Which bill of lading should I ask the carrier to issue..?? – Question #WK12-2024

Part of deciding which bill of lading is to be issued, is to remember and understand that a bill of lading has 3 basic purposes or roles (in no particular order of importance)..

1) Evidence of Contract of Carriage – emphasis on the term “Evidence”

A bill of lading is the EVIDENCE of the contract of carriage between the “Carrier” and the “Shipper or Cargo Owner” to carry out the transportation of the cargo as per the sales contract between the buyer and the seller..

2) Receipt of Goods – emphasis on the term “Receipt“

A bill of lading is a receipt issued by the carrier confirming that they have received the goods covered in the bill of lading from the shipper or their agent at the place of origin or port of loading from where the carrier’s responsibility begins..

3) Document of Title to the goods – emphasis on the term “Title“

A bill of lading is a document that confers the title to the goods to the holder of the bill of lading so that they can claim the goods or further transfer it to someone else through endorsements..

Although there is no particular order of importance to the roles of the bill of lading, the “Document of Title to the Goods” is often considered as the important role because this the only role that allows the transfer of the title to the goods from one party to the other..

So you as the buyer or seller need to understand which of these roles you want the bill of lading to satisfy.. Whether you need all 3 roles or if you need just roles 1 & 2 to be fulfilled..

The application of the above roles is related to how the bills of lading are issued.. There are 3 ways in which a bill of lading is issued :

1) Straight Bill of Lading – when a bill of lading is issued in Original(s) to a “named” consignee it is referred to as a “Straight BILL OF LADING”..

Original means, the bill of lading stationery explicitly and clearly states the word “Original” either in print form or as a manual rubber stamp on the front of the bill of lading..

The carrier’s agent at the Port of discharge will require either one of the issued originals to be surrendered at the destination (or origin) or a telex release confirming such surrender to release the cargo to the named consignee..

A straight bill of lading is a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT and fulfills only role 1 (Evidence of contract of carriage) and 2 (Receipt of Goods) above and does not satisfy role 3 (Document of Title)..

When would a Straight Bill of Lading be issued..??

• When the buyer and seller are known to each other but the seller needs to ensure that they receive the payment for the goods before releasing the cargo, the seller can request the issue of a straight bill of lading in the name of the buyer but hold on to the originals till they get paid..

The benefit of using this bill of lading is that you don’t have to go through any negotiation or documentation presentation process with banks or financial institutions and you can send the original(s) to the buyer directly once they have paid..

2) Sea Waybill – when a bill of lading is issued to a “named” consignee but without any originals, it is referred to as a “Sea Waybill“..

The Sea Waybill is also a NON-NEGOTIABLE & NON-TRANSFERABLE DOCUMENT and fulfills only roles 1 (Evidence of contract of carriage) and 2 (Receipt of Goods) above and does not satisfy role 3 (Document of Title)..

When would a Sea Waybill be issued..??

• For intercompany shipments like from ACME Company Hollywood to ACME Company in the Middle of the Australian Outback or
• You as a shipper have dealt with the buyer several times and are comfortable that you will receive the payment for the goods before releasing the cargo..

Since no originals are issued in the case of a Sea Waybill, no surrender is required..

3) Negotiable Bill of Lading – when a bill of lading is issued in Original(s) and is consigned “TO ORDER” or “TO ORDER OF SHIPPER” or “TO ORDER OF XYZ BANK” it is referred to as a “Negotiable BILL OF LADING or Order Bill“..

One of the most important aspects of a bill of lading is that it can be used as a negotiable document between a buyer and seller using say Letter of Credit..

A negotiable bill of lading must therefore be treated like gold and due care must be taken not to lose it as there are several cumbersome procedures to be followed if an original bill of lading is lost..

Another notable feature of this type of bill of lading is that it contains the Terms and Conditions of the Carrier on the 1^st Page (commonly referred to as the “back of the bill of lading”)..

The destination port agent may release cargo only after receiving at least 1 of the issued originals and only after confirming that the bill of lading has been endorsed correctly and that the recipient claiming the goods is the authorized recipient..

Read the permutation and combination regarding endorsements required on a negotiable bill of lading..

A negotiable bill of lading satisfies all 3 of the roles of the bill of lading – 1 (Evidence of contract of carriage), 2 (Receipt of Goods), and 3 (Document of Title)..

When would a Negotiable Bill of Lading be issued..??

• When the buyer and seller are not known to each other and the seller wants to ensure that they receive the payment for the goods before releasing the cargo, the seller can issue a negotiable bill of lading through a bank/financial institution.. Usually a letter of credit may be involved and once the banks confirm payment, the bill of lading is endorsed to the buyer..
• When the buyer wants to further trade or resell the goods, a negotiable bill of lading should be issued so that it can be endorsed to the new buyer..

While the above explains what type of bill of lading you as a customer should request from the carrier, you also need to ensure that the carrier issues the right bill of lading which fulfills their transport obligation..

If you look at the top of the bill of lading on Page 2 (usually referred to as the “Front” of the bill of lading), you can see the bill of lading is termed as

1. Port to Port Bill of Lading
2. Combined Transport Bill of Lading
3. Multimodal Transport Bill of Lading
4. Through Transport Bill of Lading

or a combination of these names..

This is one way to identify the carrier’s responsibility in terms of the carriage..

1. Port to Port Bill of Lading

If your arrangement with the carrier is on a port to port basis, the carrier will usually use a bill of lading stationery that reads Port to Port..

When the transport document is issued for a movement between seaports (also called Ocean Transport), it is called a Port to Port Bill of Lading..

Example: Durban to Mombasa.. This move may or may not involve transhipment at another port..

With this bill of lading, the carrier’s responsibility begins at the Port of Loading and ends at the Port of Discharge, and the Place of Origin or Receipt and/or Place of Destination or Delivery are not mentioned in the bill of lading..

Read – Parts of a BILL OF LADING – Part 2 for further details on this..

2. Combined Transport Bill of Lading

If however, your arrangement with the carrier is for the movement of your cargo from the seller’s premises to the buyer’s premises, then you need to ensure that the bill of lading stationery issued shows the terms – Combined Transport, Multimodal Transport or Through Transport and also includes the Place of Origin and Place of Destination..

When the transport document issued, indicates a Place of Origin or Receipt and/or Place of Destination or Delivery on the front of the bill of lading, it is called a Combined Transport Bill of Lading..

The Place of Origin or Receipt and/or Place of Destination or Delivery or both can be an inland location or another smaller feeder port and as the name suggests, this movement can involve a combination of road, rail and/or sea to move the container from the Place of Receipt to Place of Delivery..

Example: Johannesburg to Nairobi.. Johannesburg and Nairobi are both inland and container will most commonly be loaded out of Durban port and discharged at Mombasa port for movement to Nairobi and this could be by rail or road on both ends..

Combined Transport consists of a Port-to-Port carriage and an Inland Transport movement.. Inland transport means the carriage of the container before the Port of Loading and after the Port of Discharge..

The carrier’s responsibility begins at the Place of Origin or Receipt and/or Place of Destination or Delivery provided these are explicitly mentioned in the BILL OF LADING..

When a bill of lading is released as a Combined transport bill of lading, the boxes like “Pre-Carriage by”, “Place of receipt by pre-carrier”, “Place of delivery by on-carrier”, “On-Carriage by” etc will be filed in..

 

Read – Parts of a BILL OF LADING – Part 2 for further details on this..

3. Multimodal Transport bill of lading 

This bill of lading offers the same concept and functionality as a bill of lading issued for shipment Combined Transport shipment, i.e. the Place of Origin or Receipt and/or Place of Destination or Delivery are indicated on the face of the bill of lading.. The terms Multimodal and Combined Transport are being used interchangeably by different carriers..

 

4. Bill of Lading for Through Transport 

In the case of Combined Transport, Multimodal Transport, or Through Transport, the carrier’s liability may be limited to the direct port to port movement while for inland movement, they may be acting as agents on behalf of the merchant and will be using underlying carriers and/or sub-contractors..

The extent and limit of liability for the carrier will always follow the terms and conditions and carriage regimen outlined on the reverse (Page 1) of the bill of lading..

Conclusion

While the topic of the bill of lading and its issuance can be complicated, the customer (and carrier) need to pay attention to how the bill of lading is issued, which stationery is used, and for what purpose..

Some points to remember below:

1. Trading the goods further => Issue a Negotiable Bill of Lading
2. Unknown customer and require payment before release => Issue a Negotiable Bill of Lading
3. Letter of Credit involved => Issue a Negotiable Bill of Lading
4. Known customer but require payment before release => Issue a Straight Bill of Lading
5. Known customer and payment before release not a problem => Issue a Sea Waybill
6. Shipment between own companies => Issue a Sea Waybill
7. Shipment involves carrier movement from port of origin to destination => Ensure the bill of lading stationery reads Combined Transport, Multimodal Transport or Through Transport..

Source – https://www.shippingandfreightresource.com/which-bill-of-lading-should-i-ask-the-carrier-to-issue-question-wk12-2024/