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In this blog, I am going to writing about the Bill of Lading. I’ve written about it many times; I have blogs of many Incoterms. where I written about the bill of lading. Then we written about the letter of credit, whenever the name of trading finance or international finance comes up. so, you will always hear about the bill of lading. So, in this blog we will understand what kind of document it is, and how important document it is. Also, we will see what information is contained inside the Bill of Lading. and what is its importance. So, you must read this blog from Beginning to End. So that you do not miss the important point, and you can understand this whole concept completely.
Understand what Bill of Lading is. Meaning of Bill of Lading, how it works in International Trade. let’s understand this with an example. Suppose you want to import some goods from China, then there is a seller in China who becomes exporter. and you want to import some goods in India as a buyer let’s say in Mumbai, then it will be transported through sea, so when there is transport through sea, the document that must be carried is called Ocean Bill of Lading, now it can also be Inland Bill of Lading. The bill of lading is also used within the inland transport action, especially in inland within the USA. Or it can also be multi modal. Multi-modal means, that it is going somewhere other than sea through some other form of transport. Suppose now it were to come to Delhi instead of Mumbai, then first it comes to Mumbai through Sea transport. and by road or by rail or by air, it comes to Delhi. then when there are two or more modes of transport. So, we call it Multimodal transport.
The concept of Bill of landing is also used in sea transport, and is also used in inland transport, and is also in multimodal transport. But mainly it is used in sea transport, in international trade, we understand it only through sea transport. The concept is exactly the same, for sea transport as well as for inland transport, and also for Multimodal. for example, suppose the goods are to be exported from Shanghai, China, and it has to come in Mumbai. In such a situation, first of all, there will be a sales contract between the seller and the buyer, when this sales contract is done, the seller will say that you pay me, and generally, international payments are done through the letter of credit, so that the seller and buyer can trust each other. Within this, the banking system involved, I have already made a lot of detailed blogs above that, how letter of credit works, you must read my blogs of that.
Once the buyer sends a letter of credit is to the seller, then the seller will ship the goods through shipping agent. So here the goods will ship from Shanghai port, but there will be some documentation before that, now what will that documentation be, the most important document comes inside it Bill of Lading. So let’s understand what is Bill of Lading. This is a document that is signed between the shipper and the carrier. Shipper means either this seller or this shipping agent, or whoever is the exporter. who is exporting those goods on behalf of the seller, we call it Shipper. Carrier means whatever transport carrier it is, whether it is a container ship company, or a logistics company. if we talk about Inland transportation. So, the logistics company or trucking company, we will call that company a Carrier Company, So this is a contract between the shipper and the carrier, and for that this document is signed, all the details are written in the document, whatever the goods are been shipped is written. the quantity and the destination is written from which port to which port it will be exported. You are a shipping agent of the seller issues two sets of documents, one is the original negotiable bill of lading, which is signed, the other is the non-negotiable bill of lading, which is basically a copy of it. So this will be the original bill of lading, it will be signed by the master. who will be the master of Ship or the captain, he will give it by signing, then it means that when the master is signing and giving it, he is saying that whatever cargo you said It is loaded here, and I have received the receipt.
This is the Lading, this is the terminology. This comes only from loading, so it means that the goods have been loaded on Ship, and the receipt has been given by the master, then this is your original Bill of lading. Once the original Bill of Lading is received, the goods will be released from the port, And bill of lading basically has 3 functions. I written about it earlier, It is a receipt that the goods have been loaded and secondly, it is the evidence of the contract. between Shipper and Carrier. That the shipper, whether he is a shipping agent or a seller, there has been a contract between him, and the carrier that the goods should reach from Shanghai to Mumbai, and all the details of which goods will reach are kept within the Bill of Lading. This is also a document of Title.
Basically, when this bill of lading original reaches from the seller through the buyer, then the buyer can collect that original document as shown from Mumbai, so it is also the title document. so these are the 3 main functions of the Bill of Lading that it acts as a receipt, acts as a contract, and also acts as a title. Basically, he can get the goods by showing the original documents. So now do not get confused in this, the Invoice is a completely different thing and bill of lading is completely different, then in addition to the bill of lading, invoice and insurance documents also goes in it. so these are three to four important documents, which are transferred from Seller to Buyer.
The process, so once the bill of lading is received by the shipping agent, and signed by the master, the goods will be shipped, and it will finally reach Mumbai. So basically, it must be in traveling, because it takes time to come from Shanghai to Mumbai, then the shipping agent will forward the bill of lading, during that time to the seller first and the original one, which seller will forward the bill of lading to the buyer. the original bill of lading. The buyer will give the bill of lading to his shipping agent, Shipping agent will issue the delivery order once he gets the original bill of lading and after collecting the goods from the port, he will finally deliver the goods to the buyer. So, this is the entire process.
I am quickly check it once, In the first step, our sales contract is done. In the second step letter of credit was issued, and in the third step, the goods were sent through the shipping agent on the port, this was our fourth point. After that, this bill of lading was Issued within the fifth step, and within the sixth step, the goods were shipped to Mumbai. After that, within the seventh step, this bill of lading reached the seller and in the eighth step, it reached the bill of lading buyer. In the 9th step, it reaches the shipping agent the Original Bill of Lading. Shipping agent issues delivery order in 10th step. In the 11th step, the shipping agent received the goods. And in 12 steps the good was finally delivered to the buyer. Within these 12 steps, this entire delivery process ends. payment is decided according to Incoterms.
Incoterms are basically international commercial terms. Which is defined by the International Chamber of Commerce, so now who will give how much money, Now suppose the goods come out from the doorstep of the seller. So, the entire carriage payment will be paid by buyer. or will pay its money from this port to this port, and then finally to its destination, who will pay the insurance, then all these things are decided by the Incoterm. i have made many detailed blogs in Incoterms, so you can also read those blogs.
So the bill of lading, the originals of the bill of lading are the 3 original issues. This shipping agent who issues the original, does three issues and master signs all three. Now, why are these three, basically in the earlier times, the mailing system was not so efficient, so they used to think that if the bye chance it gets lost, the original seller has shipped it to the buyer. Or forwarded or sent by air, then there may be a problem, for that 3 original signs were made. So now one is forwarded just in case someone miss happening. So the other originals can be used. So the first original which comes to the buyer, it is necessary to surrender it only then the delivery of the goods can be done, once the delivery of the goods is done, then the rest of the bill of lading is the original they become null and void. So this was the working of the entire bill of lading.
Now let’s check once a quick sample of bill of lading, Bill of lading sample document, And inside it let’s see which parties are there, what kind of details are there, then first of all, we will talk about the parties, like we talked about the career, the carrier is, whatever the transportation company is, comes the name of the export-in-carrier, so whatever shipping line is, its name will come. Number Two Shipper. Shipper means either the exporter, the name of the exporter is written. or the name of the exporter will come, or the name of the seller will come. or the name of the consignor. Whoever is shipping or exporting it, their name is written under shipper. the third in consignee. Consignee is someone who will receive the goods. So, comes the Ultimate Consignee, the second number is Shipper. and the third number is Consignee. Fourth is Notify Party. notify party, the address of the party to which the notification is to be received comes, now it can be a forwarding agent, it can be the buyer himself or it can be any party of the buyer. Then goes the agenda Forwarding agent, this buyer’s agent will come, it is fifth. it is named agent, in sixth point comes the master. the master signs, The Master who is the Carrier signs on behalf of the shipping company. whatever the goods are, In the list has been received and loaded on the ship.
So, this was all about the party, apart from this, see the rest of the details are given, Pre-Carriage By, so it is used for multimodal transport. So, if there has been any carriage before the ship, then it includes all the details and place of receipt. after that domestic routing means all the details of domestic travels are mentioned, then port of loading, So, we will write Shanghai. Like we written about in our example, then there is a loading terminal. loading terminal one number or two number whichever terminal number is there in shanghai. Port discharge here let’s say Mumbai. Place of receipt on carrier, place of receipt carrier on means whatever shipping company the carrier is where it will receive it. After this is types of moves, it is the complete list. See Marks and Numbers, Number of Packages, Description, Weight and Measurement of the goods. So, this is the details of Cargo, comes the signature of Shipper and the exporter, the master signs, and finally the consignee after receiving it signs there.
So, I have written a basic sample of bill of lading, so its format may change a bit. in this blog, we understood how Bill of Lading works, we understood the whole working. we also saw the sample. now I will talk about types of Bills of lading in the next Blogs, so you must also read those blogs, in which we will see all the different types of Bill of lading. It can be defined in different ways, that the bill of lading can also be differentiated, on the manner in which the payment is received. Then there are some charter party’s bills of lading, and there some port to port and Multimodal transport. I will write about you all types of Bills of lading in the next Blogs.
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