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Logistics Terms Bill of Lading

Registration dateNOV 15, 2023

Bill of Lading
  1. 1)What is a Bill of Lading?1)What is a Bill of Lading?

    A bill of lading (BL or B/L) is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. It also serves as a receipt of shipment when the carrier takes possession of the goods and evidence of the contract of carriage.

    [Key Functions of a Bill of Lading]

    Receipt of goods: The BL indicates that the carrier has received the goods for shipment. This is important for the shipper to prove that they delivered the cargo.

    Evidence of contract: The BL is a contract between the shipper and carrier that the carrier will ship the goods to a specified destination. It outlines the details of carriage.

    Document of title: The BL allows the holder to take possession of the goods upon presentation to the carrier at destination. The BL can be bought, sold or traded while goods are in transit.

    Toy ship image (Source : Firefly, Adobe)
  2. 2) Type of Bills of Lading2) Type of Bills of Lading

    There are several types of bills of lading used in international trade. The main ones are:

    1. Straight Bill of Lading
    A straight bill of lading is non-negotiable and indicates a consignee. It cannot be endorsed over to other parties.

    2. Order Bill of Lading
    An order bill of lading is negotiable and requires the consignee to endorse the BL to take delivery of the goods. It can be bought, sold or traded.

    3. Master Bill of Lading
    A master bill of lading is issued by the carrier to the freight forwarder consolidating several shipments. The forwarder then issues house bills of lading to individual shippers.

    4. House Bill of Lading
    A house bill of lading is issued by a freight forwarder to a shipper. It covers a shipment consolidated with others under a master bill issued to the forwarder.

    5. Multimodal or Combined Transport Bill of Lading
    A multimodal or combined transport bill of lading covers transport by two or more modes, often issued by a freight forwarder.

    6. Switch Bill of Lading
    A switch bill of lading is issued at an intermediate point when changing transport modes to complete a multimodal movement under one contract.

    7. Ocean Bill of Lading
    An ocean bill of lading covers port-to-port carriage by sea. This is issued by the ocean carrier.

    8. Charter Party Bill of Lading
    A charter party bill of lading is issued by the party chartering an entire ship (charterer) to the shipowner. The shipowner then issues the bill of lading to the charterer.

    9. Liner Bill of Lading
    A liner bill of lading is issued by a shipping line for carriage of goods on a regular scheduled route. This is the most common for container shipments.

    10. Air Waybill
    An air waybill is the equivalent of a bill of lading for air cargo shipments. However, it is non-negotiable.

    Ocean bill of lading
  3. 3) Key Parties Involved with Bills of Lading3) Key Parties Involved with Bills of Lading

    There are several parties that interact with the bill of lading process in international logistics:

    Shipper/Consignor: The owner of the goods who contracts the carrier to transport the merchandise.

    Carrier: The party transporting the goods, normally a shipping line or airline, who issues the bill of lading.

    Consignee: The party receiving the shipment at destination listed on the BL.

    Notify Party: A third party, usually the importer's bank, that is notified on the BL when the shipment arrives.

    Freight Forwarder: A logistics provider that often issues bills of lading on behalf of carriers.

    Endorsee: A party that the BL is endorsed over to, allowing them to take possession of the goods.

  4. 4) Legalities and Liabilities4) Legalities and Liabilities

    There are several laws and conventions that determine the legal requirements and liabilities involving bills of lading:

    1. The Hague Rules (1924)
    The International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading, commonly known as The Hague Rules, was one of the earliest international attempts to create uniformity in the shipping industry regarding the rights and obligations of carriers and shippers under a bill of lading.

    Scope: These rules applied primarily to international carriage of goods by sea.

    Carrier Liability: They limited the liability of carriers for loss or damage to the goods to a certain amount per package or per kilogram unless the value of the goods was declared by the shipper and inserted in the bill of lading.

    Due Diligence: The carrier is responsible for the seaworthiness of the ship and must properly crew, equip, and supply the ship.

    Exceptions: There are various defenses and exceptions available to the carrier for liabilities, including acts of God, perils of the sea, act of war, and inherent defect in the goods.

    2. The Hague-Visby Rules (1968)
    These are an amended version of The Hague Rules, which sought to update and extend the original rules.

    Increased Liability: The amendments increased the carrier's liability and the amounts recoverable by cargo owners.

    Minimum Standards: They set out the minimum standards that any bill of lading must meet and essentially gave greater protection to cargo owners.

    Package Limitation: Updated the limits of liability and allowed for a per package or per kilogram calculation, whichever is higher.

    3. The Hamburg Rules (1978)
    An UN convention aimed at further addressing the disparities in the conditions of carriage by sea and to make carrier liability more uniform.

    Carrier Liability: They expand the instances where carriers are held responsible for the goods and reduce the carriers' rights to limit their liability.

    Period of Liability: Extends the period during which the carrier is liable for the cargo (from the time they receive the goods until the time they're delivered).

    Freight Forwarders: They treat freight forwarders who perform carrier tasks as carriers under the rules.

    4. The Rotterdam Rules (2009)
    This is an attempt to create a modern, comprehensive, internationally binding regulation covering the door-to-door transportation of goods, including sea transport.

    Multimodal Transport: They address the needs of contemporary transport, covering all the different legs of multimodal transportation, not just the sea carriage.

    Volume Contracts: They introduce provisions dealing with "volume contracts," which give parties greater freedom to negotiate the terms of their contracts.

    Electronic Transactions: The rules also modernize the bill of lading by recognizing electronic bills of lading.

    Not Yet in Force: As of my last update, these rules had not yet entered into force due to an insufficient number of countries ratifying the convention.

    5. The U.S. Carriage of Goods by Sea Act (COGSA) (1936)
    A United States statute that governs the rights and responsibilities between shippers of cargo and ship-owners.

    Scope: It applies to all contracts for carriage of goods by sea to or from ports of the United States in foreign trade.

    Liability: Essentially adapts the Hague Rules into U.S. law, setting the liability regime for ocean carriers.

    $500 per package: Limits the carrier’s liability to $500 per package unless the nature and value of goods have been declared by the shipper before shipment and inserted in the bill of lading.

    6. The U.S. Pomerene Act (1916), also known as the Federal Bill of Lading Act
    This act governs bills of lading for domestic and international transport in the U.S.

    Document of Title: It enforces the bill of lading as a document of title, which can be transferred by endorsement.

    Fraud Prevention: Establishes rules to prevent fraud and misrepresentation in the issuance and use of bills of lading.

    선박 장난감과 서류 이미지 (Source : Firefly, Adobe)
  5. 5) Considerations5) Considerations

    Adhering to best practices for bills of lading (BL) is crucial for smooth international trade transactions. Here are some elaborations on the practices you listed:

    1. Review Details for Accuracy: Ensure that the BL contains precise and comprehensive information, such as correct names and addresses of the shipper and consignee, accurate descriptions of the goods, quantity, weight, and any special handling instructions. Mistakes on a BL can lead to customs delays, misdelivery, or additional charges.

    2. Use an Order BL for Valuable or Risky Cargo: An order BL is consigned to the order of a named entity, usually the shipper, and requires endorsement to transfer ownership. This is more secure than a straight BL, which is non-negotiable and consigned directly to the named consignee.

    3. Limitation Clauses and Insurance: Pay attention to clauses that may limit the carrier's liability for loss or damage. These clauses can cap the amount you may recover. Ensure you have adequate insurance coverage to protect against potential losses that exceed the carrier's liability.

    4. Proper Endorsement for Negotiable BLs: When dealing with negotiable BLs, which allow the transfer of goods ownership through endorsement, make sure the endorsement process is correctly executed. An improperly endorsed BL can result in the loss of control over the goods.

    5. Keep Detailed Records: Maintain accurate records of all BLs, including those issued, exchanged, or transferred. This helps in tracking shipments and resolving any disputes or claims that may arise.

    6. Combined Transport BL for Multimodal Shipments: When possible, use a combined transport BL (or multimodal BL) for shipments involving multiple modes of transportation. It simplifies the documentation process as there's only one BL covering the entire carriage from origin to destination.

    7. Time Limits for Claims: Be aware of any time constraints for filing claims or submitting required documents noted on the BL. Missing these deadlines can forfeit your right to claim damages or hold the carrier liable.

    8. Compliance with Regulations: Ensure compliance with all international and domestic regulations governing the shipment. This includes customs requirements, import/export controls, and specific regulations of the countries of origin, transit, and destination.

    Additionally, it's essential to:

    Communicate Clearly with All Parties: Make sure that all parties involved in the shipment are aware of their responsibilities and the details of the BL. Clear communication can prevent misunderstandings and disputes.

    Use Electronic BLs (eBLs) Where Appropriate: Consider using electronic bills of lading if the carrier and jurisdiction allow. eBLs can streamline processes, reduce paperwork, and improve document tracking.

    Work With Reputable Carriers and Freight Forwarders: Partner with well-established and reliable carriers or freight forwarders who are experienced in international shipping and familiar with the legalities of BLs.

    Educate Your Team: Make sure that the staff handling BLs are well trained on their importance, the implications of the terms and conditions, and the correct procedures for handling them.

    Implementing these best practices can significantly reduce the risk of complications and disputes related to the transport of goods internationally.

  6. So far, we have looked at the types of bills of lading, related legalities and liabilities, and considerations. In summary, a bill of lading is a vital transportation document with important legal implications. Logistics professionals must understand the various types of bills of lading and how to properly use them when arranging shipments and managing global supply chains. Following best practices and keeping up with emerging technologies can maximize the effectiveness and efficiency of working with bills of lading.