Bill of Lading - the Key Document in Shipping. What Is It and What Is It For?
In the world of shipping, where thousands of containers are loaded and transported every hour, time and smooth processes play a key role. Precise planning of when which containers are transported from A to B is crucial. A key document in this planning is the Bill of Lading. It plays a crucial role in international trade, containing vital information for the shipper, carrier, and receiver of goods. But what exactly does a Bill of Lading say, who issues it and why is it needed?
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Bill of Lading (B/L) - a Definition
The Bill of Lading (B/L) acts as a receipt, contract of carriage and proof of ownership. It is issued by the carrier who acknowledges the receipt of the goods for shipment on board and is responsible for their safe transport to the port of destination. Hence, the Bill of Lading is one of the most crucial documents in the shipping industry and establishes terms and conditions, rights and obligations between the parties.
The Bill of Lading contains information about:
- What kind of cargo is on a ship
- Who it is from and to whom it is being sent
- Where it is going
It also acts as a proof to all involved that the transport process is being carried out correctly.
Involved Parties - Who is using the Bill of Lading?
Mainly, the involved parties are a shipper, a carrier, and a consignee. Basically, the shipper dispatches the goods via the carrier to the consignee. Between them, it must be recorded who has received what from whom, so that, for example, missing goods can be traced. It’s also important in terms of legal requirements as a correct B/L is vital for the import of goods in certain countries. This is even easier thanks to the digitalization.
Today it is possible to use technologies to centralize creation, changes, and handling of B/L related processes with tools like eaSI and BL Draft Approval. With just a few clicks these tools allow the handling process digitally that used to take days. Try it in our Online Business Suite.
What is the difference between a Bill of Lading and a Sea Waybill?
The Bill of Lading should not be confused with the Sea Waybill. The main difference is the possibility of onward negotiability. While a Bill of Lading can be either negotiable or non-negotiable and thus assigned to a third party, transferring all rights and obligations, a Sea Waybill can only be assigned to the originally named consignee and is always non-negotiable. It serves only as a contract of carriage and confirmation of receipt of goods between the parties already named and the cargo can only be handed to the named consignee.
A negotiable document (e.g. a Bill of Lading) can be transferred to a third party through endorsement, enabling it to serve as a tradeable instrument. A non-negotiable document (Sea Waybill) is specific to a named consignee and cannot be transferred.
If the rights to the goods on a Bill of Lading are to be transferred to another party, this is done by means of an endorsement. This endorsement is signed on the back of the document. Once this has been done, the new holder of the B/L has the right to claim the goods at destination.
Bill of Ladings and Sea Waybills are essential in shipping for five reasons:
- For legal reasons: International trade regulations and many countries require the use of Bills of Lading for sea transportation. This means that freight may not enter or leave certain ports without proper shipping documents. They are concrete proof that the freight has been accepted by the carrier and is on its way to its destination.
- For reasons of proof: Bills of Lading and Sea Waybills serve as receipts issued by the carrier confirming that the goods have been loaded and accepted for shipment.
- For ownership reasons: For negotiable Bills of Lading, they facilitate the transfer of title from the shipper to the consignee or subsequent buyers.
- For customs reasons: Bills of Lading are required by customs authorities to verify shipment details and calculate applicable duties or taxes.
- For financial reasons: negotiable Bills of Lading can be used in trade finance to secure payments, financing, or credit arrangements for the shipment.
What are risks using a B/L or Sea Waybill?
Despite their importance in shipping, there are risks involved in transferring a Bill of Lading. For example, any transfer also carries the potential for financial loss if the consignee or subsequent owner fails to pay for the cargo. Fraudulent practices such as issuing multiple originals of a Bill of Lading or altering the information on it without authorization are also theoretically possible. B/Ls should therefore be handled with the utmost care and diligence by the carrier. The authenticity and accuracy of all data should be checked before each endorsement. It may also be necessary to check the identity of the consignee to prevent fraud. Ultimately, companies like Hapag-Lloyd are responsible for maintaining the integrity of the shipping process.
Conclusion
The Bill of Lading (B/L) is an important shipping document that serves as a receipt, contract of carriage and proof of ownership of the goods being transported. Without this document, it is not possible to enter or leave many ports/countries. Unlike a Sea Waybill, a Bill of Lading can be assigned to other parties. An endorsement transfers the rights to the goods to a third party. Negotiable Bills of Lading can also be used in trade finance to secure payments, financing, or credit agreements for the shipment.
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