Introduction to ship management

Bills of lading

By Vinil Gupta
 Bills of lading

A bill of lading (sometimes referred to as a BOL or B/L) is a

document issued by a carrier to a shipper, acknowledging that
specified goods have been received on board as cargo for
conveyance to a named place for delivery to the consignee who
is usually identified. A through bill of lading involves the use of
at least two different modes of transport from road, rail, air, and
sea. The term derives from the noun "bill", a schedule of costs
for services supplied or to be supplied, and from the verb "to
lade" which means to load a cargo onto a ship or other form of
transport.
Bills of lading
 Bank

How does Bill of lading work? BOL

A simple illustration
BOL

BOL

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 Basic functions of Bills of lading

It functions

1. As a receipt of goods

2. As a negotiable document of title

3. As evidence of contract between shipper and carrier

4. As a receipt of freight
 Types of Bills of lading
Straight bill of lading
This bill states that the goods are consigned to a specified person and it is not negotiable free from existing equities, i.e. any
endorsee acquires no better rights than those held by the endorser. So, for example, if the carrier or another holds a lien over the
goods as security for unpaid debts, the endorsee is bound by the lien. Although, if the endorser wrongfully failed to disclose the
charge, the endorsee will have a right to claim damages for failing to transfer an unencumbered title..
Also known as a non-negotiable bill of lading; and from the banker's point of view this type of bill of lading is not safe.
Order bill of lading
This bill uses express words to make the bill negotiable, e.g. it states that delivery is to be made to the further order of the consignee
using words such as "delivery to A Ltd. or to order or assigns". Consequently, it can be endorsed by A Ltd. or the right to take delivery
can be transferred by physical delivery of the bill accompanied by adequate evidence of A Ltd.'s intention to transfer.
Bearer bill of lading
This bill states that delivery shall be made to whosoever holds the bill. Such bill may be created explicitly or it is an order bill that fails
to nominate the consignee whether in its original form or through an endorsement in blank. A bearer bill can be negotiated by
physical delivery.
Surrender bill of lading
Under a term import documentary credit the bank releases the documents on receipt from the negotiating bank but the importer
does not pay the bank until the maturity of the draft under the relative credit. This direct liability is called Surrender Bill of Lading
(SBL), i.e. when we hand over the bill of lading we surrender title to the goods and our power of sale over the goods.
("Guide to Trade Terms" (PDF). pp. 64. http://ww2.westpac.com.au/documents/pdf/wibnz/guide-to-trade-terms-payables. Retrieved
on 2007-12-13. )
Other terminology
A sea or air waybill is a non-negotiable receipt issued by the carrier. It is most common in the container trade either where the cargo
is likely to arrive before the formal documents or where the shipper does not insist on separate bills for every item of cargo carried
(e.g. because this is one of a series of loads being delivered to the same consignee). Delivery is made to the consignee who identifies
himself. It is customary in transactions where the shipper and consignee are the same person in law making the rigid production of
documents unnecessary.
 Bill of lading as document of title.
Until goods are physically delivered, the possession of the bill of lading is deemed to
be constructive possession of the goods. Transfer of the bill of lading is deemed to be
constructive possession of the goods. Transfer of the bill of lading by the seller to the
buyer is deemed to be symbolic delivery of the goods to the buyer and the buyer, on
the ship’s arrival could demand delivery of the goods.

the bill of lading by the law merchant is universally recognized as its symbol and the
endorsement and delivery of the bill of lading operates as a symbolic delivery of the
cargo.

The buyer can sell the goods on while they are at sea to the third party by simply
endorsing the bill of lading and delivering it to the third party. The third party, by
becoming the holder, can demand delivery of the goods on arrival.

Not all bills of lading, however, are transferable. To impart transferability to a bill of
lading, it must be drafted as order bills .
Therefore, bill of lading is a transferable document although in some jurisdictions it is
considered as a negotiable instrument.
 Forgery

Forgery is a common phenomenon is in international trade. There was an

issue regarding the position of the innocent carrier delivering goods against
the bill of lading.

In the case of Motis Exports Ltd v/s Dampskibsselskabet AF 1912

Aktieselskab Akteiselskabet Dampskibsselskabet Svendborg (2000) the
cargo was under the Maersk Line Bills of lading which included clause
5(3)(b) which stated the carrier shall have no liability whatsoever for any
loss or damage howsoever caused to the goods while in its actual or
constructive possession before loading or after discharge over ship’s rail, or
if applicable, on the ship’s ramp. The carriers released the goods against
forged bills of lading. It was held that the delivery against an original bill of
lading is obligatory and hence, delivery against a forged bill of lading will
not be construed in favour of the carrier.