What do you understand by Bill of Lading?

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Article 1, para 7 of the Hamburg Rules gives a clear definition of the Bill of Lading:

A Bill of Lading is a document that evidences a contract for the carriageof goods by sea and the taking over or loading of the goods and by which the carrier undertakes to deliver the goods upon surrender of the document. A provision in the bill of lading to deliver the goods to a named person or to order constitutes such an undertaking.

A bill of sale: a document that confirms the transfer of ownership of the goods or property.

 Thus, a bill of lading performs three separate functions:

  1. It is evidence of the terms of a contract of affreightment
  2. It is  receipt of goods shipped (on board)
  3. It is a document of title.

B/L - as evidence of Contract of Carriage

In the liner trade and the container business the bill of lading is usually the only written evidence of the terms and conditions under which the cargo is being carried. The terms and conditions under which the cargo is being carried. The terms and conditions are printed in very small on the back of the document. When a ship is chartered, the terms and conditions are expressed in the charter party itself, and the bill of lading is little more than a receipt. However, once the bill of lading has been negotiated to a third party who would have no knowledge of the charter party, then that bill becomes evidence of the contract of carriage that is implied between the carrier and the third party.

Under COGSA 1992, a person taking delivery of cargo under a Bill of lading is bound by the terms and conditions of the contract of carriage, but only those that the bill gives him notice of. Thus it is is essential that if a charter party is to be enforced against a receiver, the Bill of lading must give him notice of the existence of the charter party, i.e., The bill of lading must expressly incorporate the clause 'This bill is issued subject to all the terms, conditions and exceptions of the Charter Party, Dated 15.03.17 at Place, including negligence clause, and these terms are herewith incorporated'.

B/L - as a Receipt

A bill of lading records the quantity, weight and apparent condition of the goods shipped. The document is signed by the Master as agent for the owner to confirm what has been loaded aboard the vessel.

The bill of lading contains a statement regarding the quantity of the goods shipped. Once signed by the master or the person appointed by him the bill is prima facie evidence of the goods shipped. If the statement as to the quantity does not agree with the mates receipt, then the bill should be endorsed to show the correct quantity or the number in dispute, so the receiver has no doubt as to what is shipped.

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Bills of lading thus enabled the shippers or the receivers of the cargo to establish that cargo either was not delivered at all or was delivered in damaged condition at the discharge port, had been loaded on a vessel in good condition and, thus, must have been damaged whilst in the care of the carrier.

If the bill of lading contains a statement as to the quality of the Goods or the content of Packages. The carrier cannot be expected inspect and open every packages or be an expert in the quality of every type of cargo that requires to be shipped. Therefore the bill of lading is not conclusive proof of the description of the goods. In order to confirm or reinforce this notion, bills usually contain the words 'quality unknown' or 'packages said to contain'.

If the bill of lading contains the statement 'shipped in apparent good order and condition' this relates to the external condition of the cargo, including the adequacy of the packaging. During loading operations the mate or officer assigned on his behalf should check the external appearance of cargo as it comes onboard any damage, impurities, staining, discolouration or poor packing should be noted and the goods either rejected or the bill of lading to be endorsed to show exactly what is wrong with the concerned goods.

 B/L - as a Document of Title 

Physical inability of the shipper to deliver the cargo (due to long transit periods) has brought about the B/L to be treated as a symbol for the goods. The transfer of the bill of lading from the buyer to the seller has the effect in law of transferring the right of possession of the cargo from the buyer to the seller. It is often said that possessing the bill of lading is proof of ownership of the goods. To ensure the current holder of the bill of lading gets possession of the cargo at the end of the carriage, there is a duty placed upon carrier to deliver the goods to the first person presenting a valid bill of lading endorsed in their favour. The Master signature is on the bill of lading so he should be able to identify. In order to for this to go smoothly the master should request presentation of the bills of lading on arrival.

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There are different types of bill of lading - Read here

Bills of Lading in Sets

The bills of lading are issued to the shipper in sets of three or four; if three copies are issued, one is retained by the master or broker; two copies are dispatched, one usually by express mail, to the buyer, or to any other addressee of the cargo, i.e. the consignee.

If the shipper and the consignee have agreed to use a letter of credit as a method of payment, the copies would be tendered to the shipper's bank together with the other shipping documents in return for the price for the goods shipped. By the endorsement and delivery of the bills of lading to any sub-buyer, the latter as assignees steps into the consignee's shoes and, on arrival of the ship at the port of destination, the sub-buyer can take immediate delivery on presenting the bills of lading representing the lot he has purchased from the importer, who will usually be the consignee.

Important Points Master Should note when Signing Bills of Lading

  1. Check the date on the Bill of Lading, it should be date of shipment as shown on the Mate's Receipt. NEVER sign a post dated or antedated bill, as this could be for a fraud.
  2. Check the description of the cargo that the shipper has put on the bill against the description on the Mate's receipt. Subject to precautions with regard to making bill foul, transfer any endorsement on the Mate's receipt to the bill of lading.
  3. If the bill of lading is in foreign language, request a translation. If this cannot be obtained, endorse the bill in English with quantities taken from Mate's Receipt.
  4. Check that the port of delivery is one to which you are bound and that it is within the range of ports permitted by the charter party and crew management.
  5. Check that the number of original Bills presented for signature corresponds with the number of bills stated to have issued, if it does not then amend the bill of lading.
  6. Where carriage is under a charter party, check that the terms of the charter party are incorporated into the bill of lading.
  7. Check that any freight rate on the bill of lading is not prejudicial to any freight rate in the charter party, and if dead freight or demurrage is outstanding, that these are endorsed on the bill of lading.

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