The bill of lading: what it is and how to read one

Three jobs in one document

A bill of lading, often shortened to B/L, is issued by the carrier or its agent when cargo is loaded. It does three things at once:

• Receipt: it confirms that the carrier has received the goods in the stated quantity and apparent condition.
• Evidence of the contract of carriage: it records the terms on which the carrier moves the goods.
• Document of title: when it is a negotiable original, whoever lawfully holds it can claim the cargo at destination, and it can be transferred to another party.

Why it matters for payment

In most letters of credit and collections, the bill of lading is the central document. Banks pay against it, and the buyer needs the original to collect the cargo. This is why a bill that is wrong, late or missing can block a deal even when the goods are fine.

Main types

Master, house and charter party bills

A master bill is issued by the shipping line to the forwarder or shipper. A house bill is issued by a freight forwarder to its customer. When cargo moves in bulk on a chartered vessel, the bill may be issued under a charter party, and it refers to the charter terms. Banks accept these only if the credit allows. If the credit says nothing, ask your bank before shipment, not after.

Fields to check, line by line

• Shipper: the seller or the party named in the credit, spelled exactly.
• Consignee and notify party: who may take the cargo and who is told when it arrives.
• Description of goods: must be consistent with the invoice and contract.
• Quantity and packages: weight, number of containers or bags.
• Port of loading and port of discharge, and the vessel name and voyage.
• Shipped on board date and place of issue.
• Freight statement: freight prepaid or freight collect, in line with the Incoterm.
• Number of originals issued, and signature by or for the carrier.
• Container and seal numbers where containers are used.

Clean and claused bills

A clean bill carries no remarks that the goods or packing are damaged or defective. If the carrier adds a remark such as torn bags or rust on the cargo, the bill is claused or foul, and banks usually refuse it unless the credit allows it. The remedy is to correct the problem at loading, not to argue with the bank later.

Original sets and release

Negotiable bills are issued in a set, often three originals. Any one can be used to claim the cargo, and once one is used the others lose effect. Keep all originals under control until they are presented. At the discharge port, the carrier releases the cargo against an original. Alternatives, used only when both sides agree, include a telex release, where the carrier releases cargo based on an electronic instruction after originals are surrendered at origin, and a sea waybill.

Problems to look for

If something looks wrong, ask the shipper and the carrier for a clarification in writing, and do not release payment until it is resolved.

• A shipped on board date that falls after the latest shipment date in the contract.
• Differences between the port named on the bill and the one in the contract.
• A bill issued by a party that is not the carrier or its named agent, without a stated capacity.
• Unusual endorsements, changes or corrections without a stamp and signature.
• Cargo quantity on the bill that differs from the inspection certificate.

Keeping it simple

Tonport's document check compares values from a bill of lading, a weight certificate and an analysis certificate against the contract in your browser, and the verify tool can register a file fingerprint to help spot duplicate use. They are aids for a careful reader, and the final comparison with the contract and the letter of credit remains yours.

Frequently asked questions

Is a bill of lading the same as proof of ownership?

A negotiable original is a document of title to the cargo in the carrier's hands, which gives the holder the right to claim delivery. Ownership of the goods itself depends on the sales contract.

What is a telex release?

It is an arrangement in which the carrier releases cargo at destination on an electronic instruction from the shipper's side, after the original bills have been surrendered at the port of loading.

What does freight prepaid mean on the bill?

It means freight has been paid by the shipper, as under CFR and CIF. Freight collect means the consignee pays at destination, as under FOB when the buyer arranges the vessel.

What is a stale bill of lading?

It is a bill presented to the bank after the time allowed for presentation. Many credits require presentation within a set number of days after shipment.