Carriage of goods

What is the bill of lading?

A legal document between the shipper of a particular good and the carrier detailing the type,
quantity and destination of the good being carried.

Functions of the bill of lading

The bill of lading has three (3) main functions:
OReceipt for goods received on board a vessel and evidence of the condition of the goods;
OEvidence of the terms of the contract of carriage between the shipper and the carrier;
ODocument of title to the goods which enables the consignee to take delivery of the goods at the
destination or to dispose of the said goods by way of endorsement and delivery of the bill of
lading.

Receipt for goods

OThe B/L serves as evidence that certain cargo has been received for carriage in a stated
condition, determined at a set time, usually at the time of loading

OIssued by the master of the carrying ship on behalf of the carrier, it is usually signed on his or
her behalf by the master or the ship's agents at the port of loading

OClean B/L: B/L free from any adverse remarks or notations (clauses) made by the shipping
company about the condition, packaging or quantity of the goods being shipped. Importers and
their banks usually insist on a clean B/L.
OA Clean B/L has the statement, “received in apparent good order and condition”.
OClaused B/L: A bill of lading indicating some damage to the goods. Most banks or other
institutions financing the shipment refuse to accept or honour claused bills of lading .
OOn a Claused B/L, the carrier notes on the bill of lading the actual deteriorated condition of the
goods or their packages noticed on loading .

Receipt for goods

OLetter of indemnity: is a document where the shipper promises to indemnify the carrier for
any liability arising due to the issue of a clean bill of lading.
OThe letter of indemnity results from an attempt by the carrier to satisfy his client, the shipper,
whose purpose is to obtain payment of the purchase price of the goods or an immediate
documentary credit, by issuing to the shipper a document (the clean bill of lading) which he as
carrier knows to be incorrect and misleading.

Receipt for goods

ONot encouraged but sometimes practiced.
OJudges have strongly objected against the practice:
OWright J., in United Baltic Corp. v. Dundee Perth & London Shipping Co. (1928) declared:

“The practice of issuing clean bills of lading when goods are damaged is very reprehensible. It
leads to trouble, and the people who do it ought to suffer trouble.”
OThe Federal Court of Australia held in Hunter Grain Pty. Ltd. v. Hyundai Merchant Marine
Co. Ltd (1993):

“Honesty and integrity in relation to the signing of receipts for goods the subject of bills of
lading is essential if persons engaged in international trade are to have any confidence in
documents which play such a vital role in relation to the authorization of the payment of money.
If receipts are signed dishonestly or in bad faith, the confidence of the international trading
community is undermined and a whole system that was designed to work for the benefit and
protection of both parties to a transaction such as this will be called into question.”

Receipt for goods

OThere a number of things that are recorded on the bill of lading:
OShipper's name and address
OConsignee's name and address
OName and address of the party to notify at destination, if different
ODescription of the goods
OQuantity or weight of the goods
ONumber of packages
OName of the vessel and voyage number
OPort of loading
OPort of discharge
OPlace where freight is payable
OName of shipping line
OMaster's signature
OPlace and date of issue, and
ONumber of original bills of lading

Evidence of terms of the contract

OEvidence of a pre-existing, previously formed contract of carriage

OThe B/L contains the actual promise of carriage. The promise involves bringing the cargo to its
destination and delivering the cargo in exchange for a presented B/L – and usually in an
exchange for the payment of freight
OCommon law respects the terms and conditions of the B/L issued by the shipowner as the best
evidence of the contract, unless there are grounds to disturb the assumption.

Document of title
OThe B/L is a document of title, taking the place of the goods themselves for the purpose of
sale, pledge, etc.

ORight to take delivery of the goods: only the person possessing the B/L can secure the release
of the goods (if the rules are followed)

OTransfer of title by endorsement: The B/L may be transferred by endorsing it with the name
of the transferee under signature of the transferor, the last holder of the bill, and delivering
possession of it.

Document of title
OOther non-negotiable transport documents have emerged, such as Sea Waybills or straight bill
of lading
OA sea waybill is a shipping document that is only a receipt of cargo taken on board a vessel
and which, unlike a bill of lading, is not a document of title.
OA straight bill of lading is used where the goods have been paid for or do not require
payment. Under this B/L, the shipping company will deliver the shipment to its consignee on
presentation of an identification.

Dating the B/L

OThe B/L must be dated the date of completion of loading of the cargo covered by the bill.
OMisdating a bill may constitute fraud and a carrier will not be entitled to claim under his P&I
insurance for any losses arising from misdating the bill of lading (B/L).
OIn such circumstances, a letter of indemnity from the shipper/charterer will not be enforceable
(because it is designed to facilitate the issuance of a false bill of lading (B/L)) and is therefore of
no assistance to the shipowner.

Signing the B/L

OWhen the cargo has been loaded, the shipper must present a B/L to the master or his agent for
signature within a reasonable time.
OThe bill of lading (B/L) can be signed by the Master, the ship’s agent (following an express
letter of authority signed by the Master), the charterers (who may be authorised either by virtue
of the charterparty or by express letter of authority from the Master) or the shipowner’s head
office, in all cases subject to the Master confirming the contents of the bill of lading (B/L).
Consequences for inaccurate B/L
OConsequences for using an inaccurate B/L are
OExposure to Claims: For example, if the bill of lading indicates that the goods were loaded in
good order and condition, but the consignee receives them at the destination in a damaged
condition or with a shortage, the consignee will be entitled to make a claim for the damage or
shortage against the bill of lading carrier.
OLoss of the right to limit liability
OLoss of P&I cover
OLoss of the right of indemnity
OCriminal prosecution

Why back-date a B/L?

OFirstly, what is pre-dating or back-dating..??
OIt is when the shipper requests the shipping line to show the Shipped on Board date on the bill
of lading as a date before the actual sailing of the vessel
O(example : the vessel actually sails on the 2nd of March but shipper wants the line to show the
shipped on board date on the bill of lading as 28th of February)

OWhy would a shipper want his bill of lading to be pre-dated..??

OThis request is generally made to the shipping line when :
OThere is a Letter of Credit involved and the L/C stipulates a date by which the shipment must
be effected
OFor some reason, the shipper is not able to carry out the shipment within the stipulated time, he
stands to lose his order and could be subjected to further penalties and/or default

Reference

Caribbean Maritime Institute. (2002). "Study Guide". Carriage of Goods by Sea Law.