Bill of Lading

Bill of Lading (B/L)

Generally, the Bill of Lading (B/L) is issued in a pre-printed form. Bill of Lading (B/L) Form may relate to a specific or a general cargo trade or Bill of Lading (B/L) Form may be prepared for liner services.

Bill of Lading (B/L) has three (3) basic functions: 

1- Receipt for the cargo. Bill of Lading (B/L) is signed by the Ship Master or by the Shipowner’s Agents on behalf of the Carrier, with remarks as to the condition of the cargo

2- Evidence of a contract governing terms and conditions of carriage

3- Document of Title (DOT) to the cargo, by which implies the cargo may be transferred to another party

 

1- Bill of Lading (B/L) as a Receipt

Bill of Lading (B/L) indicates the quantity and description of the cargo loaded. Usually, the Bill of Lading (B/L) incorporates wording such as “Weight measurement, quality, and contents unknown. All particulars as declared by the Shipper”.

This wording is used because at the point of loading all the Ship’s Officers can tell is that the cargo has shipped on board several cases, drums, etc, or in the case of bulk cargo a quantity of a commodity, but is not capable to evaluate the exact composition of that cargo. In the case of a container or palletized cargoes, it is normal to remark “Container said to contain”. These types of wordings have been tested in many legal disputes. Nevertheless, since the terrorist attacks on the World Trade Centre in New York in September 2001, the United States Customs officers no longer permit Bill of Lading (B/L) for the United States ports to carry these types of catch-all phrases. The United States Customs officers demand the Full Description of the cargoes. 

Bill of Lading (B/L) comments on the condition of the cargo, usually by expressing “in apparent good order and condition”. 

Besides the quantity and condition of the cargo, the Bill of Lading (B/L) also shows any detail required to identify the cargo such as marks and numbers.

Bill of Lading (B/L) shows the names of the shipper and consignees, the name of the vessel, the loading port, and the discharging port. 

Bill of Lading (B/L) shows the freight payment, either that the freight has been prepaid or that the freight has to be collected. 

Eventually, the Bill of Lading (B/L) incorporates the signature of the Ship Master and the date. The date can be very important for the Letter of Credit (LC) and trading terms.

 

2- Bill of Lading (B/L) as Evidence of a Contract

In liner trades, the actual contract may well be no more than a telephone conversation or a Booking Note. Therefore, the Bill of Lading (B/L) is usually the sole means of incorporating the terms and conditions of carriage which are usually printed on the reverse side of the Bill of Lading (B/L) Form. Therefore, the Bill of Lading (B/L) Form provides Evidence of a Contract.

In bulk trades, the Bill of Lading (B/L) should contain a reference to the relevant Charterparty that includes wording such as “all terms, conditions, and exceptions of charterparty dated New York are deemed incorporated herein”.

Usually, Charterparty Forms incorporate wording to the effect that certain Charterparty Clauses, such as Clauses Paramount, are to be fully incorporated into the Bill of Lading (B/L) issued thereunder. Furthermore, Charterparty Arbitration Clause must be incorporated into the Bill of Lading (B/L) as, failing this, the Bill of Lading (B/L) Holder may not be able to apply for arbitration against the Carrier.

In case the terms of the Charterparty and the Bill of Lading (B/L) conflict, those of the Bill of Lading (B/L) will take precedence over those of the Charterparty.

This may sound odd at first when a person considers how much effort went into drafting the Charterparty, but remember the role of the Bill of Lading (B/L) as a Document of Title (DOT). If title to cargo has indeed been sold on, a new consignee would be completely remote from the original negotiations between the Charterer and the Shipowner. What the consignee would have, nevertheless, is the Document of Title (DOT) and that is what the consignee remunerated for and that is what the consignee has a right to receive. Consequently, the Bill of Lading (B/L) may incorporate the Charterparty, but this should not mean that the Charterparty incorporates anything more onerous than that which is expressly stated in the Bill of Lading (B/L).

 

3- Bill of Lading (B/L) as a Document of Title (DOT)

A shipper can transfer ownership of cargoes by making the Bill of Lading (B/L) over to a Named Consignee, or To The Order of that consignee, or by endorsing the Bill of Lading (B/L) to Another Party. 

Transfer of cargo ownership and the buying and selling of a Bill of Lading (B/L) is standard practice in global trade and a Bill of Lading (B/L) may change hands several times before it reaches the party who will finally claim and take delivery of the cargo.

When payment for the cargoes has been placed via a Letter of Credit (LC) the Bill of Lading (B/L) becomes critical in its other role as a Document of Title (DOT), i.e. as security for payment. Commercial Banks never want the actual title to the cargoes, with all the responsibilities that are also involved. Commercial Banks want the security of declining payment to a shipper until satisfied that all the prerequisites of a contract of sale have been achieved. Commercial Banks decline the transfer of title of the goods to consignees until payment has been completed.

 

Main Features of Bill of Lading (B/L): 

1- Date of the Bill of Lading (B/L)
2- Names of Shipper and Consignee
3- Quantity of Cargo
4- Accurate Cargo Description and Condition
5- Ship’s Name
6- Ports of Loading and Discharging
7- Terms and Conditions of Carriage
8- Payment of Freight.

 

Bill of Lading (B/L) at the Loading Port

Ship Agent may be assigned the duty of drawing up a Bill of Lading (B/L), and if a Bill of Lading (B/L) is subsequently required for a Letter of Credit (LC) transactions, it is reasonable that the Ship Agent is supplied with details of that Letter of Credit (LC) so that all relevant clauses can be incorporated in the wording.

All Bill of Lading (B/L) should be signed by either the Ship Master or by a duly authorized Ship Agent, in their capacities as servants of the Shipowner or the Disponent Owner (Time Charterer) i.e. the Carrier. If time does not permit the Ship Master to sign the Bill of Lading (B/L), a letter is usually drawn up giving the Ship Agent proper authority to sign the Bill of Lading (B/L). Alternatively, it may be agreed at the time of negotiating the Charterparty that “Charterers and/or their agents be authorized by owners to sign the Bill of Lading (B/L) as presented on Ship Master’s and/or Owner’s behalf, in accordance with Mate’s Receipts (MR), and/or Tally Clerk’s Receipts, without prejudice to this Charterparty”.

Uniform Custom and Practice for Documentary Credits (UCP 500) sets out the requirements of banks and other parties managing the Bill of Lading (B/L) and the shipping documents related to the Letter of Credit (LC). Uniform Custom and Practice for Documentary Credits (UCP 500) specifies that the Bill of Lading (B/L) must be signed by the Ship Master or by the Carrier or Carrier’s Agent in a format that identifies the Carrier’s name. For example, Panama Agencies Co an agent for HandyBulk LLC.

Accurately inserting a date in the Bill of Lading (B/L) is crucial. The date on which the complete cargo is actually loaded and the loading operation is completed. 

When cargo is loaded later than stipulated in the Letter of Credit (LC) transactions, shipowners may be requested to sign the Pre-Dated Bill of Lading, possibly against Letters of Indemnity (LOI) to be issued by the Charterers. The consignee may be well aware of the delay in loading and be comfortable with the proposed deal, which otherwise might involve time-consuming and tiresome additional paperwork. However, the wise Shipowner should consider such an approach cautiously. The Shipowner should contact the Protection and Indemnity Club (P&I Club) for advice, even in cases where the Shipowner is convinced that all parties are completely aware of the circumstances.

Usually, the Protection and Indemnity Clubs (P&I Clubs) do not support Shipowners issuing a Pre-Dated Bill of Lading (B/L). Letters of Indemnity (LOI) provided by Charterers under these circumstances are not legally enforceable.

A shipper may instruct the Ship Master to carry an Original Bill of Lading (B/L) in the Ship’s Bag for handing over at the destination port to a Named Consignee. Furthermore, the Ship Master may be requested to issue the shipper with a letter confirming the arrangement, termed Disposal Letter. This procedure was crucial in the days of sailing ships when the cargo-carrying ship could reach the discharging port before any other means of physical communication. However, this procedure become less important when steamships took over and fast mail ships could carry documents much quicker than the tramp ships. Today, this procedure is becoming rare, given the speed and reliability of airmail, but it is still encountered in the Short Sea (Coaster) trades. A relic of those early days, shipping people still issue more than one Original Bill of Lading (B/L) and Non-Negotiable Copy Bill of Lading (B/L). On the Bill of Lading (B/L), above the signature, there is a dotted line where the number set of Bill of Lading (B/L) has to be entered. In the old days, a person could quite understand the despatch of one Original Bill of Lading (B/L) via fast mail package, one in the Ship’s Bag and one held back by the shipper in case the other two became lost. Today, when Letters of Credit (LC) are so frequently involved, the Commercial Banks want all the Original Bill of Ladings (B/L) otherwise they lose their security, so the reason for a set of more than one is something of a historic anomaly. 

 

Releasing Bill of Lading (B/L)

Bill of Lading (B/L) should not be released to Shippers marked Freight Prepaid or incorporating any similar expression indicating that Freight has been paid to the Shipowner or Disponent Owner without that party’s Express Authority so to do. When Freight has not been remunerated, the release of Bill of Lading (B/L) puts the Shipowner in a weak legal position, as the Shipowner may reasonably lose the Right of Lien on the cargo if subsequently this is required to force payment of Freight. Therefore, either Freight should be Fully Prepaid, as indicated on the Bill of Lading (B/L), or alternative wording acceptable to all parties, and the Letter of Credit (LC) arrangements must be found. To give a Charterer the time to make required financial transactions, it is often agreed that Freight is to be paid within so many days of the signing and/or the releasing of Bill of Lading (B/L) by the Shipowner.

 

Cargo Quantity and Condition

Cargo quantity and condition must be satisfactorily and accurately expressed in the Bill of Lading (B/L). 

Usually, the quantity of general or bagged-baled cargoes can be accurately reckoned by Tallymen. Tallymen is appointed and employed by either a Shipowner or Charterer or jointly by both, in which event the Tally-Clerk’s Receipt takes the place of the Mate’s Receipt (MR). With bulk homogeneous cargo there may be a dispute between cargo quantity reckoned by Shore Apparatus and by the calculations of ship’s officers based on a Draft Survey. In some undeveloped ports where Shore Apparatus is unreliable or even non-existent, the ship’s draft measurement is the accepted means of reckoning intaken cargo weight, and the basis therefore of any Bill of Lading (B/L) figure.

Draft Survey should be performed by an Independent Draft Surveyor. Draft Survey should commence with the ship in ballast condition. The difference in the draft when fully laden calculated against the Ship’s Plans and allowing for Bunkers and Fresh Water (FW), etc. provided and consumed in the meantime, will provide a reasonably accurate measurement of cargo loaded. Likewise, a reasonable estimate of cargo on board can be performed even when commencing draft calculations with a laden ship.

If Ship Master observes a substantial discrepancy between Ship Weight Figures and Shore Weight Figures, Ship Master should clause the Bill of Lading (B/L) with Ship Weight Figures if possible, supporting these remarks with an Independent Draft Surveyor’s report or, failing this, certainly, Shipowners should strongly protest over the discrepancy.

The cargo condition may be checked by Tallymen or by Ship’s Officers as loading progresses, and appropriate remarks entered in either Tally-Clerk’s Receipt or Mate’s Receipt (MR), and thereafter in Bill of Lading (B/L). Cargo damage claims can be so high for some cargoes that a fully-fledged Cargo Survey is required. Numerous Protection and Indemnity Clubs (P&I Clubs) insist on Cargo Survey for some cargoes.

Shipowner’s local Protection and Indemnity Club (P&I Club) Representatives may assist in arranging for a respectable Cargo Surveyor to inspect all items presented for loading, recording damages apparent in the cargoes before loading such as indentation or rust, and supporting same with photos.

 

Clean Bill of Lading (B/L)

Many Letter of Credit (LC) dealings request for Clean Bill of Lading (B/L).  Clean Bill of Lading (B/L) expresses that cargoes described therein are in “Apparent Good Order and Condition”; with no additional or alternative wording revealing deficiencies in the cargoes. Unfortunately, challenging though it may be for shippers, a Carrier (Shipowner or Disponent Owner) cannot agree to issue a Clean Bill of Lading (B/L) when cargo is not in good condition, even where Letter of Indemnity (LOI) is offered by the Shippers or Charterers. Bill of Lading (B/L) must accurately reflect the actual condition of the goods, and to do otherwise is to act fraudulently.

Buyers infrequently have the opportunity to inspect the cargo and to assure themselves of its good condition. Usually, Buyers rely upon descriptions of quality and quantity as documented in the Bill of Lading (B/L). Despite a Clean Bill of Lading (B/L) indicating cargo to be unblemished, should goods be defective in some way, the Consignee, as an innocent party to a fraudulent act, has the right to claim redress from the Carrier (Shipowner or Disponent Owner), or to assume that the cargo was damaged at sea, again extremely likely the responsibility of the Carrier (Shipowner or Disponent Owner).

Outstanding supervision must be exercised by the Ship Master and by Ship Agent also to ensure that the Bill of Lading (B/L) incorporates only accurate information as to Cargo Condition, despite pressures and inducements from Shippers or Charterers.

Meanwhile, remarks incorporated should not be of trivial nature covering some insignificant defect normally acceptable in the trade concerned, as this might have the effect of interfering with a Letter of Credit (LC) transaction for no reason.

Unclean (Remarked) Bill of Lading (B/L) for a Letter of Credit (LC) transaction where a Clean Bill of Lading (B/L) is needed, puts the Shipper in a problematic position. The Consignee or Buyer can be informed of the problem, given a copy of a relevant Cargo Survey Report, and maybe renegotiate the purchase price. 

In some circumstances, the issue of a Clean Bill of Lading (B/L) against a Letter of Indemnity (LOI) may be justified where the Buyer is fully aware of the actual condition of the cargo, and where the cargoes will not be resold before the delivery at the port of discharge. However, it should again be noted that such a Letter of Indemnity (LOI) is not legally enforceable.

 

Bill of Lading (B/L) at the Discharging Port

The Carrier (Shipowner or Disponent Owner) should only deliver the cargo to a party who can produce an Original Bill of Lading (B/L) covering the item of cargo claimed. 

The Ship Agent should examine the Bills of Lading (B/L) and confirm it is in good order. When the Ship Agent is satisfied that all is accurate, the Ship Agent issues a Delivery Order in exchange for the Original Bill of Lading (B/L). Afterward, the Consignee presents the Delivery Order to the Port Authority or Terminal Operator and claims release of the cargo concerned.

The Original Bill of Lading (B/L) presented should be stamped, signed, and dated by the Ship Agent, and in doing this Ship Agent is said to have Sighted the Bill of Lading (B/L) on the behalf of the Ship Master. 

The Ship Agent should return the Bill of Lading (B/L) to the Consignee where this is the custom instead of issuing a Delivery Order. The Ship Agent must keep a careful record, as not more than one Original Bill of Lading (B/L) must be Sighted the Bill of Lading (B/L), or more than one Delivery Order be prepared for every set of Bill of Lading (B/L). As an aid to record-keeping in this respect, a copy of the Cargo Manifest may be used, on which to record Sighted the Bill of Lading (B/L).

When the Consignee claims an Original Bill of Lading (B/L) from the Ship’s Bag, the Ship Master or Ship Agent must satisfy themselves with the accurate identity of the Claimant.

In some trades, a Consignee endorses the reverse sides of the Original Bill of Lading (B/L) with confirmation of receipt of cargo, and such Bill of Lading (B/L) is said to be an Accomplished Bill of Lading (B/L). Sometimes, a Shipowner must obtain an Accomplished Bill of Lading (B/L) as a prerequisite for all or part of the Freight.

When a Bill of Lading (B/L) arrives at a discharge port unreasonably late, after a ship’s arrival, a Bill of Lading (B/L) may be said to be a Stale Bill of Lading (B/L). The Stale Bill of Lading (B/L) term is used to describe the Bill of Lading (B/L) presented to a bank for freight collection later than the terms set by a Letter of Credit (LC).

 

Delivery of Cargoes Without Production of an Original Bill of Lading (B/L)

The most serious problem arising at a discharging port regarding the Bill of Lading (B/L) is where for some reason the Bill of Lading (B/L) is unavailable. Usually, such a problem can be overwhelmed by providing the Consignee issues an appropriate Letter of Indemnity (LOI), fully guaranteed by a reputable bank. This Letter of Indemnity (LOI) is kept by the Ship Agent on the Shipowner’s behalf and ultimately exchanged for the Original Bill of Lading (B/L).

The Ship Agent should not delay in exchanging a Letter of Indemnity (LOI) for the properly presented Bill of Lading (B/L) because banks charge quite steeply on a time basis for their counter-signature on such documents.

Letter of Indemnity (LOI) for late arrival of Original Bill of Lading (B/L) must not incorporate any value or time limitation clauses, because the delivery of cargo to someone not entitled to receive it, is a fundamental breach of the Bill of Lading (B/L) contract and therefore positions the Carrier outside the terms of that contract, opening the door to an Action in Tort where the damages are not limited by the Bill of Lading (B/L) Clauses.

 

Types of Bill of Lading (B/L)

1- Clean Bill of Lading (B/L)

Clean Bill of Lading (B/L) is a Bill of Lading (B/L) that is unclaused (unremarked). Therefore, the Clean Bill of Lading (B/L) is a fully negotiable document.

2- Dirty Bill of Lading (B/L) – Foul Bill of Lading (B/L) 

Dirty Bill of Lading (B/L) is a Bill of Lading (B/L) that is in some way claused or dirty. Dirty Bill of Lading (B/L) implies that the cargo loaded on board is not perfect in every condition and therefore the shipowner is safeguarding himself against a Cargo Claim for bad delivery at the discharge port with an appropriate endorsement.

3- Received for Shipment Bill of Lading (B/L) – Custody Bill of Lading (B/L)

Most Bills of Lading (B/L) are issued when the cargo is actually shipped on board the ship. In the liner trades, there is the alternative where cargo is actually received into the custody of the Shipowner or Ship Agent, such as a Wharfinger or Port Authority, and is not actually on board the ship at that particular time. It is called Received for Shipment Bill of Lading (B/L) or Custody Bill of Lading (B/L). If such a Received for Shipment Bill of Lading (B/L) is issued, the Shipper is entitled to demand from the Carrier (Shipowner or Disponent Owner) an endorsement on the Bill of Lading (B/L). Under Uniform Custom and Practice for Documentary Credits (UCP 500), this endorsement must identify the date of shipment and reconfirm the name of the Carrier and the Ship. For example, 

“Shipped on board MV HANDYBULK YAGMUR at New York on 30th June 2022”.

Signed…………………….

Panama Agencies Co as agent for the HandyBulk LLC”

Received for Shipment Bill of Lading (B/L) or Custody Bill of Lading (B/L) is common in the container business where containers or cargo are often taken into the Carrier’s Custody at an inland depot.

4- Shipped Bill of Lading (B/L)

A Shipped Bill of Lading (B/L) is the Bill of Lading (B/L) that is usually issued, particularly for bulk cargo, and documents that the cargo described is actually on board the ship. If the Shipowner has previously issued a Received for Shipment Bill of Lading (B/L) or Custody Bill of Lading (B/L), this must be surrendered when the Shipowner issues the actual Shipped Bill of Lading (B/L) itself. 

Alternatively, the Shipowner can simply endorse the Received for Shipment Bill of Lading (B/L) as above. A Shipped Bill of Lading (B/L) is often, particularly in Letters of Credit (LC), tautologically described as a Shipped on Board Bill of Lading (B/L).

5- Direct Bill of Lading (B/L)

Direct Bill of Lading (B/L) covers the carriage of cargoes in one ship direct from one port to another.

6- Through Bill of Lading Bill of Lading (B/L)

Through Bill of Lading (B/L) is issued where the cargo will only be carried for part of the voyage by the Carrier signing the Bill of Lading (B/L). The rest may be overland transport or the cargo may be transshipment into another ship. The essence of a Through Bill of Lading (B/L), as opposed to a Combined Transport Bill of Lading (B/L), is that with a Through Bill of Lading (B/L) the Carrier signing it is only responsible as a Principal for his part of the carriage and acts as an Agent for the shipper for the other parts.

7- Combined Transport Bill of Lading (B/L)

Combined Transport Bill of Lading (B/L) is issued when the cargo is carried by more means than the ship itself. Combined Transport Bill of Lading (B/L) is mainly used in the Container Business when the different modes of the carriage can be especially complicated. For instance, the Carrier could take delivery of a container at the shipper’s premises, truck it to a railway terminal, rail to the port, ship it on board a Feeder Containership, tranship it onto the Ocean Containership and then repeat all that in reverse at the discharging destiny. With a Combined Transport Bill of Lading (B/L) the Carrier signing it takes responsibility as a Principal from start to finish but incorporates limitations of liability for the different sections according to the appropriate international conventions such as Hague-Visby for the sea transportation, C.I.M. convention for rail transportation, C.M.R. for the road transportation.

8- Order Bill of Lading (B/L)

Order Bill of Lading (B/L) should not be confused with an Open Bill of Lading (B/L) which shows No Consignee at all; such would be a most unsatisfactory document as it would be like a blank cheque. 

Order Bill of Lading (B/L) is very common undoubtedly because of its value in the Letter of Credit (LC) transactions. Order Bill of Lading (B/L) can best be compared with a cheque drawn to cash and once Order Bill of Lading (B/L) is endorsed by the Shipper it becomes in effect a Bearer Document. This sounds like an extremely dangerous practice as, theoretically, if someone dropped the Order Bill of Lading (B/L) in the street, someone picking Order Bill of Lading (B/L) up could claim the cargo; in fact, the procedure functions remarkably well.

The banks in a Letter of Credit (LC) transaction do not want to assume the liabilities and responsibilities of a Consignee but simply want to hold the Original Bill of Lading (B/L) as security. Thus, instead of the bank being named as the Consignee and then endorsing it over to the actual importer, the bank insists on the section of the Original Bill of Lading (B/L) marked Consignee having just the words To Order written in, and the Shipper’s endorsement on the back. When all is in order the Bill of Lading (B/L) is handed to the importer who can claim the cargo from the Carrier. Most Order Bill of Lading (B/L) has a space for a Notify Party to be inserted. Usually, Notify Party is the actual importer, and putting the actual importer’s name there ensures that the actual importer knows when to contact the bank. Incidentally, there is no actual legal obligation on a line to pass information to the Notify Party.

9 – Liner Bill of Lading (B/L) 

Liner Bill of Lading (B/L) is still only Evidence of a Contract it carries far more detail than a Charterparty Bill of Lading (B/L) because the reverse of a Liner Bill of Lading (B/L) incorporates the complete text of the contract of carriage. With a Charterparty Bill of Lading (B/L) such wording is not required as the contract is the Charterparty itself. Therefore, it is only required to incorporate a few clauses into the Charterparty Bill of Lading (B/L). 

10- Sea Waybill

In the liner trades, utilizing a Sea Waybill instead of a Bill of Lading (B/L) is becoming more prevalent. Sea Waybill has been in use for Air Freight practically since the commencement of carrying cargoes by air. A Sea Waybill looks very identical to a Bill of Lading (B/L). A Sea Waybill has two main functions, namely a Receipt for cargo and Evidence of a Contract. What a Sea Waybill does not have is any negotiability. A Sea Waybill is not a Document of Title (DOT). This indicates that the cargoes can only be delivered by the Carrier to the Named Consignee.

A Sea Waybill has no disadvantage at all if the Named Consignee has no intention of selling the cargo during the transportation or if a Letter of Credit (LC) is not involved. A Sea Waybill’s mere lack of Negotiability is one of Sea Waybill’s advantages because there can be no doubt or error when it comes to delivering the cargo to the right consignee. Not being proof of title, it does not matter if the ship arrives before the documents. Today, most Sea Waybills are in electronic form. Sea Waybill was not considered when most Bill of Lading Acts was written into statute books. In the United Kingdom, the Carriage of Goods by Sea Act 1992 has replaced the Bill of Lading Act 1855 and included Seaway Bills in its provision.

 

Time Charter and Bill of Lading (B/L) 

In Voyage Charter, the Charterparty is quite obviously between the Shipper and the Shipowner. Nevertheless, in Time Charter, the Shipper will not necessarily be aware of the relationship between the Shipowner and the Time Charterer (Disponent Owner). Therefore, the law recognizes that in certain cases the Charterparty signed between the Shipper and the Time Charterer (Disponent Owner) will also involve the Shipowner. 

Almost always the Time Charterer (Disponent Owner) has the same liberties as the Shipowner to make Charterparty terms with Shippers and this means that Freight Prepaid, Freight Payable, or Received for Shipment Bill of Lading (B/L) may be issued as well as Through Bill of Lading (B/L) that impose more liabilities on the issuer and the Shipowner.

When relationships between the Time Charterer (Disponent Owner) and the real Shipowner are good, a few problems may arise. However, in cases where the Shipowner has chartered out the ship to an unsubstantial or unethical Time Charterer (Disponent Owner), there are considerable potential pitfalls for the Shipowner. The worst scenario is if the Time Charterer (Disponent Owner) defaults on paying Hire Money. Then the Shipowner will most likely withdraw the ship from the charter and take over the operation of the ship. 

If the ship has cargo on board at the withdrawal time the Shipowner will need to determine what types of Bill of Lading (B/L) have been issued by the Time Charterer (Disponent Owner). Furthermore, the Shipowner will need to establish what payments, if any, the Shipper has paid over to the Time Charterer (Disponent Owner). If a “Freight Payable at Destination” Bill of Lading (B/L) has been issued, then the Shipowner can request the Freight from the Shipper before delivering the cargo. 

If the Bill of Lading (B/L) is “Freight Payable as per Charterparty” or Freight Payable within a certain period after loading, the Shipowner may be lucky enough to discover that payment had not yet been made, in this case, the Shipowner can demand the Freight or unfortunate find that the Shipper had sent the money to the Time Charterer (Disponent Owner).

If a “Freight Prepaid Bill of Lading (B/L)” has been issued, the Shipowner will be unlikely to recover any of the freight for the cargo. However, the Shipowner is legally obliged to continue the voyage and deliver the cargo to a Bill of Lading (B/L) Holder at the discharging port. The Shipowner has to pay the expensive port costs, and the bunkers required to complete the voyage. The Shipowner can claim these costs back from the Time Charterer (Disponent Owner). Usually, the Time Charterer (Disponent Owner) would hardly be able to settle the Shipowner’s claims.

If the cargo in question belongs to the defaulting Time Charterer (Disponent Owner), the Shipowner will be able to exercise a Lien on Cargo for unpaid daily hire and any associated costs in completing the voyage. 

 

Mate’s Receipt (MR)

When cargo is loaded onboard the ship, the shipper is entitled to be given some declaration of the receipt of that cargo. Traditionally, that was a Mate’s Receipt (MR) signed by a Ship’s Officer incorporating remarks as to the nature, quantity, and condition of the cargo concerned. 

Mate’s Receipt (MR) may be prepared before commencement of loading, thereby providing advance information for Ship’s Officers about the cargo to be loaded, assisting Stowage Plans (SP), and creating a suitable means of documenting a cargo’s good condition, or remarking upon cargo’s defects. Furthermore, Mate’s Receipt (MR) forms proper evidence of cargo quantity and quality.

Mate’s Receipts (MR) are simply receipts and not Documents of Title (DOT) that can be traded commercially. Mate’s Receipts (MR) are delivered to Shippers in return for cargo loaded and subsequently tendered to the Ship Master or the Shipowner’s Agents in return for a signed Bill of Lading (B/L).

In many ports, Mate’s Receipt (MR) is issued by the ship’s command and replaced by a document issued either by the Port Authority or a shore-based Tallying Company specifying the cargo loaded on board. When the Mate’s Receipt (MR) is not issued, the Ship’s Officers must inform the cargo quantify or quality to the Ship’s Agent so that suitable clauses may be placed on the Bill of Lading (B/L).

 

Bills of Lading (B/L)

In the shipping business, Bills of Lading (B/L) are critical documents. Bills of Lading (B/L) are such critical documents that most maritime disputes are about where and how Bills of Lading (B/L) apply. Bills of Lading (B/L) have three (3) functions:

  • Bills of Lading (B/L) are Receipt for the goods on board the ship
  • Bills of Lading (B/L) are Evidence of a Contract for carriage
  • Bills of Lading (B/L) is a Document of Title (DOT) with important financing functions

Parties to a Bills of Lading (B/L) are:

  • Carriers
  • Shippers

Commonly, the Carrier is the Shipowner or Time Charterer (Disponent Owner) of the ship. The Carrier enters into a Charterparty (Contract of Carriage) with the Shipper. 

Shipper is a person or company that is contracting with a Carrier to carry the cargoes. Identification of the Carrier is paramount because of significant consequences for liability and limitations of liability under applicable law. 

Usually, the Ocean Carrier issues the Bills of Lading (B/L). Bills of Lading (B/L) are usually printed on Standard Forms.

Ocean Transportation Intermediary (OTI) like a Non-Vessel Operating Common Carrier (NVOCC) can be considered as a Carrier. From the perspective of Shippers, Non-Vessel Operating Common Carrier (NVOCC) can be considered as a Carrier. From the perspective of a ship operating common carrier, Non-Vessel Operating Common Carrier (NVOCC) can be considered as a Shipper. Non-Vessel Operating Common Carrier (NVOCC) has the same obligations and defenses as any other carrier regarding its customers.

Ocean Transportation Intermediary (OTI) such as a Freight Forwarder cannot be considered a Carrier. Freight Forwarder is a service provider. Freight Forwarder does not take responsibility for shipments. So, Freight Forwarder is not a Carrier. Usually, Freight Forwarder is the agent of the Shipper. Freight Forwarder arranges carriage with the carrier on the Shipper’s behalf.

Governing Law of ocean Bills of Lading (B/L) in the United States:

  • Harter Act 1893
  • Carriage of Goods by Sea Act (COGSA) 1937
  • Federal Bills of Lading Act 1916 (Pomerene Act)

Federal Bills of Lading Act 1916 (Pomerene Act) applies to Bills of Lading (B/L) that are utilized in Interstate and the United States Foreign Commerce. Federal Bills of Lading Act 1916 (Pomerene Act) provides a general United States legal framework for Bills of Lading (B/L).

Harter Act 1893 applies by force of law to the United States IntercoastalCoastwise, and Inland Waters voyages. 

Carriage of Goods by Sea Act (COGSA) 1937 applies by force of law concerning trade between United States Ports and Foreign Ports and preempts the Harter Act from the point at which the cargo is loaded onto the ship until the point when the cargo is discharged from the ship. 

Instead of Harter Act, parties can also decide to incorporate the Carriage of Goods by Sea Act (COGSA) by contract for the United States intercoastal, coastwise, and inland waters voyages.

Federal Bills of Lading Act 1916 (Pomerene Act) applies to Bills of Lading (B/L) used in United States interstate transportation and for voyages from United States ports to foreign ports.

Hague Rules

Hague Rules refer to an International Convention. In the United States, Hague Rules entered force in 1937. Hague Rules intended to establish uniformity in international shipping. The United States adopted the Hague Rules through the enactment of the Carriage of Goods by Sea Act (COGSA). Most maritime nations and United States trading partners have adopted the Hague Rules. 

Hague Rules were amended in 1968. In 1968, Hague Rules amendments were adopted in the city of Visby. Hence, amended Hague Rules are usually referred to as Hague-Visby Rules

Hamburg Rules

In 1978, Hamburg Rules were adopted by United Nations (UN). Hamburg Rules have not been adopted by many maritime nations and United States.

Carriage of Goods by Sea Act (COGSA) applies to Inland Transportation. Even though the Carriage of Goods by Sea Act (COGSA) only applies by law when cargo is in the custody of the ship, parties may contractually extend the Carriage of Goods by Sea Act (COGSA) to other parts of the voyage, including the inland transportation.

Negotiable Bills of Lading (B/L) Vs Non-Negotiable Bills of Lading (B/L)

The difference between Negotiable Bills of Lading (B/L) and Non-Negotiable Bills of Lading (B/L) is that Negotiable Bills of Lading (B/L) is a Document of Title (DOT) to the cargoes. Holder of Bills of Lading (B/L) holds title to the cargo identified in Bills of Lading (B/L). Non-Negotiable Bills of Lading (B/L) is not a Document of Title (DOT).

Federal Bills of Lading Act 1916 (Pomerene Act) expresses that Negotiable Bills of Lading (B/L) is one that states that the cargoes are to be delivered to the Order of a Consignee. On the other hand, Non-Negotiable Bills of Lading (B/L) specifies the Name of the Consignee and indicates on its face that it is Non-Negotiable or Not Negotiable.

Shipper can endorse a Negotiable Bills of Lading (B/L). Shipper can negotiate Bills of Lading (B/L) to a third party. Then, Carrier becomes responsible as if that third party was the original shipper. Ocean Carrier must deliver the cargoes to the Named Consignee on Non-Negotiable Bills of Lading (B/L). For Negotiable Bills of Lading (B/L), Ocean Carrier must deliver the cargoes to the person or company whom can produce the Original Bills of Lading (B/L). Receiver is either the original recipient of the Bills of Lading (B/L) or a third party to whom Bills of Lading (B/L) has been negotiated. Non-Negotiable Bills of Lading (B/L) is also referred to as Straight Bills of Lading (B/L).

Through Bills of Lading (B/L) covers both ocean and inland transportation of cargo. Through Bills of Lading (B/L) that includes a substantial carriage of cargoes by sea is a Maritime Contract.

According to Federal Bills of Lading Act 1916 (Pomerene Act), unless Ocean Carrier has a lawful excuse, Ocean Carrier must deliver cargoes covered by Bills of Lading (B/L) on demand of the Named Consignee in Non-Negotiable Bills of Lading (B/L) or the holder of Non-Negotiable Bills of Lading (B/L) for the cargoes when the consignee holds Bills of Lading (B/L).

According to Carriage of Goods by Sea Act (COGSA), Ocean Carrier must:

  • Make the ship Seaworthy
  • Adequately man, equip, and supply the ship
  • Make the holds, refrigerating and cooling rooms, and all other parts of the ship in which cargoes are carried, fit and safe for their reception, carriage, and preservation of cargoes
  • Ocean Carrier shall properly and carefully load, handle, stow, carry, keep, care for cargoes
  • Ocean Carrier shall properly and carefully discharge the cargoes carried

Carriage of Goods by Sea Act (COGSA) states that after receipt of cargoes into the care or custody of Ocean Carrier, Ocean carrier upon demand by the Shipper must issue Bills of Lading (B/L) that is incorporating:

  • Marks required to identify the cargoes being shipped
  • Number of packages or pieces
  • Quantity or Weight of cargoes shipped
  • Apparent Order and Condition of the cargoes 

Naturally, courts have specified that Bills of Lading (B/L) are contracts of adhesion where the Shipper and other affected parties have no option but to accept Ocean Carrier’s form. Therefore, Bills of Lading (B/L) are generally strictly construed against Ocean Carrier. If the wording in the Bills of Lading (B/L) is ambiguous and is susceptible to two reasonable and practical interpretations, then courts will enforce plain meaning of the Bills of Lading (B/L).

Bill of Lading (B/L)

There are two types of contract for the carriage of cargoes by sea: 

1- Contract evidenced by a Bill of Lading (B/L) 
2- Charterparty

Although these are two separate contracts, a ship carrying cargo under a Bill of Lading (B/L) is often also running under a Charterparty. 

A Bill of Lading (B/L) is a contract between a Carrier (Shipowner or Time Charterer) and a Shipper of cargoes. A Bill of Lading (B/L) expresses that the Carrier undertakes to carry the Shipper’s cargoes to the destination in return for a determined amount of Freight payment. 

A Bill of Lading (B/L) is signed by or on behalf of the Shipowner. A Bill of Lading (B/L) expresses the terms on which those cargoes have been delivered to and received by the Shipowner. 

A Bill of Lading (B/L) also incorporates the terms on which the cargoes have been shipped.

If the Bill of Lading (B/L) is negotiable, the Bill of Lading (B/L) will serve as a Document of Title (DOT) to the cargoes. 

Most shipping lines have their in-house Bill of Lading (B/L) Forms, and once they are signed by the Carrier, the Bill of Lading (B/L) will be given over to the Shipper. 

A Clean Bill of Lading (B/L) is unclaused, which indicates it is a fully Negotiable Document.

A Dirty Bill of Lading (B/L) is claused, which indicates that the cargo is not in perfect condition. 

A Bill of Lading (B/L) has three (3) functions: 

1- A Bill of Lading (B/L) is a Receipt of the cargo shipped. A Bill of Lading (B/L) is both a receipt for the quantity of cargoes but also provides evidence of the condition of those cargoes. Clean Bill of Lading (B/L) or Claused Bill of Lading (B/L)

2- A Bill of Lading (B/L) is a Document of Title (DOT). A Bill of Lading (B/L) is a negotiable document

3- A Bill of Lading (B/L) is Evidence of the contract of carriage. The Bill of Lading (B/L) is not the contract but is evidence of a valid contract of carriage of cargoes by sea

A Bill of Lading (B/L) is not issued until the cargo is shipped on board, and the Shipper as the owner of the cargoes becomes jointly and severally liable to the Carrier (Shipowner or Disponent Owner) for any nonpayment of Freight due. 

A Bill of Lading (B/L) is a Document of Title (DOT) and is a Negotiable Document. Therefore, a Bill of Lading (B/L) Holder (the person or company in possession of the Bill of Lading (B/L) may sell the

cargoes to another person, even during transit of the cargoes. The Bill of Lading (B/L) is then endorsed and the Endorsee is entitled to the cargoes. The title is the right to ownership of property with or without possession. 

Many traders think that in today’s business circumstances the Bill of Lading (B/L) may not be the most appropriate document. Therefore, other documents, such as the Sea Waybill and the Combined Transport Bill of Lading (B/L), are becoming more common today. 

A Sea Waybill is not a Document of Title (DOT), but it bears the name of the Consignee who must only identify himself to take delivery of the cargo. A Sea Waybill is not a negotiable document; therefore a Sea Waybill is not accepted by the banks. 

The purpose of the Sea Waybill is to avoid delays to the ship and cargoes which may occur when the Bill of Lading (B/L) is late in arriving at the discharging port. 

Combined Transport Bill of Lading (B/L) covers door-to-door transport by several modes of transportation. Usually, the Combined Transport Bill of Lading (B/L) is used by Liner Companies that choose to propose a full service to their clients. 

In a Through Bill of Lading (B/L), a shipment of cargoes starts from and or finishes its voyage at a place at which the main carrying ship does not call. 

A valid Bill of Lading (B/L) incorporates the following details:

1- Date of Bill of Lading (B/L) 
2- Vessel Name
3- Description of Cargo
4- Name of the Shipper and the Consignee
5- Loading and Discharging Port
6- Payment of Freight
7- Number of Bill of Lading (B/L) Signature
8- Terms of carriage

Letter of Indemnity (LOI)

Occasionally, Original Bills of Lading (B/L) are unavailable at a Discharging Port. This problem can be overcome if the Consignee issues an appropriate Letter of Indemnity (LOI) that is guaranteed by a bank. 

Generally, Carriers (Shipowners or Disponent Owners) do not deliver cargoes without the production of the fully negotiable Original Bill of Lading (B/L). Nevertheless, a Carrier may decide to deliver the cargo, if a Carrier is given a Letter of Indemnity (LOI) from a reliable Consignee. This is because if the Carrier delivers the cargoes without production of the Original Bill of Lading (B/L), that Carrier may face a claim for the value of the cargo from the Bill of Lading (B/L) Holder if the person or company who takes delivery of the cargoes is not the same. 

A Letter of Indemnity (LOI) guarantees that contractual conditions will be met failure to which a monetary payment will be made. A Letter of Indemnity (LOI) is issued by the bank to the Consignee and releases the Carrier from obligation in case the cargo is delivered to the wrong party without the production of the Original Bill of Lading (B/L).

 

Electronic Bill of Lading (B/L)

BIMCO (Baltic International Maritime Council) published Electronic Bill of Lading Standard for Bulk Shipping. Currently, less than 2% of world trade is carried on Electronic Bills of Lading (B/L) due to the absence of available standards and interoperability. To boost the adoption of digital trade documents in shipping, BIMCO (Baltic International Maritime Council) published an Electronic Bill of Lading (B/L) Standard.

The BIMCO (Baltic International Maritime Council) Electronic Bill of Lading (B/L) Standard is a structured dataset consisting of 20 predefined data fields that are routine to Bulk Shipping Bills of Lading (B/L). 

BIMCO (Baltic International Maritime Council) is a founding member of the FIT (Future International Trade) Alliance. FIT (Future International Trade) Alliance is a cross-industry partnership that is operating concurrently to create Open Standards for Electronic Trade Documents. 

BIMCO’s (Baltic International Maritime Council’s) eBL Standard is aligned with the United Nations/CEFACT Multimodal Transport Reference Data Model as well as the standards produced by FIT (Future International Trade) Alliance members. 

The members of the FIT (Future International Trade) Alliance are BIMCO (Baltic International Maritime Council), DCSA, FIATA, the International Chamber of Commerce (ICC), and SWIFT.