Legal Definitions - bill of lading

A bill of lading is a vital legal document used in the transportation and shipping industry. It serves several key functions:

• It acts as a contract between the company shipping the goods (the shipper) and the company transporting them (the carrier).
• It functions as a receipt from the carrier, acknowledging that they have received the goods in good condition.
• It can also serve as a document of title for the goods, meaning whoever holds the bill of lading may have the right to claim the goods.

This document precisely details the type, quantity, and destination of the goods being shipped, along with the agreed-upon terms for their transportation and delivery. If the goods arrive damaged, incomplete, or do not match the description on the bill of lading, the carrier may be held responsible for the discrepancy.

Bills of lading can be either negotiable or non-negotiable:

• A negotiable bill of lading allows the ownership of the goods to be transferred to another party while the goods are still in transit. This is done by endorsing and delivering the document, similar to how a check can be transferred.
• A non-negotiable bill of lading specifies a particular party to whom the goods must be delivered and cannot be easily transferred to someone else.

Here are some examples to illustrate the concept of a bill of lading:

• International Shipment of Electronics: A technology company in California orders a large shipment of specialized computer components from a manufacturer in Taiwan. When the components are loaded onto a cargo ship, the Taiwanese manufacturer receives a bill of lading from the shipping company. This document lists the exact number of crates, the specific component models, their total weight, and the designated port of entry in Long Beach, California. It also names the California tech company as the consignee (the party to whom the goods are to be delivered).

  How this illustrates the term: This bill of lading acts as a contract between the Taiwanese manufacturer and the shipping carrier, a receipt for the components, and proof of what was shipped. If the shipment arrives in California with fewer crates than listed or if the components are damaged, the California company can use the bill of lading to demonstrate the discrepancy and hold the shipping carrier accountable.

• Domestic Transport of Agricultural Products: A large food distributor in Chicago purchases several truckloads of fresh produce from a farm in Florida. When the produce is loaded onto the refrigerated trucks, the farm issues a bill of lading to each trucking company. Each bill details the type of produce (e.g., 500 crates of oranges, 300 boxes of lettuce), the quantity, the origin farm, and the specific warehouse address in Chicago where it needs to be delivered, along with the expected delivery date.

  How this illustrates the term: The bill of lading serves as a critical record for both the farm and the food distributor. Upon arrival in Chicago, the warehouse manager checks the delivered produce against the bill of lading. If a truck arrives with significantly fewer crates than specified or if the produce is clearly not what was ordered, the bill of lading provides the necessary documentation to dispute the delivery and seek compensation from the trucking company.

• Commodity Trading with a Negotiable Bill: A global trading firm based in London purchases a massive quantity of crude oil from a supplier in Saudi Arabia. The Saudi supplier provides a negotiable bill of lading for the oil shipment. While the tanker is still at sea, heading towards a European port, the London firm identifies a new buyer in Rotterdam who is willing to pay a higher price for the oil.

  How this illustrates the term: Because the bill of lading is negotiable, the London trading firm can endorse the document and transfer it to the Rotterdam buyer. This effectively transfers ownership of the crude oil while it is still in transit. When the tanker arrives at the port, the Rotterdam buyer presents the endorsed bill of lading to the shipping company to take possession of the oil, without the London firm ever needing to physically handle the commodity.