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Bill of lading
A bill of lading (B/L or BOL) is the document a carrier issues to the shipper when it takes goods for transport. It does three jobs: it is a receipt for the goods, evidence of the contract of carriage, and — when issued to order — a document of title that whoever holds it can use to claim the cargo.
What a bill of lading does
Every shipment by sea, and most by road in North America, moves under a bill of lading. The same piece of paper — or, increasingly, the same electronic record — carries three separate legal jobs, and most disputes about a bill come from mixing them up.
- A receipt: it records what the carrier took — the marks, the number of packages or the weight, and the condition the goods appeared to be in.
- Evidence of the contract of carriage: the terms on the back, or the carrier's standard terms it refers to, govern the trip.
- A document of title: an order bill can be endorsed and handed on, and the carrier delivers to whoever presents an original.
Types of bill of lading
| Type | Who takes delivery | Typical use |
|---|---|---|
| Straight (non-negotiable) | Only the consignee named on it | Paid-in-advance sales, shipments between related companies |
| Order (negotiable) | Whoever holds an original, endorsed in a chain | Letters of credit, cargo sold while at sea |
| House bill (HBL) | Issued by a forwarder or NVOCC to its own customer | Consolidated and groupage shipments |
| Master bill (MBL) | Issued by the shipping line to the forwarder | The line's contract with the forwarder |
| Sea waybill (related) | The named consignee, with no original to present | Trusted buyers who want no paper delay |
In the US, the federal statute on bills of lading draws the line in one sentence each: a bill is negotiable when it says the goods are to be delivered "to the order of" a consignee, and nonnegotiable when it says they are to be delivered "to" a consignee. A carrier issuing a nonnegotiable bill must mark it "nonnegotiable" or "not negotiable".
What goes on it
Under the Hague-Visby Rules, once the carrier has the goods it must, on the shipper's demand, issue a bill showing the leading marks that identify the goods, either the number of packages or the quantity or weight as the shipper gave them in writing, and the goods' apparent order and condition. That bill is then prima facie evidence that the carrier received the goods as described. In practice a bill also names the shipper, the consignee and a notify party, the vessel and voyage, the ports of loading and discharge, and whether freight is prepaid or collect.
Worked example: a letter of credit shipment
- A tile maker in Valencia sells 18 pallets of floor tiles to a distributor in Houston, paid by letter of credit. Each pallet weighs 1,050 kg, so the load is 18,900 kg (41,667 lb) — inside the 28,330 kg payload a carrier such as ONE lists for a 20ft dry container.
- The shipping line loads the container and issues an order bill made out "to the order of" the buyer's bank, in a set of originals.
- The seller presents the full set, with the invoice and packing list, to its bank. The documents match the letter of credit, so the seller is paid.
- The buyer pays its own bank, receives the endorsed originals, and surrenders one at Houston to collect the container. The other originals in the set are then void.
Had the line claused the bill "2 pallets broken", the bank could have refused the documents, and the seller would have had to negotiate with the buyer while its tiles sat at the port.
The mistake people make
Releasing cargo against a copy, or treating a straight bill as if it could be traded. A carrier that delivers order-bill cargo without an original can be liable to whoever holds that original, which is why a carrier asked to release without one will want a letter of indemnity first. On the road and in the air the document has a different name and weaker powers: Europe's road freight moves on a CMR consignment note, and air freight on an air waybill, and neither is a document of title.
FAQ
Bill of lading: common questions
- What is the difference between a bill of lading and a sea waybill?
- A sea waybill is a receipt and evidence of the contract of carriage, but not a document of title. The carrier delivers to the consignee named on it without asking for an original, so cargo is not held up waiting for paper. It suits buyers who have already paid or who trade on open account; a letter of credit sale usually needs an order bill instead.
- Who issues a bill of lading?
- The carrier, or the master or an agent acting for it. When a forwarder or NVOCC consolidates cargo, it issues its own house bill to each shipper, while the shipping line issues one master bill to the forwarder for the whole container.
- What happens if an original bill of lading is lost?
- With an order bill, the carrier delivers only against an original, so the consignee cannot simply collect the cargo. The usual route is a letter of indemnity to the carrier, sometimes backed by a bank, before it agrees to release. With a straight bill or a sea waybill, the named consignee can usually take delivery by proving who it is.
- What is a clean bill of lading?
- A bill with no notation that the goods or their packing were defective when loaded. If the carrier notes damage — wet cartons, broken pallets — the bill is claused, and a bank checking documents under a letter of credit will usually refuse it.