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A bill of lading, being referred to as a BOL or B/L in abbreviation, is
a document issued by a carrier, e.g. a ship's master or by a company's shipping
department, 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.
Bill of Lading is the key document in the processing of the Letters of Credit.
The status of the original Bill of Lading, i.e., who possess it, the supplier/shipper
or buyer/recipient, determines the ownership of the goods covered under
the Bill of Lading. For example, when a buyer or importer fulfills his/her
payment obligation to a exporter or seller, the seller will send the original
Bill of Lading to the buyer. After the buyer receives the Bill of Lading,
he/she will automatically become the owner of the goods. Without such transfer
of the Bill of Lading, the freight carrier will not release the goods to
buyer. When the Letter of Credit is used as the trade term, the Bill of
Lading and the ownership of the goods are actually transferred at the same
time through the issuing and advising bank.
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Functions of the Bill of Lading
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It is clear that the bill of lading is a type of the traded object.
The standard short form bill of lading is the contractual evidence of carriage
of goods. It serves a number of purposes:
 It
is the evidence that a valid contract of carriage or a chartering contract
exists, and it may incorporate the full terms of the contract between the
consignor and the carrier by reference. The short form simply refers to
the main contract as an existing document, whereas the long form of a bill
of lading, which is also called "connaissement intégral", issued by the
carrier sets out all the terms of the contract of carriage.
Bill of
Lading is a receipt signed by the carrier confirming whether goods matching
the contract description have been received in good condition. The Bill
will be defined as "clean" if the goods have been received on board in apparent
good condition and stowed ready for transport.
Bill of
Lading is also a document of transfer, being freely transferable but not
a negotiable instrument in the legal sense. It governs all the legal aspects
of physical carriage and like a check or other negotiable instrument, it
may be endorsed affecting ownership of the goods actually being carried.
This matches everyday experience in that the contract a person might make
with a commercial carrier like FedEx for mostly airway parcels, is separate
from any contract for the sale of the goods to be carried, however it binds
the carrier to its terms, irrespectively of who is the actual holder of
the B/L, and owner of the goods, may be at a specific moment.
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Main Types of the Bill of Lading
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The types of Bill of Lading include the Bill of Lading in different formats
and the specific Bill of Lading at the different stages. The following are
a summary of the Bill of Lading types.
Straight
bill of lading
This type of the Bill of Lading states that the goods are consigned to a
specified person and can not be negotiated 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.
Straight Bill of Lading is also known as a non-negotiable bill of lading.
Order
bill of lading
This type of the bill of lading uses express words to make the bill negotiable
For example, the bill states that delivery is to be made to the further
order of the consignee using words such as "delivery to A Inc 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 Inc's intention to transfer. This is also known
as a negotiable bill of lading.
Bearer
bill of lading
This type bill of lading 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, or SBL in abbreviation. That means,
when we hand over the bill of lading we surrender title to the goods and
our power of sale over the goods.
Air or
Sea Waybill
A sea or air waybill is a non-negotiable receipt issued by the carrier.
It is the most common in the container trade either when 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 in the conditions such
as 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.
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Known Issues to the Bill of Lading
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In most national and international systems, a bill of lading is not a document
of title, and does no more than identify that a particular individual has
a right to possession at the time when delivery is to be made. Problems
arise when goods are found to have been lost or damaged in transit, or delivery
is delayed or refused. Because the consignee is not a party to the contract
of carriage, the doctrine of privity of contract states that a third party
has no right to enforce the agreement. However, whether this is a problem
to the consignee depends on who owns the goods and who holds the risks associated
with the carriage. This will be answered by examining the terms of all the
relevant contracts. If the consignor has reserved title until payment is
made, the consignor can sue to recover his or her loss. But if ownership
and/or the risk of loss has transferred to the consignee, the right to sue
may not be clear in contract, although there could be remedies in tort/delict
(the issue of risk will have been most carefully considered to decide who
should insure the goods during transit). Hence, a number of international
Conventions and domestic laws specifically address when a consignee has
the right to sue. The legal solution most often adopted is to apply the
principle of subrogation, i.e. to give consignee same rights of
action held by the consignor. This enables most of obvious cases
of injustice to be avoided.
In the municipal law of the U.S., the issue
and enforcement of bills which may be documents of title, is governed by
Article 7 of the Uniform Commercial Code. However, since bills of lading
are most frequently used in cross-border, overseas or airborne shipping,
the laws of whatever other countries are involved in the transaction
covered by a particular bill may also be applicable including the Hague
Rules, the Hague-Visby Rules and The Hamburg Rules at international
level for shipping, The Warsaw Convention for the Unification of Certain
Rules for International Carriage by Air 1929 and The Montreal Convention
for the Unification of Certain Rules for International Carriage by Air
1999 for air waybills, etc. It is customary for parties to the bill to
agree both which country's courts shall have the jurisdiction to hear
any case in a forum selection clause, and the municipal system of law to
be applied in that case choice of law clause. The law selected is termed
the proper law in private international law and it gives a form of
extraterritorial effect to an otherwise sovereign law, e.g. a Chinese
consignor contracts with a Greek carrier for delivery to a consignee
based in New York: they agree that any dispute will be referred to the
courts in New York but that the New York courts will apply Greek law as the lex causae to determine the extent of the carrier's liability.
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