Article published by : FGLIndia on Tuesday, October 15, 2019 - Viewed 311 times


Category : Business

8 points to consider before you sign a bill of lading

If you are just about to sign a bill of lading or you already are a bill of lading signatory in your organisation, then you definitely have to read this..

This article references bill of lading as it applies to containerised trades and not to other trades..

Before we go to the main part of the article, here is a refresher to those who may still be unclear about the purpose and roles of a bill of lading..

A bill of lading has 3 basic purposes or roles (in no particular order of importance)

Many people think that

a bill of lading is a Contract between the Seller and the Buyer
a bill of lading is a Contract of Carriage between the Carrier and Shipper

Both notions are incorrect..

The contract between a buyer and seller was already established when the buyer placed the order with the seller and they both discussed and agreed (verbally or in writing) the what, where, when, how and how much of the transaction in detail..

The contract between a shipper and the carrier was already established when the shipper or his agent made a booking with the carrier (shipping line) to carry the cargo from A to B..

The B/L is the EVIDENCE of the contract of carriage entered into between the “Carrier” and the “Shipper or Cargo Owner” in order to carry out the transportation of the cargo as per the sales contract between the buyer and the seller.

A B/L is issued by the carrier or their agent to the shipper or their agent in exchange for the receipt of the cargo.. The issuance of the B/L is proof that the carrier has received the goods from the shipper or their agent in apparent good order and condition, as handed over by the shipper.

It means that the goods may be transferred to the holder of the B/L which then gives the holder of the B/L, the rights to claim the goods or further transfer it to someone else..

In my previous article, I also discussed that a bill of lading may be issued as a

Straight Bill of Lading
Negotiable Bill of Lading or a
Sea Way Bill of Lading

If the bill of lading is issued as a Straight Bill of Lading or a Negotiable Bill of Lading, then it would be issued with one or many original bills of lading with an original signature..

Over the years there have been several different types of bills of lading (Ahmet Aytoğan from Turkey actually collects the various types bills of lading) used in the different trades such as container, bulk, break-bulk, tankers etc etc, but as mentioned above, the points in this article are about containerised shipments..

There are several technicalities to be considered before signing a bill of lading and if you are the bill of lading signatory, here are 8 points that you need to be aware of.

Why is this important..??

When I mean stationery, I mean the pre-printed bill of lading form that shows the logo of the carrier issuing the bill of lading (sample of Hapag Lloyd Bill shown here) and the various parts of a bill of lading containing the details of the shipment on Page 2 and the Carrier’s terms and conditions on Page 1 (yes the Terms and Conditions page is Page 1)..

These terms and conditions are approved by the carrier, by regulatory authorities, by insurance companies, by government authorities etc..

As shipping is a dynamic business there may be changes in the details required or in the terms and conditions of the bill of lading from time to time..

Some of the carrier’s bills of lading may not be registered with say for example FMC and therefore cannot be used for shipments to USA and if you do issue this bill of lading, then you as a carrier may have problems filing the manifest in USA..

Some of the carrier’s bills of lading have specific sequence numbers for security reasons and if the incorrect stationery is used, it may impact on the carrier’s liability and applicability of the terms and conditions..

So the issuing authority – whether it is the Master of the ship or the agent of the carrier must always ensure that the stationery used is correct and is the latest version of the document..

If you are issuing an Original Bill of Lading, then you need to ensure that the bill of lading issued is not a short form/blank back bill of lading..

Any original bill of lading issued must have the terms and conditions not just to protect the carrier, but also to convey the terms, conditions and liabilities to the merchant..

Why is this important..??

While it is not the business of the carrier to figure out if the shipper is consigning the goods to the correct consignee, the signatory must check that at least the consignee or notify mentioned on the bill of lading is from the same country as the destination..

There are several countries like Ethiopia, Brazil etc where the consignee or notify must be based in Ethiopia or Brazil as per their regulations..

If the bill of lading is issued without this check, there is a possibility that the manifest submission at POD may be delayed which could also affect the berthing and operation of the ship on the whole..

You can read more about the importance of these address details in Part 1 of the parts of a bill of lading series..

Why is this important..??

This is important because there are a lot of unscrupulous customers who may book a cargo that is allowed for carriage by the carrier but end up shipping and declaring something else on the bill of lading..

These customers also work on the fact that this comparison between booking and bill of lading may not be done by all carriers/agents and is often overlooked..

For example, the customer may book cargo as “Trophies” (which could refer to sports trophies) and end up packing, loading and shipping “Hunting Trophies” which may be banned by the POD..

Now you have a container sitting with prohibited goods on board your ship and while you as a carrier may be able to charge the client for the additional costs, you also may go through a lot of unnecessary hassles and service disruptions due to this..

For special cargo such as reefers, hazardous, out of gauge cargo the bill of lading should reflect details such as carrying temperature, dimensions of the out of gauge, hazardous class and UN Nos..

Due care must be taken to ensure that these details on the bill of lading match the details given by the customer at the time of booking, at the time of cargo movement into the port, and also the approvals received from various quarters..

Why is this important..??

In cases where the shipper is requesting the bill of lading to be claused Received for Shipment the carrier should have received the container(s) under their custody before the bill of lading is issued..

In cases where the shipper is requesting the bill of lading to be claused Shipped on Board, the container(s) should have been definitely loaded on board the ship before the bill of lading is issued..

As explained in Part 2 of the parts of a bill of lading series, there is an area on the bill of lading where the details of the performing ship must be shown..

Whether the bill of lading shows Received for Shipment or Shipped on board, it is important for the signatory to verify that the container(s) listed in the bill of lading are in the port stack allocated to the ship (in the case of Received for Shipment) or actually loaded on board the ship (in the case of Shipped on Board) before the bill of lading can be issued.

Why is this important..??

Especially in container trade, the carrier is not privy to the actual contents of the container and has to rely on what the customer declares as the containers are packed at the shippers WH or premises and the carrier has no way of knowing what or how much they packed..

These protective clauses safeguard the carrier’s interest in case of any misdeclaration by the customer including any misdeclaration of weightswhich has been the bane of many carrier’s existence..

Ensure clauses/notations such as CLEAN ON BOARD are not handed out willy/nilly.. There are several implications of issuing Clean on Board Bill of Lading which you need to be aware of..

The person signing the bill of lading acknowledges the description, quantity and quality of the goods loaded and recorded on the bill of lading..

Any bill of lading signed with the knowledge of facts that are misrepresented may be considered to be a fraudulent document and may result in legal consequences for the signatory..

Why is this important..??

You may have heard the familiar cry “Help, carrier refuses to show commercial information relating to the cargo on the bill of lading“.. Commercial information includes Cargo Value, Incoterms, Letter of Credit details etc..

As per the carriers, this commercial information does not form part of their contract of carriage and therefore it has no place on the bill of lading..

If the bill of lading states a cargo value, it becomes an Ad Valorem bill of lading (According to Value) and as per Standard Club, the purpose of an Ad Valoerm bill of lading is to sidestep the package/unit limitation set out in Article IV Rule 5(a) of the Hague or the Hague Visby Rules (the Rules)..

This article in the Rules limits the amount of damages that the cargo interest can claim from the carrier.. Issuance of an ad valorem bill of lading may allow the customer to break this limitation and deprive the carrier of the right to limitation of liability per package or unit..

But if the customers insist on the value on the bill of lading, then carriers may choose to inform their liability Insurers of the requirement.. The insurers in turn may accept to cover any eventuality of issuing an ad valorem bill of lading in exchange for a sometimes hefty extra premium..

If the customer is willing to pay this extra cost, then the carrier may issue an ad valorem bill of lading..

Why is this important..??

3 Originals and 6 Copies seems to be the general norm when negotiable bills of lading are issued.. When negotiable bills or straight bills are issued, the number of bills of lading must be reflected correctly in the relevant fields..

Reason why this is important is that all originals issued (especially Straight Bills) must be accounted for as they are like a cashier’s cheque.. For example if the bill of lading says 3 originals, but 4 originals are actually issued and one of these 4 originals falls into the wrong hands or are sent to the receiver along with other documents before they pay the seller..

The receiver could secure release of the goods based on below release clause on the bill of lading. 

About Fame Global Logistics Pvt. Ltd. : Fame Global Logistics Pvt. Ltd. is one of Best Logistics companies Mumbai . We offer services like BDD Import, BDD Export, Ocean Cargo / NVOCC, Air Cargo Division, Buyer Consolidation, Custom Clearance, Warehouse and Distribution, Transportation etc. Talk to us on +91 22 27564676 Or Email us at Happy to help!

Keywords: Freight Forwarding companies Mumbai, Freight Forwarding Agen

By: FGLIndia

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