Bill of lading

Admiralty law
History
Ordinamenta et consuetudo maris Amalfian Laws Hanseatic League
Features
Freight rate · General average Marine insurance · Marine salvage Maritime lien · Ship mortgage Ship registration  · Ship transport Shipping
Contracts of affreightment
Bill of lading · Charter-party
Types of charter-party
Bareboat charter · Demise charter Time charter · Voyage charter
Parties
Carrier · Charterer · Consignee Consignor · Shipbroker · Ship-manager Ship-owner · Shipper · Stevedore
Judiciary
Admiralty court Vice admiralty court
International conventions
Hague-Visby Rules Hamburg Rules Rotterdam Rules UNCLOS Maritime Labour Convention
International organisations
International Maritime Organization London Maritime Arbitrators Association
v · d · e

A bill of lading (BL - sometimes referred to as BOL or B/L) is a document issued by a carrier to a shipper, 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 thorough 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 verb "to lade" which means to load a cargo onto a ship or other form of transportation.^[1]

Contents

A bill of lading can be used as a traded object. The standard short form bill of lading is evidence of the contract of carriage of goods and it serves a number of purposes:

• It is 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 (i.e. the short form simply refers to the main contract as an existing document, whereas the long form of a bill of lading (connaissement intégral) issued by the carrier sets out all the terms of the contract of carriage;
• It is a receipt signed by the carrier confirming whether goods matching the contract description have been received in good condition (a bill will be described as clean if the goods have been received on board in apparent good condition and stowed ready for transport); and
• It is also a document of transfer, being freely transferable but not a negotiable instrument in the legal sense, i.e. it governs all the legal aspects of physical carriage, and, like a cheque 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, irrespective of whom the actual holder of the B/L, and owner of the goods, may be at a specific moment.

The BL must contain the following information:

• Name of the shipping company;
• Flag of nationality;
• Shipper's name;
• Order and notify party;
• Description of goods;
• Gross/net/tare weight; and
• Freight rate/measurements and eighteenth of goods/total freight

While an air waybill (AWB) must have the name and address of the consignee, a BL may be consigned to the order of the shipper. Where the word order appears in the consignee box, the shipper may endorse it in blank or to a named transferee. A BL endorsed in blank is transferable by delivery. Once the goods arrive at the destination they will be released to the bearer or the endorsee of the original bill of lading. The carrier's duty is to deliver goods to the first person who presents any one of the original BL. The carrier need not require all originals to be submitted before delivery. It is therefore essential that the exporter retains control over the full set of the originals until payment is effected or a bill of exchange is accepted or some other assurance for payment has been made to him. In general, the importer's name is not shown as consignee. The bill of lading has also provision for incorporating notify party. This is the person whom the shipping company will notify on arrival of the goods at destination. The BL also contains other details such as the name of the carrying vessel and its flag of nationality, the marks and numbers on the packages in which the goods are packed, a brief description of the goods, the number of packages, their weight and measurement, whether freight costs have been paid or whether payment of freight is due on arrival at the destination. The particulars of the container in which goods are stuffed are also mentioned in case of containerised cargo. The document is dated and signed by the carrier or its agent. The date of the BL is deemed to be the date of shipment. If the date on which the goods are loaded on board is different from the date of the bill of lading then the actual date of loading on board will be evidenced by a notation the BL. In certain cases a carrier may issue a separate on board certificate to the shipper.

Main types of bill

Straight bill of lading

Bill of lading for casks of wine shipped by United States Consul to Lisbon, Portugal, William Jarvis to President Thomas Jefferson.

In this importer/consignee/agent is named in the bill of lading, it is called straight bill of lading. It is a document, in which a seller agrees to use a certain transportation to ship a good to a certain location, where the bill assigned to a certain party. It details to the quality and quantity of goods..

Order bill of lading

This bill uses express words to make the bill negotiable, e.g. it states that delivery is to be made to the further order of the consignee using words such as "delivery to A Ltd. or to order or assigns". Consequently, it can be indorsed (legal spelling of endorse, maintained in all statute, including Bills of Exchange Act 1909 (CTH)) by A Ltd. or the right to take delivery can be transferred by physical delivery of the bill accompanied by adequate evidence of A Ltd.'s intention to transfer.

Bearer bill of lading

This bill 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. memo bill of lading: Needed for documents &revenue purpose. Express bill of lading: Non negotiable bill of lading consigned directly to third party.Hard copy is not required by shipper.

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 (SBL), i.e. when we hand over the bill of lading we surrender title to the goods and our power of sale over the goods.

A clean bill of lading states that the cargo has been loaded on board the ship in apparent good order and condition. Such a BL will not bear a clause or notation which expressively declares a defective condition of goods and/or the packaging. Thus, a BL that reflects the fact that the carrier received the goods in good condition. The opposite term is a soiled bill of lading, which reflects that the goods are received by the carrier in anything but good condition.

Other terminology

A sea or air waybill is a non-negotiable receipt issued by the carrier. It is most common in the container trade either where 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 (e.g. because 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.

The UK's Carriage of Goods by Sea Act 1992 creates a further class of document known as a ship's delivery order which contains an undertaking to carry goods by sea but is neither a bill nor a waybill.

A straight bill of lading by land or sea, or sea/air waybill are not documents that can convey title to the goods they represent. They do no more than require delivery of the goods to the named consignee and (subject to the shipper's ability to redirect the goods) to no other. This differs from an "order" or "bearer" bill of lading which are possessory title documents and negotiable, i.e. they can be endorsed and so transfer the right to take delivery to the last endorsee. Nevertheless, bills of lading are "documents of title", whether negotiable or not, under the terms of the Uniform Commercial Code. Definitions of "Document of Title" and "Bill of Lading"

Multi-modal Transport Documents

The advent of unitisation in air and sea transportation brought about many innovations in international transportation of goods. Multi-modal or combined transport is one such innovation. Cargo today can be moved from an inland freight station in the exporting country to an inland destination in the importing country. Goods may be picked up and transported using different modes of transport. E.g. a consignment of garments may be containerised at a factory in Mysore, customs cleared at ICD Bangalore, moved by rail to Cochin, by sea to Dubai, by air to Frankfurt and road to Düsseldorf, all under a single transport document. In such an operation, involving one or more land legs and/or air or sea legs, one carrier makes itself responsible for the entire transport operation. The contracting carrier is referred to as a multi-modal or a combined transport operator (MTO). He is liable in contract to the shipper if the goods are damaged at any stage of the carriage. The multi-modal transportation document may be issued either in non-negotiable or negotiable form. The multi-modal transportation document (MTD), whether negotiable or non-negotiable, is prima facie evidence of the MTO taking charge of the goods for transportation. MTDs are of two types, the COMBIDOC evolved by the Baltic International Maritime Council (BIMCO) and FBL or FIATA MT Bill of Lading evolved by the International Federation of Freight Forwarders' Associations (FIATA). This document (FBL) has been approved by the International Chamber of Commerce (ICC) for the purpose of documentary credit. FIATA has evolved specific norms for the use of FBLs. Having seen what is covered by sea, air and multimodal transport let us look at other modes including courier and charter movements. The ICC has a publication called the Uniform Customs and Practices, UCP 600(UCP 500 and UCP 400 were the earlier editions) which among other things deals with various transport documents, including those we have already looked at. Articles 20 to 24 of the UCP 600 deal with these documents.

A sample of the issues

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 the consignee the same rights of action held by the consignor. This enables most of the more 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 transborder, 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 (since that is the most convenient place — the forum conveniens) but that the New York courts will apply Greek law as the lex causae to determine the extent of the carrier's liability.

Examples

• Southern Railway Company bill of lading (1906): front side, back side

BoL and fraud

^[2][3][4][5]

Introduction

Because of their nature, Bills of Lading (BoL) present numerous opportunities for fraudsters to manipulate the commodity trades e.g. false certification of the loading date. But also in relation to the number of original documents fraud is possible.

Background

Bills of lading are normally issued in sets of three or six originals. Treating each BoL as an original leaves it open to misuse because presentation of part of a set is enough. The carrier delivers the cargo against presentation of the bill of lading and it is not necessary for the holder of the bill of lading to present the entire set. The carrier´s duty is to deliver goods to the first person who presents any one of the original BoL. Delivery of the cargo against one of a set would cause no problems if the endorsee had the complete set. The endorsee will therefore ensure that he receives the full set of the BoL with all originals. If he receives an incomplete set of documents it can not be excluded that a third party can deliver the goods. Despite the tendency to fraud and the developments in communication technology the using of bill of ladings in sets continues. Why this practice goes on these days is unclear.

Historical review

Already in 1882 Lord Blackburn suggested that making a bill of lading in parts would be confusion unless the delivery of one part of the bill of lading had the same effect as the delivery of all parts would have had. He also noticed that making only one bill of lading which should be the sole document of title (master document) and taking copies, certified by the master to be true copies which would suffer for every legitimation purpose (e.g. for an appraisal) for which the other parts of the bill can be applied, but could not be used for the purpose of pretending to be the holder of a bill already parted with.

Liability

In the event of misdelivery the carrier will not be liable if he has no notice of other endorsements. There is no duty on the carrier to make inquiries of the unendorsed bill of lading holder whether any assignments have taken place.

The House of Lords already said in 1882: the warehouseman was not liable for misdelivery. Case: Glyn Mills v. East and West India Dock Co. 1882:

• a set of three bills of lading was issued, named Cottam and Co as the consignees. Freight was to be payable on arrival of the goods at London. Cottam and Co endorsed one bill of lading as security to Glyn Mills and kept the other two bills in the set. When the goods arrived in London, they were stored, an Cottam and Co got delivery of the goods from the warehouse on presentation of the unendorsed bill of lading. Glyn Mills sued the warehouseman for misdelivery.

“It would be neither reasonable nor equitable nor in accordance with the terms of such a contract that an assignment of which the shipowner has no notice should prevent a bona fide delivery under one of the bills of lading, produced to him by the person named on the face of it as entitled to delivery (in the absence of assignment) from being a discharge to the shipowner. Assignment being a change of title since the contract, is not to be presumed by the shipowner in the absence of notice.”

Wheras a carrier delivers cargo without presentation a bill of lading the carries violates the contract. E.g. the carrier discharged the goods to their agents, who delivered the goods against an indemnity from the bank. No bill of lading was presented. The breach is regarded as a fundamental breach. He will lose the benefit of a general exception clause in the contract of carriage because one of the key provisions is the promise not to deliver the cargo other than in return for an original bill of lading.

BoL and electronic data interchange (EDI)

The impact of information technology and using paperless documents^[2][3][4][5]

Introduction

The use of electronic communication in international commercial transactions has received considerable attention in recent years. The term ELECTRONIC DATA INTERCHANGE is commonly used to designate systems of computer to computer exchange of information in predetermined formats.

The advantages are e.g.:

• saving time by speeding up processes of documents transfer and transaction completion;
• the ease doing business over long distances;
• the reduction of costs.

Background

A well known EDI system is e.g. SWIFT the Interbank Financial Telecommunications, the transmission of bank to bank financial transaction messages.

Suitable amendments have made in trade terms to accommodate the use of electronic bills of lading:

• Contracts conclude electronically are now recognized in many jurisdiction;
• Formal requirements for a contractual document such as a signature have been made possible as a result of legislation modeled on the UNICTRAL Model Law on Electronic Signatures;
• The CMI Rules on electronic Bills of lading and the BOLERO Rules have made use of electronic bills of lading a reality.

 

Advantages and disadvantages of using electronic documents

Electronic bills of lading are reducing:

• problems created by late arrival of documents at the port of discharge;
• fraud, because bills of lading will no longer be sent in sets of 3 or 6 originals.

But the using of open networks such as Internet enhance fraud because of computer misuse. The successful implementation of paperless documents is only possible if:

• it is nearly impossible for hackers or fraudsters to gain access;
  • e.g. using digital cryptology;
  • Organisations like OECD or EU are continuously considering policy issues with a view to arriving at a solution that makes electronic commerce more secure.
• deterrence based on law;
  • this legislation, like the Computer Misuse Act 1990 in the UK, carries criminal sanction in the event of computer misuse; but is not clear, if there is any success in decreasing computer misuse;
  • the Council of Europe with the intention of harmonizing the law on computer misuse has draftet the International Convention on Cybercrime which hopefully will have wide impact.
• there is a greater co-operation between countries to exchange information about cross border data flow;
  • this depends on the countries willingness to participate.
• the laws allow computer based documents for the case of evidence;
  • e.g. the UNCITRAL Model Law on electronic Commerce, on which many jurisdictions have based their legislation allows computer generated evidence in Art. 9.

The CMI Rules on electronic BoL

Short Overview

The model rules for Electronic Bills of Lading were adopted by the Comité Maritime International (CMI) in 1990.The main feature of the CMI Rules is the creation of an electronic BoL by the carrier who also acts as an unofficial registry of negotiations.

CMI Rules for electronic bills of lading:

• Art. 1 Scope of Application
• Art. 2 Definitions
• Art. 3 Rules of procedure
• Art. 4 Form and content of the receipt message
• Art. 5 Terms and conditions of the Contract of Carriage
• Art. 6 Applicable Law
• Art. 7 Right of Control and Transfer
• Art. 8 The Private Key
• Art. 9 Delivery
• Art. 10 Option to receive a paper document
• Art. 11 Electronic data is equivalent to writing

The CMI Rules for electronic BoL, like INCOTERMS, need to be incorporated into the contract. After the parties agree that the Rules apply the shipper delivers the goods to the carrier who then transmits a receipt message to the shippers electronic address. This message must contain:

• the name of the shipper,
• the description of the goods,
• the date and place of receipt and
• the private key to be used in subsequent transmission.

The private key is the device that makes issuance, endorsement negotiation and registration of the electronic bill of lading possible; it secures the electronic transmission.

Art. 2 f CMI: “Private key means any technically appropriate form such as a combination of numbers and/or letters which parties may agree for securing the authenticity and integrity (realness) of a transmission.”

The party who possesses a valid private key is the holder and is the only party entitled to claim delivery of the goods, name the consignee, transfer ownership and so on. The shipper must send a confirmation to the carrier immediately after receiving the receipt message. The shipper does not become holder until this confirmation is send. The receipt message is the equivalent to a traditional bill of lading. In other words, the receipt function of the electronic bill is to be no different from a paper bill of lading. Once the shipper confirms the receipt message, he becomes the holder. The carrier acts as an central registry and cancels the previous private key and issues a new one to the new holder. The rules place excessive responsibility on the carrier. If the holder has been careless with the private key as a result of which an entity other than the holder gives instructions to the carrier on which the carrier acts then it seems the loss will fall on the holder since the carrier shall be under no liability for misdelivery if it can be proved that it exercised care to ascertain that the party who claimed to be the consignee was in fact that party. The holder has the option at any time prior to delivery of the goods to demand from the carrier a paper based bill of lading. The issue of a paper bill of lading will cancel the private key and terminate the EDI procedures under the CMI Rules but does not affect the rights, obligations or liability of the parties; The success of the CMI Rules will depend on whether merchants are ready to give up their control over the bill of lading and entrust the carrier with information to effect a transfer.

The Bolero Rules

Bolero stands for ‘Bill of Lading Electronic Registry Organization’ and was commercially launched on September 27th 1999. Bolero International Ltd. is a joint venture between SWIFT (Society for Worldwide Interbank Financial Transactions) and the TT Club (Through Transport Mutual Insurance Association Ltd.).

• It is a project of the EU to study feasibility of electronic bill of lading.
• It is a closed network and can only be used by subscribers.
• The subscribers are subject to the BOLERO Rule Book which is the legal framework.
• Transfer is effected by a combination of notification, confirmation and authentication through digital signature.

It is not clear how widely this system is used.

Notes

1. ^ http://dictionary.reference.com/browse/lading
2. ^ ^{a b} Indira Carr, International Trade Law, 2009
3. ^ ^{a b} A.N. Yiannopoulos, Ocean Bills of Lading: Traditional Forms, Substitutes and EDI System, 1995
4. ^ ^{a b} Wolfgang Grill, Hans Perczynski; Wirtschaftslehre des Kreditwesens
5. ^ ^{a b} Hellner/Steuer, Transportdokumente, Bankrecht und Bankpraxis, Bank-Verlag

See also

• Contract of affreightment
• Delivery order
• Hitchment
• Letter of credit
• Waybill

References

• Huber, Mark (2001). "Ch. 9:Chartering and Operations". Tanker operations: a handbook for the person-in-charge (PIC). Cambridge, MD: Cornell Maritime Press. ISBN 0-87033-528-6. 
• Turpin, Edward A.; McEwen, William A. (1980). "Ch. 18:United States Navigation Laws and Ship's Business". Merchant Marine Officers' Handbook. Centreville, MD: Cornell Maritime Press. ISBN 0-87038-056-X. 
• Mills, Stephen (2005). Bills of Lading: A Guide to Good Practice (2nd ed.), North of England P&I Association, Newcastle-upon-Tyne, UK, ISBN 0-9546537-1-8..

External links

• Bill of Lading
• Bill of Lading forms
• Track and trace by Bill of Lading
• CMI Rules