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BILL OF LADING and Its Importance

A Bill of Lading is a legal document that works as proof while handling the cargo to the shipper. It is basically proof which tells that the carrier has received the cargo and this cargo is released on showing this original document of bill of lading. It works as security for the cargo.

Table of Contents

What is a Bill of Lading in Shipping

Bill of Lading

A bill of lading is a document a carrier provides to the shipper to confirm receipt of goods for transport. While the term mainly refers to sea transportation, but it is now applicable to any form of goods transport. 

Bills of lading are among the three essential documents in international trade. They ensure that exporters are paid properly for their cargo and that importers receive their goods at the proper time and in good condition. 

Key Elements in Transport

Apart from the bill of lading, there are other 2 important key elements in the transportation process:

  • Insurance Policy
  • Invoice. 

An insurance policy and an invoice are two other key documents in shipping. Unlike a bill of lading, which is negotiable, these documents are assignable.

Outside the United States, there is a distinction between bills of lading and waybills. Waybills are not transferable and do not confer title. However, under the UK Carriage of Goods by Sea Act 1992, the legitimate holder of a bill of lading or the consignee under a sea waybill or ship’s delivery order is granted all rights of suit under the contract of carriage.

Importance of bill of lading in shipping

A Bill of Lading is issued by a carrier to the shipper as proof. This document contains information about the goods which are being shipped. It also tells about from where the cargo is coming and where it had to go. Moreover, it also provides details about the shipper, carrier, and consignee.

What are Shipper, Carrier, and Consignee?

In shipping while transporting there are three very important components that are shipper, carrier, and consignee. Without them, the transportation process wouldn’t exist. Let’s learn them one by one. 

1. What is a Shipper?

A shipper is the person who supplies the transported cargo.  It is the responsibility of the shipper to pack all the goods carefully and prepare the goods for safe transportation. Moreover, the shipper is the party that sends the goods. This role is typically fulfilled by the exporter, supplier, or seller of the goods.  The shipper is responsible for arranging the transportation and providing essential details for the bill of lading, such as:
Details  Why is it Important
  • Cargo’s description 
 Quantity, quality, and type of cargo
  • Information about the destination 
 Information about where cargo has to go 
  • Details of consignee
 It is the person who receives the cargo

2. What is a Carrier?

The carrier is the company or individual responsible for transporting the goods from the origin to the destination. The carrier could be a  shipping line, airline, trucking company, or any logistics service provider involved in moving the cargo. 

3. What is a Consignee?

The person who gets the cargo from the carrier is called a consignee. The carrier is the party designated to receive the cargo on arrival at the destination. The consignee is often the buyer or importer of the transportation.

Functions of Bill of Lading

Bill of Lading

A Bill of Lading is a fundamental document in international trade and logistics, serving as a key instrument in the transportation of goods. Its primary functions encompass three crucial roles: it acts as a receipt for the shipment of goods, a document of title, and a contract of carriage between the shipper and carrier. This legal document ensures that goods are transported and delivered as per the agreed terms, offering transparency, security, and accountability to all parties involved. Understanding the functions of a Bill of Lading is essential for smooth and efficient operations in global commerce.

Some of the important functions are

    • It is the evidence of the cargo’s contract.
      • This document contains all the details of how much cargo is transported and other descriptions that work as a contract                                                                                 
    • Keeps the receipt of cargo
      • This document has all the details of all different types of cargo kept for transportation with its cost and keeps its complete receipt
    • Provides legal title to goods.
      • It is a document that tells that the cargo is properly safe and legal.

Different Types of Bill of Lading in Shipping

The different types of bills of lading in shipping are:

  • Clean Bill of Lading

It is a legal document that certifies cargo as good or bad according to their condition.

  • Received for Shipment Bill of Lading

It is a document that tells goods are reached to the carrier for transportation. 

  • Through Bill of Lading.

It is the bill that gives allowance to the cargo for transportation.

  • Claused Bill of Lading.

It is the bill that tells about the unfulfillment of the shipment

  • Container Bill of Lading.

The bill required for shipping of container is called a container bill of lading

Importance of Bill of Lading

The bill of lading is one of the most important documents in international shipping and trade. It serves multiple important functions that are necessary for the smooth movement of goods across borders.

Some reasons why it is important are:

Contract of Carriage’s Evidence

  • The Bill of Lading is a legal document that serves as proof of the agreement between the shipper and the carrier for the transportation of goods.
  • It tells the important details such as the type of goods, quantity, destination, and terms of carriage.

Good’s Receipt

  • Issued by the carrier to the shipper, it confirms that the goods have been received in good condition and as described.
  • Acts as an acknowledgment that the carrier has taken custody of the shipment.

Document of Title

  • The holder of the bill of lading can claim the goods at the destination, making it a valuable document in trade financing.

Trade Finance Becomes Easy

  • Banks often require a bill of lading when issuing letters of credit or financing trade.
  • It assures financial institutions that the shipment matches the terms of the trade agreement.

Customs and Regulatory Compliance

  • The bill of lading contains vital information for customs clearance, ensuring that goods meet import/export regulations.

Information in Bill Of Lading

It includes crucial details such as the names and addresses of the shipper, consignee, and carrier, a comprehensive description of the cargo that includes its quantity, weight, and packaging, etc, and the shipment’s origin and destination, the terms and conditions of transportation, and any special instructions for handling the goods. Below are the things in a bill of lading document.  
Details Function
Name Name of the person who sends and receives the cargo
Address Address of the person sending and receiving the cargo
Packing details Details about whether the cargo is hazardous or nonhazardous
Quantity Indicates the amount or volume of cargo
Type of package Describes how the cargo is packed

FAQs of Bill Of Lading

Ans: There are 3 original bills of lading as it is needed by the shipper, carrier, and consignee.

Ans: It is important as it is used in the shipping process so that we can get a proper list of items that have been transported and the rules set up for the safe and easy shipment

Ans: A bill of lading is issued after the departure of a vessel from the port where it loads the cargo.

Ans: Bill of lading documents are issued by a carrier, such as the operator of a container ship.

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