instead of an Ocean Bill of Lading where the Shipper has no need to control the release of cargo.
House Bill Of Lading (HBoL)
Where cargo is arranged by sea freight through an NVOCC/Freight Forwarder a House Bill of Lading is generated. This can be arranged as a Negotiable or Non Negotiable option depending on the requirements of the shipper. Where a Non Negotiable option can be utilised it can sometimes be arranged/referred to as an Express Bill of Lading.
Master Air Way Bill Of Lading
Master Air Way Bills (MAWB’s) are Airline bills of Lading and are generated by the Airline or Freight Forwarders. They are Non-Negotiable documents except where the cargo is consigned ‘To Order’. This generally means that the shipment has been negotiated through a bank in which case a release from the bank in question would need to be presented prior to the cargo being released by the carrier.
Generally, these are arranged from Forwarder to Forwarder and a House Air Way Bill is generated from the shipper to the consignee.
House Air Way Bill Of Lading
This is the Air Way Bill that is issued by a Freight Forwarder for consolidated air freight shipments. HAWB’s are treated exactly the same as MAWB’s, provided they indicate that the issuer itself assumes the liability as the carrier or is acting as the agent of a named carrier.
Multimodal Bill Of Lading
These are when you’re using more than one type of transport. For instance, you may use rail for some of the trip and then road for the rest.
Through Bill Of Lading
Through bills of lading are for goods transported by ocean as much as it can possibly be transported by ocean, and then by road or rail to the final destination. Ensure these are not mixed up with multimodal bills of lading.
Switch Bill Of Lading
When goods need to be moved and the supplier’s information needs to be kept private – generally in the case of a Triangle shipment where a buyer is onselling to a 3rd party, a second BoL is generated replacing the first with the updated information.
Dirty/Claused Bill of Lading
This term is used when the goods are received by the shipper in a damaged condition. In these cases, the carrier’s insurance company may refuse a claim for damage. Contrast this with a ‘clean’ bill of lading, where the goods are delivered in an acceptable condition.
Straight Bill Of Lading
This is a type of format of either an Ocean or House Bill of Lading and are used when the goods are paid in full and delivered directly to the consignee (i.e. the person or organisation that purchased the goods in the first place).
Cargo is only released to the named consignee at the declared destination and it only happens upon surrender of at least 1 of the original copies issued.
Electronic Bills of Lading – Telex Release and Express Release
Telex release and Express release are not types of Bill of Lading, but are methods of releasing Bill of Lading.
A Telex Release is simply an EDI message or email which is sent by the carrier or agent at load port to their office or agent at discharge port informing that the shipper has surrendered one or all of the original bills of lading that have been issued to them. Based on this, the discharge port agent can release cargo to the named consignee shown on the bill of lading without the presentation of any original bills of lading. Find a Telex Release Example and Guide here.
The Express Release Bill is similar to the Telex Release in the sense that it can be digital. However, the difference being that with the Express Release, no hard copies of the Bill of Lading are issued. With no originals created, the Express Release offers many advantages, but should only be used under very specific circumstances.
Why Are Incoterms Important To A Bill Of Lading?
Your choice of incoterms will determine how the whole process will be handled. Before reading on, check out our Beginner’s Guide to Incoterms to understand how the two interact.
Which incoterms to use can be tricky, as it will depend on the nature of the business and what goods are being handled.
You must determine exactly what terms you are shipping on so there is clarity on who is responsible for what part of the shipping process.
One Last Tip
Whenever embarking in shipping activity, be sure to engage an experienced forwarder to ensure all documentation and the flow of BoLs are handled correctly.
International Cargo Express have an in-house team of customs brokers with over 150 years of combined experience to assist you with your shipping documentation. Give us a call today.Request A Quote
or call us on 1300 227 461
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