Legal Definitions - negotiable bill of lading

A negotiable bill of lading is a specialized shipping document issued by a carrier (such as a shipping company, airline, or trucking company) to a shipper (the party sending the goods). It serves as a crucial document in international and domestic trade, fulfilling three primary functions:

• It acts as a receipt, confirming that the carrier has received the goods for shipment in good condition.
• It serves as a contract of carriage, outlining the terms and conditions under which the goods will be transported.
• Most importantly, it is a document of title, meaning that whoever legally possesses this document has the right to claim the goods at their destination.

The term "negotiable" signifies that this document can be transferred from one party to another, much like a check or a promissory note. By endorsing and delivering the negotiable bill of lading, the original owner can transfer ownership or control of the goods to a new party, even while the goods are still in transit. This flexibility allows the goods to be bought, sold, or used as collateral before they physically arrive at their final destination.

Examples:

• Selling Goods While in Transit: An exporter in Vietnam ships a large container of furniture to a buyer in the United States. Instead of waiting for the furniture to physically arrive in the U.S. to receive payment, the exporter uses a negotiable bill of lading. Once the ship departs, the exporter can sell the bill of lading to a third-party trading company or a bank. The trading company then becomes the legal owner of the furniture while it is still at sea and can present the bill of lading to claim the goods upon arrival at the U.S. port. This illustrates how the goods can be traded and ownership transferred before they reach their destination.

• Using Goods as Collateral for a Loan: A distributor in Canada orders a significant quantity of electronics from a manufacturer in South Korea. To finance this large purchase, the Canadian distributor secures a short-term loan from a bank. The bank agrees to provide the loan but requires collateral. The distributor can use the negotiable bill of lading for the electronics shipment as security for the loan. The bank holds the bill of lading until the loan is repaid. If the distributor defaults on the loan, the bank, as the holder of the negotiable bill of lading, can claim the electronics upon their arrival and sell them to recover its funds. This demonstrates the bill of lading's role as a transferable document of title that can be pledged.

• Changing the Ultimate Recipient: A wholesaler in Spain orders a bulk shipment of olive oil from a producer in Greece. While the goods are en route by sea, the Spanish wholesaler finds a new, larger buyer in France who wants the entire shipment. Instead of having the olive oil arrive in Spain and then re-shipping it to France, the Spanish wholesaler can endorse and transfer the negotiable bill of lading to the French buyer. The French buyer then presents the bill of lading at the designated port of destination (perhaps Marseille, France) to take possession of the olive oil directly, saving time and additional shipping costs. This highlights the flexibility of changing the recipient of the goods mid-transit by transferring the document of title.