Bills of Lading

You see it almost everyday, you endorse it, stamp it, keep it in your files for years, you pay thousands of dollars to a bank sometimes to get a hold of this piece of paper, sometimes you take it to your lawyer. It’s arguably the most important and widely used document in the shipping industry. It can also be one of the most overlooked items when making shipments.

The functions of the bill of lading were gradually created by the practical needs and technical developments of a certain time. I think it’s necessary to understand how the bill of lading evolved into the instrument that we know today. Bills of “Loading” as they were once called have been around for centuries, the early transportation contracts began to appear in 13th century. Back then it only functioned as a receipt for goods received by master or ship owners. Through the centuries it has developed into a receipt containing the contract of carriage between shipper and carrier, and it acquired the third characteristic later on, negotiable document of title.

Originally merchants in the old days didn’t really have a need for such a document when transporting their goods, because merchants were often also the master of the ship or at least they used to travel at sea with their merchandise. Obviously this wasn’t very practical practice. With commercial activity increasing in the world and merchants staying at shore, such transportation documents needed to be generated to prevent disputes and to serve as a proof of shipment to protect both shipper and consignee.

Back in old times, masters of the vessels had to be attended with clerks when receiving goods, these clerks were a member of the crew and their most important duty was to accurately record the cargo received in a parchment book or register while the master, shipper and another witness were present. The bill of lading which was originally a copy of the book of lading probably produced to guard against the loss of the only record of the cargo in case a ship was lost. In such case the shipper would often be at the mercy of the master to clarify what the cargo consisted. Since the merchants didn’t accompany the cargo anymore, there was also a need for separate documentation that they could keep with them, and later another copy would also serve as a proof that the party demanding the cargo at destination was in fact the consignee. One of the earliest documents where the bill of lading is mentioned by its modern name was in Europe, in the law of the Hanseatic cities in 1591. It’s also widely accepted that Italy is the birthplace of  the bill of lading, because of the growing economies of the Italian city states due to the sea commerce between Italy and the Roman Empire in Constantinople.

Through the centuries, many protocols and rules shaped the characteristics of today’s modern bill of lading, limitation of the parties, practices of bill of lading exchanges, shipper’s, consignee’s and carrier’s legal rights. Hague Visby protocols, Bill of Lading Act of U.K. Brussels Protocol, Carriage of Goods by Sea Act are some of the most important ones. There are many types of bill of ladings used in shipping industry depending on transportation mode, purpose etc., to summarize shortly we can list Shipped (On Board) B/L and received for shipment B/L, Clean B/L and unclean B/L, Straight, blank and order B/L (which is used widely used in international trade), Direct, transshipment, through bill of lading, Liner B/L, container B/L and combined transport B/L, On Deck B/L, stale B/L, ante-dated B/L and advanced B/L, Non-Negotiable Bill of Lading, House Bill of Lading (also known as forwarder bill of lading).

There have been many efforts to bring into existence negotiable electronic bill of lading that would replicate all the functions of their paper version but the development has been slow so far. Because this concept hasn’t received the full support and confidence of all the participants in international business due to concerns about security and authenticity. Now after mentioning brief history of the bill of lading, I’d like to mention the importance of it. A bill of lading has 3 main characteristics:

(1) Receipt for the goods shipped.
(2) Evidence of the terms of the contract of carriage
(3) Document of title to the goods specified in the Bill of Lading.

The Receipt Function.
It indicates the identification of the shipped goods, the number of packages, pieces, quantity, or weight of the goods shipped, and the apparent order or condition of the goods at the time of loading.

Evidence of Contract of Carriage Function

It is evidence about a valid contract of carriage of goods by sea. In short the bill of lading is evidence of the contract of carriage of goods. So, it is not a contract but it is only evidence of the contract between shipper and carrier.
Bill of lading is a document of title.

The bill of lading is a typical document of title. This makes it one of the key instruments in international trade. A document of title to goods is a written document which proves that the person indicated on it as the owner of goods has title to them. When transferred from the indicated owner of the goods to another party, transfers title to those goods to that other party, even though the goods may not be in the physical possession of the original owner. The passage of title to goods specified in a Bill of Lading is done by endorsement.