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Bill of Lading: what you need to know

A Bill of Lading, often written as BL or BoL, is a document issued by a carrier that lists the goods being shipped and specifies the terms of their transport. While the exact origin of the BL is unknown, the concept of documenting goods on board a trade vessel is an old one - dating back to medieval and even Roman eras. In the modern world, the Carriage of Goods by Sea Act (COGSA) provides a set of rules that govern bills of lading and their application to the transport of goods. A BL was originally meant to be applied to maritime transportation, but it is nowadays used by every transportation mode: sea freight, airfreight, trucking, and railroad.

The BL has many uses. It can be a receipt of goods, where the carrier acknowledges that they have received the goods from the shipper. It’s important to note that the carrier confirms only the carton quantities they receive, but not the amount or type of goods that are inside the cartons – this is why the BL states “as declared by shipper.” Besides being a confirmation of receipt, a BL also acts as an evidence of the terms of the contract of transportation. It can even be used for insurance and customs purposes.

The Hague Rules state that every BL should include the following:

(a) The leading marks necessary for identification of the goods as the same are furnished in writing by the shipper before the loading of such goods starts, provided such marks are stamped or otherwise shown clearly upon the goods if uncovered, or on the cases or coverings in which such goods are contained, in such a manner as should ordinarily remain legible until the end of the voyage.

(b) Either the number of packages or pieces, or the quantity, or weight, as the case may be, as furnished in writing by the shipper.

(c) The apparent order and condition of the goods.

The complete law can be accessed on the Admiralty Law Guide website

Types of BL

There are several types of BLs for ocean transportation, although some are becoming less common: Straight Bill of Lading, Inland Bill of Lading, Multimodal Bill of Lading, and others. To keep things simple, carriers and freight forwarders only use a few terms:

  • Sea Way Bill: It’s mainly called BL, but some carriers use the term “Sea Way Bill,” which is used for ocean transportation.
  • Air Way Bill: This is what it sounds like – a BL for air freight.
  • Bill of Lading: This is used for both air and ocean transport, and for any other combination: sea transport and trucking, air transport and trucking, etc.

House BL vs. Master BL

A House BL is always a BL issued by “the house” that provides the service to you, AKA your freight forwarder (FF).

The Master BL is issued by the party who is actually in charge (the master) of physically moving your goods – the airline or shipping line.

Since a FF has a service contract with a shipping line in order to occupy space in a ship, the forwarder requires the Master BL as evidence that they have delivered the goods to the line. Then they provide you – the client – a House BL as evidence that your shipment is in their hands. The Master BL states the name of the FF at the origin as the Shipper, and the name of the FF  at the destination as the Consignee. As the FF’s client, you usually work with the FF at the destination; but it is typical for a freight forwarding company to have a branch or a partner at the destination. For example, Kuehne + Nagel in Los Angeles (destination) works with Kuehne + Nagel in Shanghai (origin) to import your goods from China to the US. Same procedures apply for airfreight involving an airline and a cargo jet.

Original BL vs. Express Release BL

Original BL is the BL issued by the forwarder to the factory as a proof that the forwarder has picked up the goods from the factory. Most commonly, the original BL states the factory as the shipper.

For the consignee – typically the client – to retrieve the goods at the final destination, the BL must be sent by the shipper to the consignee either as an Original BL or an Express Release. Express Release is much more common nowadays. The Original BL differs from the Express Release in an important way: it requires the consignee or importer to physically have it in hand in order to receive the goods. Therefore, the document has to be sent physically from one location to another, with additional shipping costs involved for the document delivery. The Original BL is mostly used when the shipper is waiting for payment confirmation from the consignee while advancing a shipment. If the shipper does not receive payment, the goods will not be released to the consignee even if they have arrived at their final destination.

In contrast, an Express Release (or Telex Release), is an easy document that allows an electronic or printed copy of BL to be enough for the importer to claim the goods. Express Release is the most popular among current traders.

The factory will issue a Telex Release to the FF to confirm payment. With the Telex Release, the FF can retrieve the goods at the port.

How a BL is created

Here is a brief summary of the steps taken to get your shipment from the factory:

  1. You place a booking with your freight forwarder indicating weight, dimensions, addresses of pickup and delivery, and additional services.
  2. For air shipments: The FF requests a booking with the airline. For sea shipments: The FF adjusts the container loading plan when it’s an LCL shipment
  3. The FF responds with a booking confirmation for you
  4. The FF sends you a draft of the BL for you to revise and adjust, if necessary
  5. You confirm the final weight and dimensions based on your final packaging
  6. The FF confirms the details with the airline or shipping line and receives the Master BL
  7. The FF issues the House BL to you
  8. FF issues original BL to the factory
  9. Your goods are picked up at origin and get ready for overseas shipping
  10. Shipment arrives at port
  11. You pay factory
  12. Factory issues FF Telex Release to the FF
  13. FF picks up goods at destination port

If you’ve already made a payment to your factory before the goods are shipped, skip steps 11 and 12. Your freight forwarder won’t have to wait for the Telex Release. Instead they can pick up the goods as soon as the shipment arrives at the destination port.

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