Bills of Lading

In shipping business, Bills of Lading (B/L) is a key document. Bills of Lading (B/L) is such an important document that most of the maritime disputes are about where and how Bills of Lading (B/L) apply. Bills of Lading (B/L) has three functions:

  • Bills of Lading (B/L) is a receipt for the goods on board the ship
  • Bills of Lading (B/L) is evidence of a contract for carriage
  • Bills of Lading (B/L) is a document of title with important financing functions

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

  • Carriers
  • Shippers

Generally, carrier is usually ship owner or a charterer of the ship. Carrier enters into a contract of carriage with shipper. Shipper is person or company that is contracting with carrier to carry shipper’s goods. Identification of carrier is crucial because of important consequences for liability and limitations of liability under applicable law. Usually, ocean carrier issues the Bills of Lading (B/L). Bills of Lading (B/L) are usually printed on standard form documents.

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 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 with regard to its customers.

Ocean Transportation Intermediary (OTI) such as a Freight Forwarder cannot be considered as carrier. Freight Forwarder is a service provider. Freight Forwarder does not take responsibility for shipments. So, Freight Forwarder is not 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 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 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 United States intercoastal, coastwise, and inland waters voyages. Carriage of Goods by Sea Act (COGSA) 1937 applies by force of law with respect to 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 Carriage of Goods by Sea Act (COGSA) by contract with respect to 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 refers to an international convention. In United States, Hague Rules entered force in 1937. Hague Rules intended to establish uniformity among international shipping. United States adopted the Hague Rules through enactment of 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 usually referred to as Hague-Visby 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) apply to inland transportation. Even tough, Carriage of Goods by Sea Act (COGSA) only applies by law when cargo is in the custody of the ship, parties may contractually extend Carriage of Goods by Sea Act (COGSA) to other parts of the voyage, including the inland transportation.

Difference between Negotiable Bills of Lading (B/L) and Non-Negotiable Bills of Lading (B/L). Negotiable Bills of Lading (B/L) is a document of title to the goods. 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.

Federal Bills of Lading Act 1916 (Pomerene Act) states that Negotiable Bills of Lading (B/L) is one that states that the goods 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 goods to the consignee named on Non-Negotiable Bills of Lading (B/L). For Negotiable Bills of Lading (B/L), Ocean Carrier must deliver the goods to the person or company whom can produce or handle original bill of lading. Cargo receiver is either the original recipient of the Bills of Lading (B/L) or another person or company (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 goods 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 goods covered by Bills of Lading (B/L) on demand of the consignee named in Non-Negotiable Bills of Lading (B/L) or the holder of Non-Negotiable Bills of Lading (B/L) for the goods when the consignee holds Bills of Lading (B/L).

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

  • make the ship seaworthy
  • properly man, equip, and supply the ship
  • make the holds, refrigerating and cooling chambers, and all other parts of the ship in which goods are carried, fit and safe for their reception, carriage, and preservation of cargo
  • ocean carrier shall properly and carefully load, handle, stow, carry, keep, care for
  • ocean carrier shall properly and carefully discharge the goods carried

Carriage of Goods by Sea Act (COGSA) provides that after receipt of goods into the care or custody of ocean carrier. Ocean carrier upon demand by the shipper must issue Bills of Lading (B/L) that is showing:

  • marks necessary to identify the goods being shipped
  • number of packages or pieces
  • quantity or weight of goods shipped
  • apparent order and condition of the goods

Generally, courts have determined that Bills of Lading (B/L) are contracts of adhesion where the shipper and other affected parties have no choice but to accept ocean carrier’s form. Hence, Bills of Lading (B/L) are generally strictly construed against ocean carrier. If the language in the Bills of Lading (B/L) is ambiguous and is susceptible to two reasonable and practical interpretations, then court will enforce plain meaning of the Bills of Lading (B/L).