Bill of Lading: What It Is and Its Functions

The bill of lading is a crucial document in cargo transportation, commonly referred to as a bill of lading (B/L). Today, international logistics experts at DiFFreight will explain, in simple terms, how this document is prepared, why it is needed, and highlight its key challenges.

So, a bill of lading is a document that performs three functions:

• Receipt — confirms that the carrier has accepted the goods and is committed to delivering them.
• Contract — describes the conditions of transportation, route, and cargo details.
• Ownership — specifies who owns the goods and is authorized to retrieve them at the final point of this transportation stage.

Why Does This Document Exist? The logistics chain consists of multiple links. Before delving deeper, let’s clarify some terms:

• Shipper: In our case, it is a company (DiFFreight) that sends the goods. We receive the goods from the manufacturer/supplier at the warehouse and pass them for transportation.
• Carrier: The company responsible for delivering the goods from point A to point B.
• Consignee: In the case of the bill of lading, this is DiFFreight’s representative at the destination port.

The cargo owner is you. Since international transport ships carry thousands of cargo units, detailed accounting is essential to ensure the goods are delivered to the correct recipients.

Imagine you ordered a set of dishes from China to Ukraine, choosing maritime transport. Upon loading the ship, a bill of lading is issued to confirm receipt of the cargo, describe its type, status, and quantity. The document also states who will receive the cargo at the port of arrival.

Key Conditions of a Bill of Lading

Having explained what a bill of lading is and its functions, let’s explore its conditions. A B/L is a multi-page legal document describing:

• Carrier obligations: The carrier is obliged to deliver the goods intact via the described route.
• Responsibilities of the parties: Who is responsible for loading, unloading, and storage. Force majeure, such as weather conditions, is often excluded from the carrier's liability.
• Cargo types, packaging, and labeling requirements.
• Claims procedure: Under what circumstances compensation can be claimed for damages or delays.
• Financial terms: Freight charges, demurrage (penalties for ship delays), etc.
• Jurisdiction: Refers to laws regulating the transportation (e.g., Hague, Hague-Visby, or Hamburg Rules).

The conditions of a bill of lading are standardized, complying with international regulations and protecting both the carrier and the shipper.

Example of a Bill of Lading

Types and Categories of Bills of Lading

Bills of lading are classified based on various criteria depending on their functions, features, and legal capabilities. While not all types will be covered here, we’ll highlight the most significant ones for transportation.

Primary kinds of Documents

The first distinction concerns who issues the bill of lading:

• Liner B/L: Issued by a shipping line to monitor the transportation process. It confirms the cargo's existence, acceptance for transportation, and ownership rights.
• House B/L: Issued by a freight forwarding company at the port of origin. It lacks the same legal strength as a liner B/L and has limited application.

The second aspect concerns the authenticity of the document:

• Original Bill of Lading: Has legal force.
• Non-Negotiable Copy: Used solely for informational purposes.

Even notarized copies lack legal force. If multiple copies are needed, several originals are issued, marked as such. Typically, three identical originals are created—one for the sender (forwarder), one for the recipient, and one for the owner.

Given that cargo delivery from China to Ukraine often involves multimodal transport (using multiple modes of transportation), a multimodal (combined) B/L is prepared.

Types of Bills of Lading

• Original Bill of Lading: A physical document issued by the carrier to the forwarder (owner).
• Telex Release: An internal B/L issued by the shipping line, allowing the goods to be collected without presenting the original but with a copy.
• Sea Waybill: Issued to a specific consignee without original documents. This is a non-negotiable document.

An electronic bill of lading (eB/L) is now available as a digital alternative to the paper document. It is stored and transmitted electronically through specialized platforms and systems. While this speeds up the exchange process, some companies still require physical originals.

Instructions for Preparing a Bill of Lading

Although the document's forms are standardized, they must be filled out correctly. It should include:

• The quantity and condition of the cargo, including weight, dimensions, volume, and status (intact or damaged).
• Shipper and consignee details.
• Notification party, often a broker monitoring the shipment.
• The name of the vessel and voyage.
• Ports of departure and destination.
• Container and seal numbers.
• Loading and B/L issuance dates.
• Place of issuance.
• Number of originals.
• The shipping line’s signature and stamp.

Creating this document requires knowledge of transportation laws, regulations, and technical procedures. It is advisable to use professional intermediaries or forwarders to avoid inaccuracies.

The Cost of Errors in a Bill of Lading

International logistics is expensive, and even minor errors can be costly:

• Additional expenses for correcting errors: A new set of originals must be issued. The average issuance cost is around $100, with corrections adding another $50–100.
• Delays in loading and delivery deadlines: Goods may be stored at the port under non-ideal conditions.
• Customs issues: Discrepancies in quantity, descriptions, or routes raise questions.

For this reason, it is better to entrust preparation to professionals. DiFFreight offers customs brokerage services, including the preparation of essential documents.

Types of Bills of Lading That May Confuse: Explained by DiFFreight Experts

Let’s set aside obvious cases of forged documents within a letter of credit or intentional fraud. Bills of lading are sometimes falsified to deceive carriers or recipients, but this does not happen when working with reliable parties. Below, we clarify certain types of documents that often cause confusion.

The Difference Between Negotiable and Non-Negotiable Documents

A negotiable bill of lading is commonly used in logistics, as it provides a more flexible method of transferring goods. It does not specify the consignee’s name.

With order or bearer types, the cargo is delivered to anyone with a corresponding bill of lading (electronic or paper) or the sender/consignee's authorization. In contrast, a non-negotiable B/L specifies a named consignee, prohibiting rights transfer to third parties.

This does not mean one type is inherently better. Each has its specific use case, and understanding this reflects the experience and professionalism of a logistics company.

Clean and Dirty Bills of Lading

If the goods are intact, a clean bill of lading is issued. A dirty B/L documents damage at the time of loading. If damages are discovered later and the B/L is clean, this creates confusion, especially regarding insurance. The nature of the damage and liability remains unclear.

Marine Bill of Lading

Its scope extends beyond maritime transportation. For multimodal shipments, a combined marine B/L includes air or rail transport, though additional waybills are required for subsequent stages.

The bill of lading is an essential document in international trade. Proper preparation and understanding of its terms are crucial for safe and reliable international shipments.

We invite you to a consultation with DiFFreight’s logistics experts. Our brokers will prepare a bill of lading to minimize potential risks.