Bill of lading

A bill of lading (B/L) is a document that serves as a receipt, a contract, and a title of goods in the shipping industry.  It outlines the agreement between the shipper and the carrier, providing all the necessary information about the goods being transported, such as their classification, quantity, weight, volume, and the ports of loading and destination. The B/L is usually abbreviated as B/L or BOL.

The functions of a bill of lading are as follows:

Receipt: It acts as a document of the receipt of the goods by the shipowner.  The Bill of Lading is a receipt issued by the carrier confirming that the goods match the description listed and have been received by the carrier in good order.

Contract: It outlines the shipping method that will be used for the cargo and acts as evidence of the contract of carriage with the carrier.  The Bill of Lading should also contain a reference to the relevant charter party.

Title of goods: Because it is considered a title of goods, the Bill of Lading can be used as a negotiable instrument and can be traded much in the same way goods may be. The owner of the cargo (the holder of the B/L) has the legal rights to claim the goods or arrange the transfer of ownership of the cargo to another party in the supply chain. For a named consignee to take the delivery of the goods in the discharge port they must surrender the original copy of a B/L. 

The use of a Bill of Lading is not limited to knowing the details of the shipment; it serves as a legal document that can be used for claims if anything undesirable happened during the logistics process.Without a legally enforceable agreement like a B/L, the carrier could deliver the goods to anyone they see fit. Therefore, it is crucial to have the proper information on the B/L, as it can be used in litigation if the need should arise, and all parties involved will take great pains to ensure the accuracy of the document.

When completed in full, the Bill of Lading also helps the customs broker in matching up the commercial clearance documents to ensure they can make an accurate declaration for all goods to Customs.

On occasion there can be issues that arise with Bill of Lading in shipping that require additional documentation, such asa Letter of Indemnity (LOI).

ALetter of Indemnity is a document that serves as a promise to indemnify the carrier in respect of any liability incurred under the Bill of Lading as a result of the incorrect or inaccurate information. In shipping, LOIs are often used when the cargo is not in good condition, and the shipper or charterer offers to give the Master a letter of indemnity in return for the Master signing clean Bills of Lading. LOIs are also used for delivery of cargo without production of a Bill of Lading. 

The Bill of Lading is generated by the shipper and issued by the carrier, while the Letter of Indemnity is offered by the shipper or charterer to the carrier in exchange for signing clean Bills ofLading or for delivery of cargo without production of a Bill of Lading. TheLetter of Indemnity is not necessarily strictly enforceable in maritime law, so the shipowner will need to carefully consider, on a case by case basis, whether they should accept a LOI for commercial reasons.  

More shipping academy lessons