Bill of Lading
A bill of lading is a transport document issued in connection with the carriage of goods by sea. Depending on its form, it can evidence receipt of the goods, contain the carriage terms and function as a document controlling delivery.
Also called: B/L · BOL
A bill of lading is issued by the carrier, or its agent, when goods are loaded for carriage by sea. It describes the cargo, the shipper, the consignee, the ports and the vessel, and its date is the evidence of when the goods shipped. It has three functions: a receipt for the goods, evidence of the contract of carriage, and, in its negotiable form, a document of title that controls who can take delivery at the destination port.
That third function is why the bill of lading matters so much in trade payments. A negotiable bill issued to order can transfer control of the goods by endorsement, so banks can hold it as security under a letter of credit or a documentary collection and release it only when the buyer pays or accepts a draft. A straight, non-negotiable bill names the consignee directly and offers far less leverage. A sea waybill is not a document of title at all.
For payment and compliance purposes, the bill of lading confirms that a shipment actually happened. Banks may compare its dates, ports, quantities and parties with the commercial invoice and the payment. Fraudulent or recycled bills of lading are a known feature of trade-based money laundering and fake-supplier schemes, so a reviewer may verify a bill with the carrier or a tracking service. Air shipments use an air waybill, which does not function as a document of title.
In practice
Not every transport document controls the goods. Check whether the bill is negotiable, straight, or actually a sea waybill before relying on it as security for payment.
Example
Hypothetically, a Chinese exporter ships 40 tonnes of steel fittings under a documentary collection. The carrier issues a negotiable bill of lading made out to order and endorsed in blank. The exporter's bank sends it to the importer's bank, which releases it only when the importer pays US$62,000. Without the original bill, the importer cannot collect the cargo from the port.
See also
- Commercial InvoiceA commercial invoice is the seller’s formal statement of the goods or services supplied and the amount owed by the buyer. Banks, customs authorities and payment providers may use it to verify the payment amount, parties, currency and commercial purpose.
- Letter of CreditA letter of credit is a bank’s conditional undertaking to pay when the seller presents documents that comply with its stated terms. Banks examine documents rather than confirming the physical quality or performance of the goods.
- Documentary CollectionA documentary collection is a trade-payment method in which banks handle shipping or commercial documents in exchange for payment or acceptance. The banks facilitate the process but do not provide the same payment guarantee as an issuing bank under a letter of credit.
- IncotermsIncoterms are standardized trade terms published by the International Chamber of Commerce that allocate specified delivery responsibilities, costs and risks between buyer and seller. They do not by themselves determine ownership, payment method or every contractual obligation.