What is the bill of lading used for?
The bill of lading or commonly known as B/L (Bill of Lading), serves as a maritime transport contract, constitutes reliable proof that the goods have been shipped, and determines the responsibility of the contracting parties. This document is not issued by government authorities, however, regardless of who issues the bill of lading, it is an extremely important document!
Who issues the bill of lading?
The agent of the shipping company carrying out the transport.
Who is it meant for?
The exporter, the shipping company through the agent, and the importer.
Understanding the B/L
The document is issued in three originals that confer the title of ownership on the person who owns them if it has been made in the negotiable mode; in fact, with a single original, it is possible to process the cargo so it is recommended to be able to locate at all times the complete set of these originals for any operation. Copies are non-negotiable, so in case the buyer needs to be informed in advance of shipping details it is advisable to send these and keep the originals.
You already know who issues the bill of lading, however, the bill of lading is also greatly influenced by the bank, which determines the information that has to be contained on it. Because the issuance of the document is not done by the exporter, the exporter must transmit in detail all the data it must contain and review compliance with the requests made on the initial copy transmitted to it by the agent and, if not, request the necessary modifications prior to its issuance, as once issued, the modifications may incur additional costs. Hence, the one who issues the bill of lading has to be very careful in its preparation.
The bill of lading will sometimes include the amount of freight. It is necessary to indicate whether the freight prepaid or is a freight payable at destination or freight collect. This depends on the Incoterm of sale.
Taking into account the needs indicated by the exporter, this document will show the actual dates on which the shipment is made. These can sometimes be modified and backdated, which allows changing the boarding date to an earlier one provided that the contractor of the transport is agreeable, since the agent himself cannot accept on his own behalf the responsibility for this change and must, in turn, request the shipping company for acceptance to process the change. This date change is very common due to the difficulty of specifying the day of boarding on a mode of sea transport. In any case, it is important for the exporter to obtain this document as soon as possible so that it is in the possession of the importer before the goods arrive at the port of destination. This document must be provided by the seller under conditions of sale of groups C and D of the Incoterms.
Another aspect to consider is the importance of the bill of lading on the ownership of the goods. In cases where the cost of transport is settled at destination (Freight collect), the shipping company will not release the goods without the collection of freight, being able to retain those goods in lieu for non-payment of transport. In this situation, which can occur without the exporter’s knowledge, there is no legal possibility of dispatching the goods without the settlement of the cost of transport. The same is not true of prepaid freight, as the goods travel as released because the transport has already been paid for.
What happens if the B/L is lost?
Regarding the loss of the original documentation of a B/L, it may not cause problems as long as there is at least one original of the same, but if the original three are lost it is a serious problem since the shipping company (or its agent), will not accept the verbal confirmation of the participants in the operation, without requesting the following documents: letters sent by Consignee (buyer) and Shipper (seller), accepting the release of the goods and exonerating the shipping company of any claim that this release could produce. This is known as a Letter of Indemnity. In addition, the buyer may need to submit a bond to the shipping company for the amount corresponding to that of the purchase, which the latter may invoke in order to compensate the owner of the goods, in the event that the originals are presented to him subsequently and it is determined that a fraud has occurred.
There are different B/L bills of lading formats to take note of.
B/L Received for Shipment: This implies that the goods have been received for transport on the indicated date, but have not been shipped. It is typically used in deliveries with multimodal transport, confirming the date on which the container has reached the terminal of the first carrier. It is not recommended in transactions linked to the form of a letter of credit as the importer does not request this document as it does not serve to confirm the shipment of the goods.
Nominative B/L: This B/L issued in the name of a particular person or company, who may collect the goods upon identification and presentation of at least one original of the B/L. In case of processing by the freight forwarder or agent designated for the collection of the goods must be delivered to the townhouse (signed on its back by the person who is nominative) for the purposes of transfer of rights for such operation, although it does not confer transfer for negotiation, so in transit sales operations it is not operational, since it cannot be freely negotiated.
B/L to the order: In this type of B/L the owner of the goods is the owner of the original documentation who can transmit the property to another by endorsement making it nominative or simply endorse the document as “to the bearer”. This is one of the most widely used types of bill of lading by bank-intervened documentary credits in which it is the bank that appears as consignee of the goods, subsequently dosing such documentation to its customer, who is the importer.
B/L to carrier: This is issued as “carrier”, i.e. without identifying the owner of the goods who will be the owner of the original documentation. It is not highly advisable as the loss of the document can cause serious problems so importers and banks do not accept deliveries with this type of B/L, which is not common in international operations.
House B/L : This is a document issued by the freight forwarding and negotiable agent. Acceptable in banking operations. It is usually accepted in shipments in which either the exporter or importer assumes the entire operation of the international operation.
B/L Express Release: This issued by the freight forwarding agent, allows the release of the goods at destination with simple photocopies, that is, no original document is required for any procedure. It is useful in cases of full trust between seller and buyer as well as in fast-traffic maritime operations. The issuance of the document is done through electronic format, EDI language, from the terminal to the agent at source and is received in the terminal of the Agent at the destination.
You can learn more about the different types of bills of lading in our other article.
The responsibility of the transport contractor is established in relation to the space occupied by the goods on the ship in cases of force majeure, such as simple breakdowns and thick breakdowns, in which the vessel could suffer damage or slaughter of the goods, with direct exemption from the shipping company. The concepts of simple and thick breakdown are usually described on the front of the B/L, as they are considerations and responsibilities of the contract of carriage itself, such as:
Simple breakdown: This refers to when the vessel has specified maritime intervention by breakdown, it may cause delays in transit as well as costs for tugging, transshipment handling, etc., which must be paid proportionately to the space occupied by the goods transported on the ship by the contractor.
Thick breakdown: When this happens the complexity increases, as in the above circumstances it should be added that the scrapping or destruction of goods has been necessary to avoid the loss of the vessel or very significant damage due to causes outside the ship but attributable to navigation (sinking, cargo movements, shocks, etc.)
In cases where the goods arrive with defects, two situations must be considered when claiming for claims:
Apparent damage: In this case, reservations must be made indicative of the defect or damage assessed in the same document that identifies the delivery of the goods (container or grouping).
Non-apparent damages: In this situation, it should be noted that the application of legends such as “Pending Review” or “As unless examination”, have no effect since the maritime law delimits the claim to a period of seventy-two hours from delivery. Once that period has elapsed, there can no longer be any complaints raised.
In the bill of lading, it is common to find a variety of concepts abbreviated by acronyms that refer to information about weights, dimensions, costs, surcharges, services, etc., which can be requested by the buyer himself or introduced by the shipping company itself as identification of the characteristics of the shipment.
A final note
In this article, we have looked at who issues the bill of lading and various other aspects of the document that are important. However, there are many more points to cover! The exporter must request the document and will require its issuance for a sale with maritime transport from the Incoterm CFR and up to DDP including, among these, all Incoterms for maritime use. In sales whose conditions of delivery are EXW, FCA, FAS, and FOB it is the importer who has to contract the maritime transport, so it will be the one who processes his request to the freight forwarding agent for the realization of the maritime shipment. Bills of lading is a big topic and many questions about bills of lading arise on this document in the course of international trade. If you are unsure, seek professional guidance as the document is very important for payment and release of cargo.
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