Bill of Lading in Letters of Credit Transactions

What does freight forwarder's bill of lading mean in export and import business?

Definition and Usage of Bills of Lading :

Bill of lading is a transport documents used in sea shipments. A bill of lading is an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight be delivered to the order or assigns of a specified person at a specified place. (source : http://thelawdictionary.org/bill-of-lading/) 

Bills of lading fulfill three basic functions :

  • bills of lading are receipts for the goods; 
  • bills of lading evidence the terms of the contract of carriage (by way of clauses usually printed on one side of the document); 
  • they are said to be “negotiable documents of title” (except for the nominative or “straight” bill of lading) (source link

Important Note : Letter of credit rules UCP 600 define bill of lading as a transport document used only port-to-port sea shipments. You can not use bill of lading with air or land shipments. Also if transportation take place more than one mode of transport than letter of credit should call for a multimodal bill of lading or combined bill of lading.

Bill of Lading in Letters of Credit Transactions :

Bill of lading is covered under article 20 of UCP 600.

a.A bill of lading, however named, must appear to:
i. indicate the name of the carrier and be signed by:
the carrier or a named agent for or on behalf of the carrier, or
the master or a named agent for or on behalf of the master.
ii. indicate that the goods have been shipped on board a named vessel at the port of loading stated in the credit by:
- pre-printed wording, or - an on board notation indicating the date on which the goods have been shipped on board.
iii. indicate shipment from the port of loading to the port of discharge stated in the credit.
iv. be the sole original bill of lading or, if issued in more than one original, be the full set as indicated on the bill of lading.
v. contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back bill of lading). 
vi. contain no indication that it is subject to a charter party. (source : UCP 600)

Special Hints on Bill of Lading from ISBP 2007 :

  • To comply with UCP 600 article 20, a bill of lading must appear to cover a port-to-port shipment but need not be titled “marine bill of lading”, “ocean bill of lading”, “port-to-port bill of lading” or similar.

  • If a credit requires presentation of a bill of lading (“marine”, “ocean” or “port-to-port” or similar) covering sea shipment only, UCP 600 article 20 is applicable.

  • If a credit states “Freight Forwarder’s Bill of Lading is acceptable” or uses a similar phrase, then the bill of lading may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or agent for the named carrier. In this event, it is not necessary to show the name of the carrier.

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What is Bill of Lading? How can we use a bill of lading in a letter of credit transaction? 
On this page I will try to explain you "Bills of Lading" and their application in letters of credit transactions. Banks mention bill of lading as "Marine Bill of Lading", "Ocean Bill of Lading" or "Negotiable Bill of Loading" on letter of credit texts. 

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