If you are just about to sign a bill of lading or you already are a bill of lading signatory in your organisation, then you definitely have to read this..
This article references bill of lading as it applies to containerised trades and not to other trades..
Before we go to the main part of the article, here is a refresher to those who may still be unclear about the purpose and roles of a bill of lading..
A bill of lading has 3 basic purposes or roles (in no particular order of importance)..
Role 1 : Evidence of Contract of Carriage – emphasis on the term “Evidence“
Many people think that
- a bill of lading is a Contract between the Seller and the Buyer
- a bill of lading is a Contract of Carriage between the Carrier and Shipper
Both notions are incorrect..
The contract between a buyer and seller was already established when the buyer placed the order with the seller and they both discussed and agreed (verbally or in writing) the what, where, when, how and how much of the transaction in detail..
The contract between a shipper and the carrier was already established when the shipper or his agent made a booking with the carrier (shipping line) to carry the cargo from A to B..
The B/L is the EVIDENCE of the contract of carriage entered into between the “Carrier” and the “Shipper or Cargo Owner” in order to carry out the transportation of the cargo as per the sales contract between the buyer and the seller..
Role 2 : Receipt of Goods – emphasis on the term “Receipt“
A B/L is issued by the carrier or their agent to the shipper or their agent in exchange for the receipt of the cargo.. The issuance of the B/L is proof that the carrier has received the goods from the shipper or their agent in apparent good order and condition, as handed over by the shipper..
Role 3 : Document of Title to the goods – emphasis on the term “Title“
It means that the goods may be transferred to the holder of the B/L which then gives the holder of the B/L, the rights to claim the goods or further transfer it to someone else..
In my previous article, I also discussed that a bill of lading may be issued as a
- Straight Bill of Lading
- Negotiable Bill of Lading or a
- Sea Way Bill of Lading
If the bill of lading is issued as a Straight Bill of Lading or a Negotiable Bill of Lading, then it would be issued with one or many original bills of lading with an original signature..
Over the years there have been several different types of bills of lading used in the different trades such as container, bulk, break-bulk, tankers etc etc, but as mentioned above, the points in this article are about containerised shipments..
There are several technicalities to be considered before signing a bill of lading and if you are the bill of lading signatory, here are 8 points that you need to be aware of..
1) Use the correct stationery – First and foremost you need to check that the bill of lading that you are about to issue is the right bill of lading stationery..
Why is this important..??
When I mean stationery, I mean the pre-printed bill of lading form that shows the logo of the carrier issuing the bill of lading (sample of Hapag Lloyd Bill shown here) and the various parts of a bill of lading containing the details of the shipment on Page 2 and the Carrier’s terms and conditions on Page 1 (yes the Terms and Conditions page is Page 1)..
These terms and conditions are approved by the carrier, by regulatory authorities, by insurance companies, by government authorities etc..
As shipping is a dynamic business there may be changes in the details required or in the terms and conditions of the bill of lading from time to time..
Some of the carrier’s bills of lading may not be registered with say for example FMC and therefore cannot be used for shipments to USA and if you do issue this bill of lading, then you as a carrier may have problems filing the manifest in USA..
Some of the carrier’s bills of lading have specific sequence numbers for security reasons and if the incorrect stationery is used, it may impact on the carrier’s liability and applicability of the terms and conditions..
So the issuing authority – whether it is the Master of the ship or the agent of the carrier must always ensure that the stationery used is correct and is the latest version of the document..
If you are issuing an Original Bill of Lading, then you need to ensure that the bill of lading issued is not a short form/blank back bill of lading..
Any original bill of lading issued must have the terms and conditions not just to protect the carrier, but also to convey the terms, conditions and liabilities to the merchant..
2) Verify the address details – While the details on the bill of lading are submitted by the customer, it is of paramount importance that the carrier also verify the details shown on the bill of lading..
Why is this important..??
While it is not the business of the carrier to figure out if the shipper is consigning the goods to the correct consignee, the signatory must check that at least the consignee or notify mentioned on the bill of lading is from the same country as the destination..
There are several countries like Ethiopia, Brazil etc where the consignee or notify must be based in Ethiopia or Brazil as per their regulations..
If the bill of lading is issued without this check, there is a possibility that the manifest submission at POD may be delayed which could also affect the berthing and operation of the ship on the whole..
You can read more about the importance of these address details in Part 1 of the parts of a bill of lading series..
3) Verify the cargo particulars – The cargo particulars of the shipment should also be verified and matched with the details given at the time of booking, before the bill of lading is signed..
Why is this important..??
This is important because there are a lot of unscrupulous customers who may book a cargo that is allowed for carriage by the carrier but end up shipping and declaring something else on the bill of lading..
These customers also work on the fact that this comparison between booking and bill of lading may not be done by all carriers/agents and is often overlooked..
For example, the customer may book cargo as “Trophies” (which could refer to sports trophies) and end up packing, loading and shipping “Hunting Trophies” which may be banned by the POD..
Now you have a container sitting with prohibited goods on board your ship and while you as a carrier may be able to charge the client for the additional costs, you also may go through a lot of unnecessary hassles and service disruptions due to this..
For special cargo such as reefers, hazardous, out of gauge cargo the bill of lading should reflect details such as carrying temperature, dimensions of the out of gauge, hazardous class and UN Nos..
Due care must be taken to ensure that these details on the bill of lading match the details given by the customer at the time of booking, at the time of cargo movement into the port, and also the approvals received from various quarters..
4) Ensure cargo is received for shipment or shipped on board – Always check that the correct vessel information and clause is reflected on the bill of lading…
Why is this important..??
Especially in container trade, the carrier is not privy to the actual contents of the container and has to rely on what the customer declares as the containers are packed at the shippers WH or premises and the carrier has no way of knowing what or how much they packed..
These protective clauses safeguard the carrier’s interest in case of any misdeclaration by the customer including any misdeclaration of weights which has been the bane of many carrier’s existence..
Ensure clauses/notations such as CLEAN ON BOARD are not handed out willy/nilly.. There are several implications of issuing Clean on Board Bill of Lading which you need to be aware of..
The person signing the bill of lading acknowledges the description, quantity and quality of the goods loaded and recorded on the bill of lading..
Any bill of lading signed with the knowledge of facts that are misrepresented may be considered to be a fraudulent document and may result in legal consequences for the signatory..
6) Non-inclusion of commercial terms – Commercial terms relating to the sales contract etc does not form part of the bill of lading and ideally should not be included in the bill of lading..
Why is this important..??
You may have heard the familiar cry “Help, carrier refuses to show commercial information relating to the cargo on the bill of lading“.. Commercial information includes Cargo Value, Incoterms, Letter of Credit details etc..
As per the carriers, this commercial information does not form part of their contract of carriage and therefore it has no place on the bill of lading..
If the bill of lading states a cargo value, it becomes an Ad Valorem bill of lading (According to Value) and as per Standard Club, the purpose of an Ad Valoerm bill of lading is to sidestep the package/unit limitation set out in Article IV Rule 5(a) of the Hague or the Hague Visby Rules (the Rules)..
This article in the Rules limits the amount of damages that the cargo interest can claim from the carrier.. Issuance of an ad valorem bill of lading may allow the customer to break this limitation and deprive the carrier of the right to limitation of liability per package or unit..
But if the customers insist on the value on the bill of lading, then carriers may choose to inform their liability Insurers of the requirement.. The insurers in turn may accept to cover any eventuality of issuing an ad valorem bill of lading in exchange for a sometimes hefty extra premium..
If the customer is willing to pay this extra cost, then the carrier may issue an ad valorem bill of lading..
7) Bills of lading originals must be issued in the right numbers and marked appropriately – When bills of lading are issued in originals and copies, due care must be taken to issue the right numbers
Why is this important..??
3 Originals and 6 Copies seems to be the general norm when negotiable bills of lading are issued.. When negotiable bills or straight bills are issued, the number of bills of lading must be reflected correctly in the relevant fields..
Reason why this is important is that all originals issued (especially Straight Bills) must be accounted for as they are like a cashier’s cheque.. For example if the bill of lading says 3 originals, but 4 originals are actually issued and one of these 4 originals falls into the wrong hands or are sent to the receiver along with other documents before they pay the seller..
The receiver could secure release of the goods based on below release clause on the bill of lading..
Due care must also be taken to ensure that all bills of lading issued are identical and printed at the same time.. Originals and Non-negotiable bills must be stamped as Original and Non-Negotiable if there are no pre-printed markings on the bill of lading stationery to this effect..
8) Ensure monies have been received – Always ensure that all monies due have been collected before you sign the bill of lading
Why is this important..??
For starters, everyone is in the business to make money and to get paid for services rendered, so it is natural to ensure that you collect all monies due for the carriage..
Also, in most of the cases, the people signing the bill of lading may be the agents of the carrier and not the carriers themselves..
All agents are obliged to ensure collection of freight and charges for the carriage and duly remit the same to the carrier.. In cases where the agent releases the bill of lading without collection of freights, they may be still obliged to pay the carrier whether they collect it or not..
Furthermore, in case the bill of lading has been released with a FREIGHT PREPAID notation but you as the agent missed to collect the freight or gave customers unauthorised credits (trust me, this has happened), you may not get the chance to collect the freight or stop the release of the cargo without a long legal battle..
Apart from the above main points, there might be also some points specific to your company/carrier that needs to be followed by you as the signatory of the bill of lading for container shipments..
In reality, in a lot of the cases the actual signatory of the bill of lading may be a senior person in the organisation and may not have the time to check and verify all of the above points before signing..
But since the liability is on the signatory, they would do well to develop a trustworthy back office staff complement whom they can depend on to check all these details..