Definition: What is a Bill of Lading?
A bill of lading (B/L) is one of the key documents in the whole documentary chain of sea freight.
Contrary to popular belief, a bill of lading is neither a contract between the seller and the buyer nor a contract of carriage between the carrier and shipper.
It is:
- Evidence of Contract of Carriage
- Receipt of Goods and
- Document of Title to the goods
One of the most important aspects of an Original Bill of Lading is that it can be used as a negotiable instrument for payments between a buyer and seller using a Letter of Credit.
Different Types
A B/L comes in different forms, which we will explain here:
- Straight Bill of Lading
- Order Bill of Lading or Negotiable Bill of Lading
- Seaway Bill of Lading
Straight Bill of Lading
When a B/L is issued in original(s) to a “named” consignee, it is referred to as a “Straight Bill of Lading”.
A straight B/L is NOT negotiable or transferable and therefore, the cargo covered under a straight B/L can only be released to the named consignee and cannot be transferred to anyone by endorsements on the B/L.
Thus, a straight B/L can be considered only as evidence of the contract of carriage and receipt of goods.
Negotiable Bill of Lading or Order Bill of Lading
When a B/L issued is in original(s) and consigned “TO ORDER” or “TO ORDER OF SHIPPER” or “TO ORDER OF XYZ BANK” it is termed as “Negotiable Bill of Lading” or “Order Bill of Lading“.
As the name says, this is the only type of B/L that is negotiable and also transferable to someone else based on the endorsements on the B/L.
A negotiable B/L can be considered as evidence of the contract of carriage, the document of title, and the receipt of goods.
Seaway Bill of Lading
When a B/L is issued to a “named” consignee without any originals, it is known as a “Seaway Bill of Lading“.
Like a Straight Bill of Lading, a Seaway Bill is also not negotiable or transferable by endorsements on a B/L.
This bill of lading acts merely as evidence of the contract of carrier and receipt of goods and does NOT act as a Document of Title.
In trade terms, a Seaway B/L is also referred to as an Express Release indicating the quickness of import release of this kind of B/L.
So, these are the three types of bills of lading that are used in the container trade.
Original Bill of Lading
Hang on a minute, if you are wondering what then is an Original Bill of Lading, there is no bill of lading “type” called Original Bill of Lading.
An Original B/L is a physical paper document of a Straight B/L or Order B/L issued to the shipper at the port of lading by the carrier.
In the regular shipping process, the release of goods to the consignee at destination occurs only upon surrender of one or more of these original B/Ls issued by the carrier.
The release of cargo without surrendering of original Bills of Lading at the destination can happen only under two circumstances
- The original B/L has been surrendered at the port of loading (or elsewhere) to the carrier and they send a release message to the port of discharge to release cargo without presentation of the original B/L; or
- The B/L issued was a Seaway Bill of Lading, and since in a Seaway Bill no original is issued, there is nothing to be surrendered at the destination or elsewhere.
Telex Release
In the first case above, when an OBL is surrendered either at the load port or elsewhere (for example, say a container is loaded out of Kenya, but the shipper is based in London), the carrier or their agent will send a release authorization to the port of discharge so that the consignee can secure the release of the cargo without presentation of an OBL.
This release authorization is called a “Telex Release”. What does “Telex Release” mean?
In the olden days of Vintage Shipping, such messages were transmitted using a Telex machine. TELEX is an acronym for TELegraph EXchange service.
Telex Machine was a teleprinter used to send and receive text-based messages using the telegraph service.
In trade practice, a Telex Release is sought by the shipper or consignee only in the case of a Straight B/L and not an Order B/L.
Reason being
- The original(s) of an Order Bill of Lading (Negotiable B/L) is usually required to be submitted to the bank for negotiation purposes;
- After the negotiation process and payments are made, the bank will send the original(s) to the consignee to secure release;
- The consignee will then surrender that endorsed OBL to the carrier to obtain the delivery order
Depending on the customs and trade regulations in the country of destination some countries (like Brazil) may not allow the release of cargo against a telex release or express release and insist on an original paper B/L.
Conclusion
For the purpose of import release, either an endorsed original B/L or a Telex Release or a Seaway Bill may be used.
Whether an original B/L, Seaway Bill or a Telex Release is used for the release of cargo at the destination, both the shipper and consignee side must ensure that proper documentary procedures are followed, and suitable safeguards are taken to avoid any fraud.
For Forto customers, consultancy and documentation such as B/Ls and telex release are available for use, filing and archiving within the platform. Want to know more about the platform? Feel free to get in touch!
