What is the importance of the bill of lading?
Have you ever pondered how bills became the standard in businesses? Product bills often describe the buyer's record and product specifications and assist in keeping track of sales and payments.
Isn't it a great way to keep the business on track? This is why the shipping industry started using a bill of lading, one of the most frequently used invoices.
In legal terms, a bill refers to the paperwork that specifies the product, whereas a lade simply means to place it on something (like a ship). That is why the phrase bill of lading exists.
In this blog, we will learn about the importance of the bill of lading in the shipping industry.
The shipping industry, as we know, has numerous routes and partners involved, with multiple documentation. The most common ones are commercial invoices, package lists, bills of lading, and custom clearance documents. These documents are the soul of the shipping business that details the whereabouts of the freight containers, the products carried, and the location for delivery of those products.
Knowing these parameters will help us avoid unanticipated scams and save a lot of money while negotiating deals effectively.
Now that we've established the importance of these documents, let's look at the bill of lading.
What exactly do you mean by a bill of lading?
The phrase may be boiled down to its simplest components: bill (detailing the goods) and lade (putting it on ships). Although this is a straightforward response, it still needs to be completed. Bills of lading is a legally binding document (handwritten, printed or presented digitally) that outlines the terms and conditions of the transportation of goods, including the type and quantity of goods being shipped, the destination, and any special instructions or requirements for handling the goods.
Bills of lading serve as an agreement record between the shipper & the carrier and a receipt for the goods. It also serves as a record of the condition of the goods at the time they were shipped and can be used to resolve disputes that may arise during transportation.
The carrier usually issues the bill of lading, although a third party, such as a freight forwarder or a customs broker, may also issue it. The shipper may offer the bill of lading in some situations, but this is uncommon.
What are the several components of the bill of lading?
- Shipper's name and address
- Consignee's name and address
- Date of delivery
- Place of delivery
- Mode of transportation
- Type and quantity of goods being shipped
- Packaging type
- Shipping date and expected date of arrival
- Shipping route and any stops or transfers along the way
- Description of the items
- Terms and conditions of the transportation, including any special instructions or requirements for handling the goods
Types of bills of lading
- Straight bill of lading: This bill of lading is issued to the consignee named on the document. The consignee is entitled to take possession of the goods upon arrival at the destination port, among the busiest ports in the world.
- Order bill of lading: This is a bill of lading issued to the order of a specific person or company, typically the consignee. The consignee can then endorse the bill of lading to another party, transferring ownership of the goods.
- Negotiable bill of lading: This bill of lading may be delivered and then transferred from one party to another. It may be used as proof of ownership and ensures that the products will be delivered to the consignee under the arrangement.
- Non-negotiable bill of lading: This bill cannot be transferred from one party to another through endorsement and delivery. It serves as a receipt for the goods, but it cannot be used as a document of title.
- Sea waybill: Although it resembles a bill of lading, this document is not a title document. It functions as a contract of carriage and a receipt for the goods, but it cannot be assigned to another party. It is frequently employed where the goods are shipped from one port to another with intermediate transshipments.
The individual demands and specifications of the parties involved in the cargo will determine the kind of bill of lading utilized in that transaction.
Importance of the bill of lading
- One of the essential papers needed in international trade to guarantee that importers receive the goods and exporters are paid for them is the bill of lading.
- Given the complexity of international trade, this document helps clarify who the cargo owner is to prevent confusion at any point in time.
- These are frequently the foundation for the goods' transit-related insurance coverage. Insurance companies may utilize it to establish the conditions of coverage and the cost of the premium as evidence that the carrier is accountable for the goods' safe transportation.
- When discussing receipts, bills of lading can be correlated with Incoterms such as CFR (Cost and freight) and FOB (free on board), where customs and insurance duties and obligations are established. These documents serve to verify goods transportation and help determine freight authorization.
- Ocean bills of lading have inherent value as security to banks that fund the sale of the underlying cargo or the papers themselves. They entitle their rightful holders to sell the items in transit through document transfer and serves as collateral for lenders.
- Bills are designed to display the name of the brand from which a product is purchased. The bills of lading function similarly to a title document by identifying the owner of the commodities.
- It is necessary for establishing the connection between all middlemen in the international trading of freight commodities.
Overall, this is an essential document in the shipping industry since it performs a range of critical roles and is necessary for transporting products by the busiest sea routes.
After reading about the significance of bills of lading, you might now be in charge of the transportation of the goods and be a specialist at paperwork.
Found this information helpful? Check out the seven most commonly used incoterms for international shipping and follow LOTUS Containers, a container trading company and business specializing in designing and manufacturing shipping containers.