A BOL contains information such as details of the shipping line, the pick-up date, name of the vessel used for transport, details of the goods, nature of the consignment transported, and the kind of packaging used, among other details.
If you are starting out as an exporter, you must surely be buried in paperwork. One of the most important documents among them is the bill of lading (BOL). It is a legal document issued by a carrier to the shipper to move a shipment. The information in a BOL is critical, as it lists details such as type and quantity of goods, details of the consignor (shipper), carrier (transport), consignee (receiver) and the destination.
It serves as a contract and a receipt and is legal proof that the carrier has received the freight and is obligated to transport and deliver the goods in proper condition to the receiver or consignee. BOL must be accompanied by the shipped products and signed by authorised representatives of the shipper, carrier and receiver.
Purpose and importance
The BOL is helpful in many ways. “It serves as the primary document to determine the freight charges and custom fees payable to port authorities. Further, a bill of lading is critical for tracing the link between all intermediaries in international trade of freight goods,” says Arvind Sharma, Partner, Shardul Amarchand Mangaldas & Co.
A BOL defines the liability of the carrier of the goods, along with all the other terms and conditions, explains Vinay Sriganesh, Export Documentation, Maersk. “The trade between two parties can be complex and hence this document plays an important role to establish ownership of the cargo at all times when the shipment is on its journey,” he says.
The three basic functionalities of a bill of lading are:
- Evidence of contract of carriage – between the consignor or shipper and the shipping line
- Receipt of goods – proof that the shipping line has received the cargo
- Document of title of goods – the title holder of the bill of lading also owns the cargo
A BOL contains information such as details of the shipping line, the pick-up date, name of the vessel used for transport, details of the goods (number of units, weight and dimensions), nature of the consignment transported, and the kind of packaging used (crates, pallets or drums), among other details. In case the items being transported are hazardous, the BOL has to say that and also carry the necessary certification for transport.
Sriganesh points out that the document can be used by certain entities such as banks for trade finance — when an exporter submits the original bill of lading to the bank, they release him the money. Most importantly, a copy of the BOL is required for customs declarations, customs clearance and receiving exemptions.
How to issue BOL
The document is issued by the shipping company, to carry the consignment from port-of-receipt to port-of-discharge, and signed by the carrier. The bill can be issued on “freight collect” (the receiver or consignee is responsible to pay the shipping charges) or on “prepaid basis” (the shipper or consignor is responsible to pay the shipping charges). Typically, three bills are issued: one for the shipper; one for the consignee; and one for the banker, broker or third party. In trading jargon, they are often termed as 3/3 sets of BOL.
Apart from this, the BOL can be issued by freight forwarders and banks as a negotiable instrument under Article 30 of the Uniform Customs and Practice for Documentary Credits (UCPDC).
Factors that need to be taken care of while filling BOL
- All information is correct and matches with the bill of lading and other documents (such as packing lists, commercial invoices, phytosanitary certificates, etc)
- At least 3/3 sets are required to be submitted to the bank and consignee
- Bill of lading is authentic and stamped correctly, showing shipped on board or received for shipment comments
- The shipment date is correctly mentioned
“The shipper must provide accurate information about the details of the shipment. Any incorrect details may delay the clearance of freight goods by port authorities and the goods may be impounded, adding to warehousing and custom fees,” says Sharma. “As there are different formats of bill of lading issued by a carrier, it is necessary to verify that the bill of lading contains all the required information and is in accordance with the charter agreement of the shipper.”
Sriganesh adds that if you are booking cargo via a third party, make sure that you validate the company well. Unscrupulous parties sometimes hold a BOL hostage and claim extra money to cover costs before they provide the bill of lading.
Types of BOL
There are various kinds of BOL based on certain parameters. Some of the primary types of BOL are classified under the following categories.
Based on the Carrier
- House Bill of Lading: Issued by the freight forwarder or non-vessel operating common carrier (NVOCC). Here, the consignor is the seller/exporter and the consignee is the receiver/buyer.
- Master Bill of Lading: Issued by the shipping line or carrier and is also known as the ocean or carrier BOL. The details here should match with those in the house BOL except for a few exceptions. The consignor is the agent or freight forwarder or NVOCC of the main seller/exporter and the consignee is the respective freight forwarder/agent or NVOCC of the buyer.
Based on Consignee and Payment
- Straight Bill of Lading: This is issued when the consignee has completed the payment in advance and can get the consignment directly. In this way, the consignment will only go to the consignee and there is no way to renounce the right to receive the shipment to a third party. It is, therefore, known as a non-negotiable bill.
- Order Bill of Lading: One of the most common kinds of BOL. Unlike the straight BOL, this one is negotiable and allows the consignee to transfer to a third party his right to receive the delivery.
- Bearer Bill of Lading: This document enables the delivery to whoever holds the BOL. The name of the consignee here can be blank or “bearer”.
- Clean Bill of Lading: This document is issued by the carrier after the inspection of the goods on arrival. It declares that the goods received are in good condition, with no damage and in the right quantity and packaging.
- Foul/Dirty or Claused Bill of Lading: This document consists of clauses outlining quality defects or shortcomings in quantity of the shipment. The carrier points out the damages and other issues in the cargo under the clauses in the BOL and gives the right to the consignee to refuse to accept the delivery and, hence, the bank to refuse release of payment.
Based on Transportation
- Inland Bill of Lading: This is issued for domestic shipments
- Ocean Bill of Lading: This is issued for overseas shipments
- Through Bill of Lading: When the goods cross several destinations through single or multiple modes of transportation
- Multimodal Bill of Lading: This is issued when the shipment moves through at least two modes of transportation
Thingsthat can go wrong around BOL
With an important global document as such, mistakes and problems are bound to happen. According to Sriganesh, some of the things to look out for includes mismatch with the letter of credit, loss of BOL, delayed cargo release because of delay in getting the paperwork before the cargo arrives , and fraudulent BOLs where the bill of lading is “copied” and cargo is then claimed by a different party.
Digitisation of Bill of Lading
Last year, owing to the difficulties of the pandemic, Gopal Krishna, the Secretary of the Department of Shipping, announced digitisation of bill of lading and trade documents. This was executed with the help of cargo application platform Portall Infosystems and CargoX. Portall Infosysyem developed the Indian Port Community System in six months. It acts as the centralised hub for ports and stakeholders such as shipping lines and agents, container freight stations, surveyors, banks.
The system is installed at 19 ports in India. The CargoX Platform is a blockchain transfer tool where you can upload and create documents which can be traced anywhere. CargoX and Portall Infosystems have partnered to help digitalise the processing of BOLs and the transfer of trade documents.
Lauding the initiative, Sharma says, “The objective of digital bills of lading through blockchain technology is to plug an important element missing in the electronic Indian Port Community System (launched in 2018). The pandemic has disrupted supply chains worldwide and caused significant stress to the shipping industry. Digital bills of lading would ease time lag bottlenecks and reduce document transaction costs.”
Sriganesh points out the several benefits of an electronic BOL: reduced courier and documentation cost, 4-7 days saved due to faster processing of documents and better security due to use of the blockchain system.