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Bill of Lading
Practical Law Glossary Item w-022-4615 (Approx. 2 pages)
Glossary
Bill of Lading
A bill of lading is a document issued by a carrier, such as the operator of a container ship, acknowledging that it has received goods for shipment. The bill of lading is issued to the shipper, the party shipping the goods, usually the seller in a commercial sale transaction, and typically includes:
- A description of the merchandise, including quantity, weight, and condition.
- The points of loading and discharge.
- A statement about whether freight charges have been prepaid.
- The name of the consignee, that is, the party to whom the carrier must deliver the goods at the point of discharge, as specified by the shipper.
A bill of lading is a document of title, conferring title to the goods. In trade finance, there are two kinds of bills of lading:
- A straight bill of lading, if the goods are consigned directly to the buyer. A straight bill of lading is non-negotiable, and the carrier must deliver the goods directly to the buyer at the point of discharge.
- An order bill of lading, in which the goods are consigned "to order" or "to bearer." An order bill of lading is negotiable and entitles its holder to delivery of the goods at the point of discharge.
A bill of lading is an essential tool of trade finance. In a documentary credit transaction, such as a commercial letter of credit, the carrier issues the bill of lading to the shipper, the seller. To receive payment under the commercial letter of credit, the seller, as beneficiary, delivers the bill of lading to the issuing bank, the issuer of the letter of credit. After the buyer, as applicant, reimburses the issuing bank for its payment to the beneficiary, the issuing bank delivers the bill of lading to the buyer, and the buyer takes possession of the goods. If the buyer fails to reimburse the issuing bank, and the bank holds an order bill of lading, the bank, as title-holder to the goods, may dispose of the goods to reimburse its payment to the seller.