Bill of Lading

A Presentation by: Ankit Shah(5) Harsh Bhatia(14) Lalit Gupta(19) Piyush Marwaha(25) Sahil Saini(35) Mayank Gupta(41) Faraz Anis(42)

Contents
Introduction Purposes Types of bill of lading Types of payment in international business Use of B/L in the transactions

Introduction- Bill of Lading

A document that determines the term and conditions for the freight which is to be moved between two points for a specified charge Signed between a shipper and the shipping company May be negotiable or non negotiable.

Sample BoL

Introduction(Contd.)
Serves a number of purposes: 1.Acts as a proof that a contract exists between the shipper and the shipping company. 2.Acknowledgment by the shipper that the goods have been transferred in the ship. 3.Can be used to transfer the ownership of the goods.

The Process

Seller

Buyer BoL

Sellers Bank

Buyers Bank

Contd..
A bill of lading contains the following details: Shipping company Nationality Name of the shipper Order and notify party; Nature of goods; Total weight; and Rates of freight

Types Of Bill Of Lading

Straight bill of lading: In this importers name is in the bill of lading. It is a document, in which a seller agrees to transport goods to a certain location, where the bill assigned to a certain party. It contains details about the quality and quantity of goods Order bill of lading: This bill uses express words to make the bill negotiable such as "delivery to A Ltd. or to order or assigns". This B/L can be endorsed by the importer or the bank. Bearer bill of lading: This bill states that delivery shall be made to whosoever holds the bill

Clean bill of lading: It states that the cargo has been loaded on board the ship in apparent good order and condition. Direct bill of lading: This B/L is issued when the initial vessel takes the shipment from the port of shipment to the port of discharge. It is issued when cargo/goods are carried in same vessel up to the destination. Through bill of lading: This B/L is issued when the cargo is shipped in a vessel that will not carry it to the port of destination. Rather cargo will be shipped into another vessel that will take it to the destination.

Types of payments in International Business

1.Cash in advance: It occurs when a buyer sends payment in the mutually acceptable currency and through decided method to a seller before the product is manufactured and/or shipped. Sellers risk: The product manufactured might never be paid for. Buyers risk: The product received might not be as per order. Seller does not have required funds to practice deferred payment mode.

2. Documentary Collections: Seller first ships the products and prepares a document for the transaction. This document is then send for processing at the buyers bank. On receiving the document the bank asks the buyer to make the payment. After which the cargo is released from customs. There are four types of processes available to buyers and sellers: 1. D/P(Documents against Payment) 2. D/A(Documents against Acceptance) 3. Clean Collection 4. Cash Against Documents

3. Open Account-Open account occurs when a seller ships the goods and all the necessary shipping and commercial documents directly to a buyer who agrees to pay a sellers invoice at a future date. Sellers risk: Buyer defaults on payment obligation Buyers risk: Seller does not ship per the order (product, quantity, quality, and/or shipping method) Used more regularly in international transactions to avoid high banking fees

Drafts/Bills of Exchange Usual Time of Payment : Remittance time from buyer's bank to seller's bank may still take one week to one month Goods available to Buyer: Risk to seller: Drafts, by design, should contain terms and conditions mutually agreed upon Risk to buyer: Comments : A draft may be written with virtually any term or condition agreeable to both parties. When determining draft tenor (terms and conditions) consult with your banker and freight forwarder to determine the most desirable means of doing business in a given country.

1. Sight Draft (With documents against acceptance ) Usual time of payment: On presentation of draft to buyer. Goods available to buyer: After payment to buyer's bank. Risk to seller: If draft is not honored, goods must be returned or resold. Storage, handling, return freight expenses may be incurred. Risk to buyer: Assures shipment but not content, unless inspection or check-in is allowed before payment. Comments: A draft can be a collection instrument used to exchange possession and title to goods for payment. Seller is essentially drawing a check against the bank account of the buyer. Buyer's bank must have preapproval, or seek approval of the buyer prior to honoring the check. Payable upon presentation of documents.

2. Time Draft (With documents against acceptance ): Usual time of payment: On maturity of the draft Goods available to buyer: Before payment, after acceptance Risk to seller: Relies on buyer to honor draft upon presentation. Risk to buyer: Assures shipment but not content, time of maturity allows for adjustments, if agreed to by seller. Comments: Payable based upon the acceptance of an obligation to pay the seller at a specified time. Although a time draft has more collection leverage than an invoice, it remains only a promissory note, with conditions.

T/T Payment in Advance

T/T means telegraphic transfer, or simply wire transfer. It's the simplest and easiest payment method to use used when the sample and small quantity shipments are transported by air Usually takes 3-4 days

Letter of Credit

Formal payment methods that offer a lot of protection to the parties Letter of credit is a letter written by the importer's bank to the exporter. It verifies that the payment will be guaranteed when the bank is presented with the concrete documents (bill of lading, and freight documents) Most letters of credit are "irrevocable" once the importer has had them sent A letter of credit usually includes applicant (you, the importer), beneficiary (our I/E agent), opening bank, negotiating bank, specification and quantity of the goods, amount of money, loading port ,destination port, shipment date, the validity date of the L/C, terms and conditions agreed by both the importer and seller, and the documents required by the importers (bill of lading, commercial invoice, packing list, insurance certificate, etc.) L/C is used for the larger quantity order shipped by sea. The typical L/C scenario takes 14-21 days to complete

But do we really need an L/C. Well, you better think again!

What if my cargo is transported like this?

Or this?

My feelings exactly!

D/P (document against payment)

The exporter makes shipment and sends the shipping documents to the exporter's bank for collection. The exporters bank then sends the shipping documents along with a collection letter to the importer's bank, who then sends a collection notice to the importer. The importer makes payment upon receiving the notice, and only after payment does the importer receive the original shipping documents with which you take the physical possession of the goods The major advantage of the use of a cash against documents payment is the low cost, versus using a letter of credit. But, this is offset by the risk that the importer will for some reason reject the documents. So, a payment against documents arrangement involves a high level of trust between the exporter and the importer

There is no payment method that is perfectly safe to both the importer and supplier at the same time. But, we still have got to do business, right? So, we hold it's crucial to develop a long-term relationship with our customers based on mutual trust.

B/L and Methods of Payments

Letter of Credit

After a contract is concluded between buyer and seller, buyer's bank supplies a letter of credit to seller. Seller consigns the goods to a carrier in exchange for a bill of lading. Seller provides bill of lading to bank in exchange for payment. Seller's bank exchanges bill of lading for payment from buyer's bank. Buyer's bank exchanges bill of lading for payment from the buyer. Buyer provides bill of lading to carrier and takes delivery of goods

 Document against payment The seller makes shipment and obtains B/L from shipping line, which reads to order of shipper. The ocean bill of lading is endorsed by the exporter and sent via the exporter's bank to the buyer's bank. The buyers bank notifies the buyer when it has received these documents. The buyers bank gives the B/L after getting money from the buyer. Shipper issues B/L to the buyers bank who in turn issues it to the buyer.

B/L and Methods of Payments (Contd.)

 When no L/C is involved Seller makes shipment and receives B/L. Seller then sends a fax of B/L as a proof of shipment to the buyer. Buyer then uses the B/L no. to verify it with the shipping company Buyer instructs his bank to remit and asks payment to be made B/L endorsed in favor of the buyer is then couriered to the buyer

B/L and Methods of Payments (Contd.)

 Air Waybill (AWB) AWB is a non-negotiable waybill issued by the airlines when exporter uses air-freight Seller hands over the cargo to the airline and receives AWB Seller then faxes a copy of AWB & other required documents to the buyer AWB is dispatched simultaneously with the cargo Buyer pays money to its bank & obtains Bank Release Order (BRO) addressed to airline to deliver cargo to buyer Buyer then uses BRO to obtain the cargo from the airlines

B/L and Methods of Payments (Contd.)