What is a Bill of Lading?

Both the ‘ticket to ride’ and the document of title, it is fair to say that in the international sale and movement of goods the ocean bill of lading, is a crucial document which has been relied upon by the commercial community over many years.  Indeed, it is regarded by the banks as the most important document in international trade.  Issued by the carrier it holds three distinct functions:

• evidence of a contract for carriage between the shipper and the ocean carrier;
• a receipt for goods showing that they have been entrusted prima facie to the carrier;
• a transferable document of title, effected through endorsement and the passing of the bill from one party to another.

The responsibilities and liabilities of the parties involved in the carriage between shipper and ocean carrier under the Hague-Visby-Rules and the Carriage of Goods by Sea Act 1971 are set out in the legal Issues Chapter 7 and what needs to be considered in this chapter is the commercial role of the bill of lading in relation to the transfer of title of goods and of payment for the goods.  In effect, the only party able to take delivery of the goods at destination is the one who is the legitimate holder of the consigned or endorsed bill of lading.

There is an interesting analogy between the bill of lading and the cloackroom ticket by P & O Nedlloyd in ‘The Merchants Guide’, to the effect ‘no ticket – no coat; no Bill of Lading – no goods!’  But the transfer of title of the goods is not synonymous with the transfer of property.  That will pass when the buyer and seller intend it should do so under a contract of sale, usually when payment is affected.

The bill of lading is a key to the control of the payment procedures in international trade.

Safe in the knowledge that a contract of carriage exists and that goods have been received by the carrier, the bill of lading shows the buyer and the buyer’s bank that despatch of goods according to the contract of sale is under way – remember that banks deal in documents and not goods and therefore the system relies on the availability of transport documents.  For the exporter, holding a bill of lading as title to the goods may control when the buyer takes delivery by choosing the point at which it is transferred.

For any further information please contact FirstBase Freight Ltd, Tel: 0844 272 6731.