Bill of lading – what is it and how does it work in practice?

Transport documents play a key role in international maritime transport – if they are not prepared properly, even the best-planned delivery may encounter difficulties. Among them, the bill of lading is of particular importance, as it combines logistical, legal and commercial functions.

At first glance, it may seem like a simple confirmation of the loading of goods onto a ship, but in practice it is also a tool for managing cargo during the voyage and the basis for settlements between the parties to the transaction.

In this article, we explain exactly what a bill of lading is, what types there are, what it should contain and how it works in practice. We also highlight the most common mistakes that can occur when using it.

What is a bill of lading and what is its significance in transport?

A bill of lading (B/L, BL, BOL) is one of the most important documents used in the transport of goods by sea. It is issued by the carrier or its representative – most often the freight forwarder, shipowner or ship captain – after the goods have been loaded on board.

It has three basic functions: it constitutes proof of acceptance of the cargo, is proof of the conclusion of a contract of carriage and, most importantly, serves as a title to the goods. This means that possession of the original bill of lading confirms the right to collect the cargo at the port of destination and also enables this right to be transferred to another entity, for example by endorsement or assignment. The new purchaser of the bill of lading obtains the right to dispose of the cargo.

As a negotiable instrument, the bill of lading plays an important role not only in logistics but also in commercial settlements. It is crucial in transactions secured by a letter of credit – the bank transfers the document (and thus the right to the goods) only after the payment terms have been met. This makes the bill of lading a real tool for controlling the cargo and securing the interests of the parties.

In practice, this means that without a bill of lading, it is impossible to collect the goods at the port of destination, and its loss can paralyse the entire logistics operation. This document often literally ‘guides’ the shipment – it regulates who can manage it and when, and, if necessary, even allows the sale of goods during transport.

The document is issued in as many numbered copies as requested by the shipper – usually three. Each copy is as valid as the original. Copies may also be made for information purposes only and for internal use by the importer and exporter.

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What are the types of bills of lading?

There are many types of bills of lading, used, among other things, depending on who issues them, to whom they are issued, the condition of the goods received and the route of transport. The type of bill of lading determines how the cargo is collected, how it is sold during the voyage and the scope of the carrier’s liability.

Classification according to to whom it is issued:

• Straight Bill of Lading – issued to a specific person or company, it can be transferred by assignment.
• To Order Bill of Lading – issued on behalf of the shipper or another person designated by the shipper. It can be transferred by endorsement.
• Bearer Bill of Lading – the rights to the goods are vested in anyone who holds the document.

Classification based on the time of issue:

• Shipped / On Board Bill of Lading – issued after the goods have been loaded onto the ship.
• Received for Shipment – issued upon acceptance of the goods for loading.

Classification according to the issuer:

• Master Bill of Lading (M/BL) – issued by the shipowner or carrier
• House Bill of Lading (H/BL) – issued by the freight forwarder.
• FIATA Bill of Lading – issued by the Multimodal Transport Operator, i.e. the freight forwarder acting as a multimodal transport operator (MTO). In the event of damage to or loss of the cargo, the freight forwarder is liable.
• Combined transport bill of lading – issued by the Combined Transport Operator, i.e. the shipowner acting as a multimodal transport operator (CTO). The shipowner bears full responsibility for the goods throughout the entire transport route.

Classification according to the condition of the goods:

• Clean Bill of Lading – contains no reservations regarding the condition of the cargo.
• Claused / Dirty Bill of Lading – contains comments on damage or discrepancies.

Classification according to the course of transport:

• Simple Bill of Lading – for transport without transhipment.
• Through Bill of Lading – covers the transport of cargo with transhipments in different ports, with a possible change of carriers.
• Transshipment Bill of Lading – confirms that the goods will be transhipped during the voyage.

Classification by type of carrier:

• Liner Bill of Lading – applies to liner transport.
• Bill of Lading to be used with charter – used in the context of ship chartering.

Classification by form:

• Original paper bill of lading – with signature and stamp.
• Electronic bill of lading (Electronic Bill of Lading, eBL) – electronic version of the document.

The variety of bills of lading results from the flexibility required by international maritime trade. The choice of the appropriate document should always take into account the type of commercial relationship, the route of transport and the need to protect the interests of the parties.

Bill of lading – what does it contain?

A bill of lading must contain precisely defined information that gives it legal and practical force. This data is the basis for identifying the shipment, its receipt, financial settlements and any claims.

The bill of lading must contain the following information

• the name of the carrier and the details of its representative (e.g. the ship’s captain or forwarding agent),
• the name of the shipper (details of the person who loaded the cargo),
• the name of the consignee (details of the recipient of the cargo) or information that the document has been issued ‘to the bearer’ or ‘on behalf of’,
• the name of the ship on which the transport is being carried out,
• the description of the cargo and its type – the description of the cargo should include the quantity or number of items, dimensions, weight and volume,
• description of the external condition of the cargo and packaging – very important in the event of any claims,
• main marks on the packaging or on individual items of cargo, necessary to identify the cargo, indicated in writing by the shipper before loading,
• indication of freight and carrier’s charges, together with information whether they have been paid in advance or whether payment is to be made in accordance with the terms of another document,
• the exact name of the place of loading and the name of the place of discharge of the cargo (or information on where or when the place of discharge of the goods will be indicated),
• the date and place of issue, the number of copies of the bill of lading issued and the signature of the carrier or his representative, e.g. the ship’s captain.

It is worth noting that the information in the bill of lading should match the packing list and commercial invoice. Even a minor discrepancy can result in problems at the border, customs clearance delays or additional costs.

What is the step-by-step process of a bill of lading?

Understanding how a bill of lading works in practice is crucial for the smooth execution of sea transport. This allows you to avoid unnecessary complications.

The bill of lading circulation usually takes place in several stages:

1. Acceptance of goods by the carrier – after loading onto the ship, the carrier (or its representative, e.g. the ship’s captain, freight forwarder) issues a bill of lading at the request of the shipper, based on the information received from them.
2. Issuing the document to the shipper – the bill of lading is usually drawn up in three original copies (or as many as requested by the shipper). The freight forwarder may retain the document until payment has been made by the buyer of the goods.
3. Transfer of the document to the buyer – upon receipt of payment for the goods, the original bill of lading is transferred to the buyer. This can be done directly, by courier or through a bank (e.g. under a documentary letter of credit).
4. Presentation of the document at the port of destination – the buyer, having the original bill of lading, presents it to the carrier at the port of destination. This entitles him to collect the cargo.
5. End of circulation – after the goods have been released, the documents cease to be valid.

In some cases, for convenience, simplified forms of documentation are used, such as a sea waybill (Sea Waybill) or a telex release, known as a telex (Telex Release), which eliminate the need for physical circulation of originals. However, in the case of a bill of lading, the correct flow of documents is a prerequisite for the successful collection of the cargo.

Bill of lading – the most common errors and problems

An incorrectly completed or improperly used bill of lading can cause real complications, ranging from delivery delays to financial risk. Below, we have compiled the most common problems with bills of lading that arise in maritime transport practice:

• Data inconsistency – differences between the data on the bill of lading and those on the invoice or packing list (e.g. in weight, number of items, name of goods or markings) may lead to detention at the border or refusal to accept the cargo. This is also a common reason for disputes upon receipt of goods at the port of destination.
• Lack of endorsement – in the case of a bill of lading on order, a lack of continuity of endorsements may prevent the transfer of ownership of the goods and result in their detention.
• Loss of the original document – as a bill of lading is a negotiable instrument, its loss involves costly and time-consuming procedures (bank guarantees are often required). Furthermore, the absence of a bill of lading suspends the release of the cargo.
• Issuing a clausulated, so-called dirty bill of lading – the reservations contained therein regarding the external condition of the cargo may result, among other things, in problems with receipt or a reduction in the commercial value of the goods.

Correct issuance of a bill of lading, ensuring its consistency with other elements of the cargo documentation and securing it against loss are key to avoiding costly operational errors.

Bill of lading vs. sea waybill – differences

In the TSL industry, a bill of lading is often confused with a sea waybill. This mistake even appears in industry publications, yet these are two separate documents with completely different characteristics and legal significance.

The common denominator between a bill of lading and a sea waybill is the confirmation of acceptance of cargo on board a ship, but their functions in the movement of goods differ greatly. First of all, a bill of lading is a security representing the right of ownership of the goods – what is more, it can be transferred to another entity. A sea waybill, on the other hand, does not have this status – it serves only as a transport document.

For complete clarity, below you will find a summary of the most important differences between them.

Both documents are important in everyday operations, but only one of them – the bill of lading – provides a real possibility to manage the goods during transport.

Summary

A bill of lading is one of the most important documents in maritime transport. Not only does it constitute proof of acceptance of cargo on board a ship, but it also serves as a title of ownership and confirmation of the conclusion of a contract of carriage. Its correct issuance and circulation have a direct impact on the safety of goods receipt, timely delivery and settlement in international maritime trade.

Although often confused with a sea waybill, a bill of lading is a much more important document – it allows the transfer of rights to the goods to another entity and gives real rights to dispose of the cargo throughout the entire transport route – from the port of loading to the port of destination. Shippers, freight forwarders and banks alike should treat it with full awareness of its importance. It is one of the key elements of effective maritime transport

Frequently asked questions (FAQ)

What is a B/L in transport? What does bill of lading mean?

The abbreviation B/L comes from the English term bill of lading and means a document used in maritime transport which confirms the acceptance of cargo for transport and forms the basis for its release at the end of the journey. It also serves as a title of ownership and proof of the conclusion of a contract of carriage between the sender and the carrier.

In what language is a bill of lading issued?

Although national regulations do not impose a language, in international practice, a sea bill of lading is almost always drawn up in English. English terminology, such as clean bill of lading, freight collect and master bill of lading, is standard in global trade.

Who issues the sea waybill and who issues the B/L?

A bill of lading (B/L) is issued by the carrier or another representative of the carrier (e.g. the captain or freight forwarder) after the goods have been accepted on board at the port of loading. The carrier is also responsible for issuing the sea waybill. In the case of a Sea Waybill, the consignee does not need to present the original document.