Bill of Lading

Bill of Lading – Introduction
When discussing Bills of Lading, we must distinguish between a carrier B/L (B/L)
and a House B/L (HBL). Please see separate chapter for HBL.
In Maersk Logistics, we do not issue carrier Bills of Lading. Only Ocean Carriers
(also known as VOCCs or shipping lines) can issue a carrier B/L.
In the old days, the Bill of Lading was a document issued by the captain of the
vessel for goods carried onboard his vessel. This is not practical today where
instead the document is issued by an agent acting on behalf of the captain.
Maersk Sealand’s offices around the world have been empowered to sign Bills of
Lading on behalf of “the captain” (the principal carrier).
Bill of Lading – Issuing Party
The B/L is issued by an ocean carrier, also known as a VOCC (vessel-operating
common carrier) or shipping line.
Maersk Sealand, being a VOCC, issues Bs/L for goods shipped onboard their
vessels.
Bill of Lading - Functions
Basically, a Bill of Lading has 3 functions:
1. A receipt for the cargo
2. A document of title
3. Evidence of a contract of carriage
1. Receipt for cargo
The B/L is a receipt by the carrier that the goods are in his custody. The B/L acts
as a receipt between the shipper and the carrier until such time as title has been
passed to a third party (the consignee). Then it becomes an independent contract
between the carrier and the third party. The third party assumes the rights,
responsibilities and obligations identical to those of the shipper.
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2. Evidence of contract of carriage
It is common to hear the B/L referred to as the ‘contract of carriage’. However, the
contract of carriage is always the underlying agreement between the carrier and
the customer to carry his goods. The B/L is merely evidence of this.
The B/L evidences a contract of carriage between the ocean carrier and the
shipper/consignee in the B/L.
Also see: Evidence of contract of carriage in the Glossary.
3. Document of Title
A B/L is a Document of Title. This means that the legal right (the title) to the goods
covered by the B/L can pass from one party to another by means of endorsements
(please see explanation below).
The carrier will only release the goods at destination to a rightful holder of a duly
endorsed original Bill of Lading.
At the time the B/L is issued, the shipper will advise the carrier who the B/L should
be consigned to - I.e. who the Consignee on the B/L is.
The shipper can choose to consign the B/L in different ways:
a. Full name and address of an individual or company
b. “TO ORDER” (of shipper)
c. “TO ORDER OF [bank]” – example: To order of Dubai Bank
d. “TO ORDER OF [company]” – example: To order of Toy Trader Ltd.
e. “TO ORDER OF [individual]” – example: To order of Gary Jensen, Street, City
“To order” means that the party can transfer their rights as consignee to another
party by endorsing the B/L.
3a. Endorsement
An endorsement is a signature (and company stamp) on the B/L (and preferably
also a clear written statement that the B/L is being endorsed to “Company XYZ”).
The endorsement is written on the original B/L document by the party who is
shown as the consignee on the B/L but now wishes to transfer this right to another
party.
When obtaining the endorsed B/L, the new consignee now assumes all rights,
obligations and responsibilities that were previously vested in the first consignee.
This also includes the right to transfer the B/L to yet another party by adding a new
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endorsement on the B/L document. In this way, a chain of endorsements may take
place.
The Ocean Carrier will check the endorsements on the original B/L document
before releasing the goods at destination. As you can see, it is not always the first
consignee (as printed on the B/L when it was issued) that actually take delivery of
the goods at destination.
Because of this function ad Document of Title, a B/L is often referred to as a
“negotiable” document but “transferable” is actually the more correct term.
Bill of Lading – Originals and Copies
The fact that the carrier B/L functions as Document of Title places great importance
on the B/L document. All parties involved (shipper, consignee and carrier) rely on
the document to decide who can take delivery of the goods at destination.
The carrier will normally print a B/L document in 3 originals and a reasonable
number of copies. It is only an Original B/L document that can be transferred to
another party. The copies may be pre-printed ‘Copy’ or ‘Non-Negotiable’. Both are
non-transferable.
Although 3 originals have been issued, the carrier will release the goods at
destination to whoever presents one duly and properly endorsed original B/L
Now you may think: “But what if the shipper sells the goods twice and endorses
two of the original Bs/L to two different parties?”
The carrier must exercise due care to check that the B/L is properly endorsed to
the party who submits it. If this is the case and the carrier is in good faith, he can
release the goods. The change of ownership of the cargo is a matter between the
seller and the buyer only. The carrier is not involved. If the seller has sold the
goods twice, it is a matter between the seller and the two buyers.
Bill of Lading – Carrier’s responsibility
The three main areas of responsibility of the carrier under a B/L are:
1. Responsibility for correct description of the goods
2. Responsibility to release the goods to the properly entitled party at the proper
location
3. Responsibility to care for the cargo while it is in the carrier’s custody
1. Responsibility for correct description of the goods
Any third party buyer may purchase goods by relying on the description of the
goods in the B/L (quantity, condition, etc.).
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The description of the goods on the B/L is usually supplied by the shipper or his
agent. (The carrier will not know what is inside a container or carton packed by the
shipper). It is however essential that if the carrier knows that the description of the
goods supplied by the shipper is not correct (for example that cartons are
damaged), the carrier clearly notes the discrepancy on the B/L or refuses to accept
the cargo and issue the B/L.
If the carrier does not note the discrepancy on the B/L, the carrier “steps into the
shoes” of the shipper and assumes responsibility, on behalf of the shipper, to the
buyer of the goods. This means that if there was a dispute between the carrier and
the buyer of the goods, the buyer could file a claim against the carrier. The carrier
would need to file claim against the shipper but may not be able to prove that the
goods were not received as stated in the B/L.
2. Responsibility to release the goods to the properly entitled party at the proper
location
Whoever presents a duly and properly endorsed B/L at the correct destination is
entitled to take delivery of the goods.
The carrier receiving a B/L and being satisfied that the proper endorsement is in
place, when releasing the goods, is relieved of any responsibility should it later
appear that the B/L holder was in fact not the proper receiver.
The carrier must of course also ensure that the person who submits the B/L and
take delivery of the goods is a representative of the consignee (e.g. an employee
or an agent of the company to whom the B/L has been consigned).
Release of the cargo without receipt of a properly endorsed B/L compromises the
carrier’s responsibility towards the true owner of the goods. This may expose the
carrier to unlimited liability inclusive of consequential damages. In other words, the
carrier may be required to compensate the rightful consignee not only for the value
of the goods but potentially also for additional costs such as loss of sales profits.
If the carrier is in doubt about who the rightful owner of the B/L is, e.g. because
there has been a chain of endorsements and the carrier is not familiar with all
signatures and stamps of the intermediate consignees, the carrier should in
principle contact these parties to check. The carrier may can also contact the
shipper and/or the notify party on the B/L to hear their views.
2a. Release at different destination
If the release of the goods is requested at a destination different from the one
mentioned on the B/L, the carrier should first receive the full set of Bs/L (all
originals) for the particular shipment.
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The full set of an issued B/L has an intended destination. Since release is possible
against any one of the Bills of Lading in a set, then only by receiving all the issued
originals can the carrier assure himself that no other lawful holder of an original B/L
can present the B/L at the B/L destination and rightfully claim title to the goods.
2b. Release of goods without original B/L or issuance of a new set of Bills
It is a critical situation when the full set of original Bills are lost. By releasing the
goods without obtaining a duly endorsed original B/L, the carrier will expose
themselves to unlimited liability, incl. consequential damages, in case a rightful
holder of the B/L later turns up and expects to receive the cargo. On the other
hand, the consignee may in fact be the legal owner of the goods after having paid
the shipper and the carrier will be under pressure from the consignee to release
the goods as soon as possible.
In such a situation, the carrier will typically ask both the shipper and the consignee
to confirm that they agree to the issuance of a new set of bills or release of goods
without the bills. In addition, the party who has asked for a new set of bills (the
shipper or the consignee), or has asked to have the goods released (the
consignee), is asked to sign a Letter of Indemnity (LOI) and this must be backed up
by a first class bank guarantee which is valid for a minimum of 6 years or whatever
the B/L filing period is in that country. The process must be approved and release
signed off by appropriate management.
It is a commercial decision by the carrier whether they will release the goods on
this basis or not.
3. Responsibility to care for the cargo while in the carrier’s custody
The duty of care of the goods is both regulated in law and is based on common
sense. If the goods arrive damaged at destination and no note has been made on
the B/L regarding the condition of the cargo, it is the carrier’s responsibility.
If the carrier wants to claim against the shipper, it is the carrier’s responsibility to
prove that the goods were not damaged while in his custody.
Bill of Lading - Amendment
When a shipper requests an amendment to a B/L which has already been printed
and issued, the carrier must make a judgement of the request and decide if the B/L
can be amended accordingly.
The carrier must ensure that the full set of original Bs/L are returned (if 3 originals
were issued, 3 originals should be returned for amendment) and ensure that the
description of the goods is still correct.
If a shipper requests a completely new set of Bs/L, this is considered an
amendment and the full set of originals must be surrendered. If the shipper or
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consignee is not able to produce the full set of originals, the carrier should not
issue a new set. If the customer insists, the carrier must make a judgement of the
commercial risk and may decide that a new set can be issued. In such case, the
first set of Bs/L will be considered lost.
You must ensure to check local procedures for this.
Bill of Lading – Cargo Description
Cargo description
The transport provider cannot physically verify the contents of the cartons and
packages received from the shipper. For legal reasons, the description of the
goods must therefore always include the wording “Said To Contain” or “S.T.C.” to
signify that the transport provider is relying on the description of the goods supplied
by the shipper. Example: S.T.C. 1020 cartons of CD players.
If the carrier knows that the description of the goods supplied by the shipper is not
correct (for example that cartons are damaged), the carrier should note the
discrepancy on the B/L or refuse to accept the cargo and issue the B/L.
No. of packages
If cargo is lost during transit, it is the number of units as stated in the “no. of pkgs”
field that will be used for calculation of potential compensation to the owner. For
this reason, this field should always reflect the smallest number of shipping units.
Example 1 (FCL container): “1 x 20’std” instead of “500 cartons”. Example 2 (LCL
shipment): “5 pallets” instead of “50 cartons”.
Clauses
The transport provider should insert the clause “Shipper’s load, stow and count” if
the customer is loading the container at his premises.
“Shipped onboard” must only be used when the document is issued after vessel
sailing. If the customer wants the document issued before vessel sailing, the
clause “Received for shipment” is used instead.
Most carriers will not insert the clause “Clean onboard” on the Bill. Even for LCLshipments
where they are physically handling the cartons, they cannot check the
quality and condition of the merchandise inside the cartons.
Clean B/L without notations of damages or shortcomings
The buyer or the bank (Letter of Credit) sometimes demands a so-called “clean
B/L” which means a B/L without any notes of damages or shortcomings at the time
of loading. This sometimes creates problems between the carrier and the shipper,
who in spite of damage or other discrepancy to the cargo wants the shipping line to
incorrectly issue a “Clean B/L” against a letter of indemnity from the shipper or a
bank guarantee. Such indemnities are not allowed under the international
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conventions that governs Bs/L and if brought to court will not be upheld. Therefore
the carrier should not issue “Clean” Bs/L if this is not the correct cargo description.
24-hour manifest rule (U.S. customs)
You may have heard about the 24-hour manifest rule established by U.S. Customs
and its requirements regarding description of goods – for example that “S.T.C.” is
not allowed and that the cargo description must be very specific (i.e. “general
merchandise” and other general cargo descriptions are not allowed).
For the purpose of transport documentation, you should be aware that the U.S.
Customs rules relate to the vessel manifest, not the printed Bill of Lading or Waybill
document. The vessel manifest is used for customs purposes. The printed Bill or
Waybill is used for legal and commercial purposes.
Bill of Lading – Document Date
The date of the B/L must be the date on which it is actually issued, irrespective of
the date the cargo was received or loaded, however not earlier than the date the
cargo was received or loaded respectively.
For a “Shipped on Board” B/L, the date cannot be earlier than the date the cargo
was actually loaded on board the first vessel or conveyance mentioned in the
document.
For a “Received for Shipment” B/L, the date cannot be earlier than the date the
cargo was actually received at the place of receipt or load port mentioned in the
document.
Sometimes, a shipper will request a carrier to issue the B/L with earlier or later
dates in order to comply with time restrictions in the shipper’s Letter of Credit. The
carrier is not obliged to do so and should not do so. It would be considered an
attempt to defraud the buyer.
Bill of Lading – Freight payment
The charges payable at origin (usually by the shipper) are called “prepaid”. The
charges payable at destination (usually by the consignee) are called “collect”.
In order to secure payment, the carrier will usually not release the original B/L
document to the shipper before he has paid all prepaid charges.
At destination, the carrier will usually not release the goods until all freight charges
are paid (even when a duly endorsed B/L is presented).
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It is a commercial decision by the carrier whether they wish to grant the shipper
and/or consignee credit. If credit has been granted, the carrier will release the
goods and expect the freight and other costs to be paid within the agreed time.
The shipper is responsible for advising the carrier which charges are prepaid and
collect. If the carrier is in doubt whether the consignee will pay for the collect
charges, he may check with the consignee before accepting the shipment.
In some areas of the world, from where there is a great risk and/or cost for the
carrier to ship cargo, the carrier may require that all charges are prepaid.
Bill of Lading – Filing
After collecting the original B/L and releasing the goods, the carrier should stamp
the original B/L “accomplished” (or similar).
The carrier must then file the original B/L for at least 6 years according to
international and domestic regulations. Local legislation may require a longer filing
period.
Bill of Lading – Why use this document?
When buying goods internationally, there is a distance between the buyer and the
seller. The exchange of goods and the payment for the goods therefore cannot
take place at the same time. The seller wants to ensure that he does not transfer
ownership of the goods without receiving payment, and the buyer wants to make
sure that he does not pay without getting ownership of the goods that he was
expecting.
The seller uses the B/L as proof that he has delivered the goods for shipment at
the agreed place. The B/L also confirms the quantity and apparent condition of the
goods in the B/L.
When a B/L is issued (a document of title), the carrier will only release the goods at
destination to the party who can present an original B/L that covers the goods. The
B/L becomes the “key to the cargo”.
When the buyer has paid for the goods, the seller will transfer the original Bs/L to
the buyer. If the buyer does not pay for the goods, the seller can keep the original
Bs/L and in this way control that the buyer does not receive the goods from the
carrier. (In some cases, the buyer will require to receive the originals before
paying).
In cases where the payment for the goods is facilitated by a bank through a Letter
of Credit, the bank at origin may require that they obtain title to the goods in the
period between paying the seller and obtaining payment from the buyer or the
buyer’s bank. This is why the B/L is sometimes consigned “to order of [bank]”. If it
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happened that the buyer could not pay for the goods after all, the bank would be
able to recover some of their loss by selling the goods.
In other cases, the B/L is used because goods are sold during transit and there is a
need to have a negotiable/transferable document to cover the shipment. The
original consignee will endorse the B/L to the new consignee who can then obtain
release of the goods.
It is important to note that although the B/L is used to facilitate the payment of
goods between seller and buyer, the carrier does NOT take part in the change of
ownership of goods. This is only a matter between the seller and the buyer. The
carrier follows the rules and obligations as stated in the B/L and contract of
carriage (ships and releases goods in accordance herewith).
Bill of Lading – the role of Maersk Logistics
In Maersk Logistics we do not issue carrier Bills of Lading. However, we work with
the carriers either on behalf of the clients (when we are acting as agents on behalf
of the shipper or the consignee and the customer has agreed freight rates and
other terms and conditions directly with the carrier) or as customers (when we are
acting as NVOCC and have sub-contracted our shipments to the carrier).
Scenario 1: Acting as agent on behalf of a shipper or consignee
When acting as agent on behalf of our customers, the carrier B/L evidences a
contract of carriage between the carrier and our customer. Maersk Logistics is not
a party to the contract under the B/L although we are performing freight forwarding
services on behalf of our client.
In this scenario, we usually book the cargo with the carrier chosen by our
customer, arrange containers to be loaded/consolidated and brought to the
carrier’s terminal, co-ordinate the issuance of documents and check the documents
issued by the carrier. We may also pay the carrier charges on behalf of our
customer and invoice him accordingly. At destination, we may co-ordinate the
release and delivery of the container and arrange customs clearance on behalf of
our client.
Scenario 2: Acting as NVOCC
Wen acting as NVOCC, Maersk Logistics is the customer of the carrier. We
therefore book our shipments with the carrier, deliver the goods in our name,
provide shipper’s instructions, pay freight charges to the carrier and obtain release
of the goods at destination based on the B/L which is issued between us and the
carrier.
Bill of Lading – Difference between B/L and SWB
1. In which areas are the B/L and the SWB the same?
􀂃 They both function as a Receipt for cargo and Evidence of contract of carriage
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􀂃 They both contain details about the shipment such as shipper, consignee,
vessel, place of delivery, cargo description and date
􀂃 They must not be issued with a date different than the true issuance date /
onboard date
􀂃 They are issued by the ocean carrier (VOCC)
􀂃 They obligate the carrier to ensure correct description of the goods
􀂃 They obligate the carrier to care for the cargo while in his custody
􀂃 They obligate the carrier to ensure that he releases the goods to the correctly
entitled party at destination
2. In which areas are the B/L and the SWB different?
􀂃 The B/L is a document of title. The Sea Waybill is NOT.
􀂃 A SWB cannot be consigned “to order”, it must always state a consignee.
􀂃 The B/L is printed in sets of originals and copies (often 3 originals). A SWB is
only printed as copies.
􀂃 The carrier does not require an original SWB in order to release the goods at
destination
Bill of Lading – Difference between B/L and HBL
1. In which areas are the carrier B/L and the House B/L the same?
􀂃 They have the same functions: A receipt for cargo, A document of title,
Evidence of contract of carriage
􀂃 They can both be endorsed to another party if the document is consigned “to
order” or “to order of [name/company]”
􀂃 They must not be issued with an onboard date different than the true onboard
date
􀂃 They are both issued in a set of (usually) 3 originals and a reasonable number
of copies
􀂃 They often have the same format and fields
􀂃 They obligate the issuing party to ensure correct description of the goods
􀂃 They obligate the issuing party to care for the cargo while in his custody
􀂃 They obligate the issuing party to ensure that the goods are released to the
correctly entitled party at destination
2. In which areas are the carrier B/L and the House B/L different?
􀂃 The HBL is issued by the NVOCC who does not operate vessels. The B/L is
issued by a VOCC.
􀂃 The HBL evidences a contract between the NVOCC and his customer. The B/L
evidences a contract between the carrier and his customer.
􀂃 Maersk Logistics can issue HBL. We cannot issue carrier B/L.

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