Bills of lading are issued every day, but the transportation professionals who truly understand their significance are in the minority. With that in mind, we spoke with transportation law expert Brent Primus, J.D., CEO of Primus Law Office, P.A., and CEO and senior editor of transportlawtexts, inc. to discuss the Bill of Lading and its purpose.
What Is a Bill of Lading? A Definition.
The words “bill of lading” come from an old English term that literally means “a list of cargo.” If you search Google for the definition of a bill of lading, you’ll get thousands of results that say the bill of lading is a contract between you, the owner of the goods, and the carrier stating what goods you’re shipping, where the shipment is coming from, and where it’s headed.
When freight changes hands from shipper to carrier, it is the signature on the bill of lading that signifies the goods have been received in "good order." That is, the goods are in the same condition as when they left the shipper's facility, or a "clean" bill of lading has been issued. A bill of lading without any comments regarding damage, overage or underage can play a crucial role in permitting the seller to receive payment for the merchandise.
3 Primary Functions of a Bill of Lading
1. A bill of lading is always a receipt for goods.
As it has been for thousands of years, the bill of lading’s main purpose is to serve as a receipt for goods. (Check out the image below of a Sumerian bill of lading dating back to 3400 B.C.!)
2. A bill of lading is sometimes a contract for carriage.
This is the function of the bill of lading that brings us into the modern era. Exporters should understand that in the absence of an individually negotiated contract between a shipper and a carrier, the bill of lading is the contract for carriage.
In his work, Primus develops contracts between shippers and brokers to move away from the standard terms of carriers. This is where the phrase “subject to terms and conditions” comes into play in bills of lading—shippers must be acutely aware of and understand this language. It’s where all the gotchas will be; for example, limits of liability for cargo, late payment penalties, etc.
3. A bill of lading sometimes serves as evidence of title.
According to Primus, a bill of lading as an evidence of title was more common in earlier times than it is now, but it still may be true in some situations. At present in the U.S., the bill of lading does not serve as evidence of title; a typical bill of lading says “non-negotiable” at the top, meaning a person can’t sell the bill of lading.
If it is labeled as negotiable, it can be bought and sold. This provides an advantage for the buyer who may have pre-sold the goods because he can simply endorse it to the next buyer in line. In fact, it can be bought and sold any number of times. You can read more about negotiable bills of lading in our article, Correctly Completing a Bill of Lading Can Help You Get Paid.
Who Issues the Bill of Lading?
People in the exporting industry often think a shipper or broker issues the bill of lading, but this is wrong. Primus emphasizes that the bill of lading is issued by the carrier. It is issued when, for example, a driver signs it.
People are confused by this because, typically, the shipper will prepare the bill of lading, complete it, and enter it into their MIS/TIS systems, and sometimes even add their corporate logo to it. This makes people think the shipper has issued it, but in reality, it is issued by a carrier. This only makes sense because its primary purpose is to serve as a receipt.
Types of Bills of Lading
Straight Bill of Lading
This bill of lading is typically used to ship goods to a customer who has already paid for them.
The air waybill (AWB) is the equivalent of an ocean bill of lading used in air transport. However, unlike the ocean bill of lading, it cannot be negotiable; in other words, it may not be consigned "to order."
Inland bills of lading are often the first transportation document issued for an international shipment. They are used for cargo shipments by rail or road, but not sea.
Multimodal Bill of Lading
You’ll use this type when you combine shipping methods. For example, goods flown from Omaha, Nebraska, to New York City and then shipped to Europe qualify for a multimodal bill of lading.
This bill of lading is used for shipping goods overseas. It authorizes the holder or another party to take possession of the goods. Ocean bills of lading can be straight bills of lading or consigned "to order" bills of lading.
“To order” Bill of Lading
A “to order” bill of lading is typically a negotiable document. It allows the transfer of ownership of the goods outlined in the bill of lading to another party upon endorsement by the party listed as the ultimate consignee on the document. Often under the terms of a letter of credit, the bill of lading is consigned "to order" or "to order of [named] bank.”
- Free downloadable bill of lading forms
- Seminar: Transportation & Logistics Councils—Transportation, Logistics and the Law presented by Brent Primus
- The Bill of Lading Always Proves Shipment Ownership
- 3 Things You Need to Know about the Bill of Lading Form
- 8 Common Costly Mistakes Shippers Make on the Ocean Bill of Lading
Special thanks to Brent Primus for his expertise in this article.