The bill of lading contract in cargo claims

Claims handlers from over the world deal with cargo documentation while handling a cargo claims, and bill of lading is one the most important document in the marine insurance industry, acting as evidence of the contract of carriage, a receipt for shipped goods, and a document of title.

In this post, we dive deep into the intricacies of the bill of lading. Understanding the variations is vital for claims handlers, as different types such as 'straight', 'order', and 'bearer' bills can significantly impact the negotiation and settlement of claims.

The details listed on a B/L, from the condition of the cargo to the ports of discharge, must be precise. Any discrepancies can lead to delays, financial losses, and legal disputes. Knowledge of the B/L’s nuances is essential for effectively managing and mitigating the risks associated with cargo claims.

Bill of Lading Document

The Bill of Lading  (B/L or BoL) serves as prima-facie evidence of the terms of the contract of carriage between the shipper and the carrier.

The value of the bill of lading

Imagine how crucial this document is when it comes to handling claims?

Once the cargo is loaded on board the vessel (“shipped on board”), it’s time to issue the B/L, which serves 3 purposes.

  1. Receipt for the goods: it contains a description of the cargo received, including the marks needed to identify the goods, as well as the quantity of packages, their volume, and weight.
    The B/L also proves that the cargo has been received “clean,” in other words, in apparent good order and condition.
    Well, unless it’s “dirty”, and remarks to this effect have been made on the B/L itself.
  2. Evidence of the transport contract: the terms of carriage agreed upon before the goods are sent to the ship are printed on the front and back of the B/L.
  3. Document of title: the B/L authorized holder is entitled to receive delivery from the carrier. However, it doesn’t necessarily operate as a transfer of the property.

Key participants in the bill of lading

As with all commercial documents and operations, there are essential parties whose roles are critical to facilitating the most efficient shipping process possible:

Role Description
Shipper The shipper is the originator of the goods being shipped. This entity is responsible for the initiation of the shipping transaction and is often the principal in the contract of carriage with the carrier.
Consignee The consignee is the end recipient of the goods being transported. This party is usually identified in the B/L as the entity to whom the goods are destined and to whom the title of the goods may ultimately be transferred upon delivery.
Notify Party The notify party is the individual or entity designated in the B/L to be contacted once the goods reach the specified destination and are ready for reception. This contact is crucial for the coordination of the cargo release and delivery processes.
Carrier

The carrier role is performed by the shipping company or shipowner responsible for the transportation of the goods. The carrier, whether it is a shipping line, a ship’s agent, or the shipowner themselves, is also tasked with issuing the Bill of Lading document. It is important to note that the shipping company’s role encompasses the legal and logistical responsibilities for the goods while in transit.

The Hamburg Rules in Article 14 stipulate the carrier’s obligation to issue a B/L to the shipper, underlining its foundational role in the maritime legal landscape[1].

Furthermore, it is incumbent upon the shipping companies to issue the B/L document—whether done by shipowners, consignees, or shipping lines—or by the captain of the vessel on which the goods will be carried.

It is imperative to remember that between three and five original copies of the B/L should be issued to account for various legal and logistical needs throughout the shipping process.

Yes, a B/L can be transferred. There are generally three types of B/L with respect to the ability to transfer:

Order Bill of Lading: This can be transferred to another party through endorsement and delivery of the bill. It is negotiable and commonly used in international trade where the shipment is consigned to the order of a shipper’s bank, the buyer, or another party.

Straight (or non-negotiable) Bill of Lading: This is consigned to a specific consignee and cannot be transferred to another party in the sense of transferring title to the goods. The consignee may still be able to direct the carrier to deliver the goods to another party, but the rights under the B/L remain with the original consignee.

Bearer Bill of Lading: This can be transferred by simple possession, as it consigns the goods to whoever holds the bill. This type is very rare due to the high risk of loss or theft.

When a B/L is transferred, the transferee (new holder) obtains the rights to claim the goods from the carrier and, in the case of an order B/L, can also pursue any cargo claims that may arise due to loss, damage, or other shipping issues. 

The transfer of rights is significant in trade, as it allows the goods to be sold in transit and the seller to retain control until payment is secured. However, the transfer must be done according to the type of bill of lading and the corresponding laws and practices governing such transfers.

Requirement data in a Bill of Lading

The information within a B/L encompasses much more than the ports of origin and destination. Functioning as a deed of the goods in transit, the data captured within a B/L must be precise and comprehensive. In the words of John F Wilson, “Most companies engaged in the liner trade will produce their own proprietary brand of bill, while smaller operators can adopt the standard forms drafted by the international shipping organization”[2]. This statement underlines the customizable nature of the B/L, adapting to the needs of a diverse array of shipping companies while maintaining a standard that ensures consistency across the industry. A Bill of Lading should meticulously detail the following essential information:
Category Details
Description of Goods The type of cargo being transported is critical. For Full Container Load (FCL) shipments, the number of containers; for Less than Container Load (LCL) shipments, the number of packages should be specified. Additionally, a thorough description of each package should be included, detailing the type of goods, type of packaging, quantity per package, and the number of units.
Shipper’s Details Full name and address of the shipper, including the name, address, telephone number, and email of the party responsible for sending the goods.
Consignee’s Information Full name and address of the consignee: The details of the end recipient who will receive the goods must be recorded.
Notify Party’s Details The full name and address of the party to be notified of the shipment’s status should be explicitly stated to ensure proper communication upon cargo arrival.
Vessel Particulars The name of the ship and the voyage number on which the goods are being transported should be provided for identification and tracking purposes.
Initial Receipt Location The place where the shipping company first takes possession of the cargo needs to be identified to trace the movement of the goods right from the start.
Port of Loading The port at which the goods are loaded onto the vessel is a fundamental data point, as it represents the initial stage of the sea transit.
Port of Discharge The port where the goods will be offloaded from the vessel must be clearly indicated to ensure all parties are aware of the final maritime destination of the cargo.
Place of Delivery Finally, the exact location where the goods are to be delivered to the consignee should be noted, completing the journey’s itinerary from shipper to recipient.
Freight amount Cost of maritime transportation, surcharges (additional costs associated with transport), the currency used for these figures, and whether the freight is prepaid or payable at the destination (freight collect)
Each element of data provided in the B/L forms the skeleton of the shipping transaction, providing a transparent and traceable map of the journey. This meticulous documentation is not merely an operational formality but a legal necessity, ensuring that the rights and responsibilities of all parties are clearly defined and protected throughout the entire transportation process.

As the B/L is a legal record of the transaction, inaccuracies in completing it may have serious repercussions.

The precision of the Bill of Lading is imperative and constitutes an indispensable element in preserving the transactional integrity between the shipper and the carrier. It operates not merely as a record but as a fundamental instrument ensuring the legality and validity of the contractual agreement. When discrepancies infiltrate this document, they may precipitate a cascade of adverse legal and financial outcomes.

Additional Expenses

The first wave to hit might be additional expenses. A B/L marred by inaccuracies can generate a domino effect of cost overruns. For instance, if the weight of the cargo is underreported, you could be looking at hefty fines and re-weighing charges at the port of discharge. Similarly, incorrect descriptions or codes related to the cargo can lead to delays and the accrual of demurrage charges, where the cargo sits idle, accruing fees like a taxi stuck in traffic with the meter running.

Service Interruptions

Furthermore, errors can cause service interruptions. A B/L serves as a navigational chart for the cargo, guiding it through the myriad checkpoints and ports. An error might misdirect your cargo, leading to delays that ripple outward, affecting not just the immediate shipment but the schedules of connecting hauls, ultimately disrupting supply chains. In a world where time is money, these delays translate to lost revenue, strained customer relationships, and dented reputations.

Insurance Voidance

The third squall borne from B/L inaccuracy is insurance voidance. Insurance coverage for cargo is hinged on the declarations made in the B/L. Misrepresentation or omissions can lead to a void in coverage, leaving shippers exposed and vulnerable. In the unfortunate event of cargo damage or loss, an inaccurate B/L could thus render insurance claims null and void, thrusting the financial burden of replacement or reimbursement squarely onto the shipper.

Potential Criminal Charges

Finally, and most gravely, is the specter of criminal charges. The B/L is a legal document, and deliberate inaccuracies can be construed as fraud. This is particularly acute in cases where the contents of a container are falsely declared – a serious violation that can attract legal sanctions, penalties, and in severe instances, custodial sentences. The implication of fraud not only imperils the immediate parties involved but can also tarnish the broader reputation of entities associated with the shipment.

A meticulously detailed B/L is a shipper’s safeguard against these formidable pitfalls. It’s the thread that stitches the safety net under the high-wire act of shipping logistics. It is vital that every character and digit entered on a B/L is triple-checked for its veracity. In essence, accuracy in a B/L does not just prevent fiscal and legal jeopardy; it fosters a climate of trust and efficiency that is foundational to the shipping industry.

Legal Framework for B/L

The B/L does not exist in a vacuum; it is enmeshed within a complex legal framework that spans national and international law.

International Conventions

International conventions have defined the basic obligations of the carrier towards the cargo and prescribed the maximum immunities and limitation of liability he can claim.

Several international conventions, such as the Hague-Visby Rules, the Hamburg Rules, and the Rotterdam Rules, provide a legal backdrop for the B/L. These conventions attempt to balance the rights and responsibilities of all parties involved in the shipping process, offering a medley of regulations that underpin the B/L’s legal standing.

National Laws

While international conventions set the stage, national laws play a critical role in the enforcement and interpretation of B/L terms. The diversity of legal systems adds layers of complexity to the B/L, making it imperative for parties to understand the specific legal context in which their B/L will operate.

In Spain, the maritime transport by Bill of Lading (B/L) in Spain is regulated by the Law of December 22, 1949, on Maritime Cargo Transport by Bill of Lading, and articles 246 to 266 of the Maritime Navigation Law 14/2014, of July 24. This legislation establishes the legal framework for the issuance and management of B/Ls, which serve as a receipt for shipped goods, a document of title, and a potential contractual agreement between shippers and carriers.

In England, the Carriage of Goods by Sea Act 1992 is the key legislation governing B/Ls. This Act implemented the Hague-Visby Rules and outlines the rights and responsibilities of all parties involved in the shipping contract. It is noteworthy that, despite Brexit, English law continues to have a substantial influence on international maritime law, and the use of B/Ls in England remains consistent with global practices to ensure smooth international trade operations.

The introduction of containerization and the use of multimodal transportation have indeed changed the shipping industry, enhancing the efficiency of global trade. In terms of cargo claims, the use of a Combined Transport Bill of Lading (CTBL) or Multimodal Transport Document (MTD) reflects these changes by providing a unified contract that covers the entire transportation process, even though it may involve several different carriers operating across sea, land, and air.

When addressing cargo claims, the CTBL or MTD brings forth the complexity of dealing with multiple liability regimes.

Since the liability clause within these documents dictates that responsibility for loss or damage is determined by the local laws of the region where the incident occurs, and by the specific mode of transport being used at that time, claimants must navigate through varied legal frameworks.

This could mean, for instance, that if cargo is damaged during the rail leg of its journey following a sea passage, the claim would be subject to the rail transport regulations of the country in which the damage took place.

Understanding the nuances of how liability is assigned in multimodal transport is crucial for both shippers and consignees. It impacts the level of recourse they have in the event of loss or damage. Therefore, securing comprehensive insurance coverage that takes into account the different carriers and jurisdictions involved in the transport process is vital. Insurance policies should be tailored to cover the specific risks associated with each segment of the multimodal journey to ensure adequate protection against potential cargo claims.

The Electronic Bill of Lading (eB/L)

Definitively, the last thing to be mentioned in the posts is the eB/L. In an age of digital transactions and blockchain technology, the traditional paper B/L faces challenges of adaptation. 

The shift from paper to eB/Ls has the potential to transform the cargo claims process, promising enhanced traceability, reduced documentation errors, and faster claim resolution. Utilizing blockchain technology, eB/Ls offer an immutable record of the cargo’s journey, increasing transparency and making it easier to determine liability in the event of a dispute. This can lead to quicker settlements and improved efficiency for all parties involved.

However, challenges remain in the form of legal recognition and global standardization. The legal frameworks across different jurisdictions are yet to fully embrace eB/Ls as being on par with their paper counterparts. Moreover, the maritime industry’s hesitance to move away from traditional methods and concerns about cybersecurity also pose significant hurdles to the widespread adoption of eB/Ls.

This topic warrants further exploration and will be the subject of subsequent discussions in our forthcoming posts.

Conclusions

Remember, the ultimate role of a bill of lading is to serve as a definitive record of the goods shipped, ensuring accountability, facilitating the resolution of disputes, and minimizing financial damage in the face of a claim.

So, when precision and proficiency in cargo claims are paramount, play it safe and rely on our seasoned experts at Marlin Blue.

Discover more about our comprehensive claims handling services and how we can safeguard your interests.

Bibliographic References

  1. K S Trujillo, ‘International Marine Cargo Insurance: Building Generic and Thematic Competences in Commercial Translation’ (2019) 32 The Journal of Specialised Translation 268, 268-279 https://jostrans.org/issue32/art_trujillo.pdf accessed 7 November 2023.
  2. John Wilson, Carriage of Goods by Sea (7th edn, Pearson Longman 2010)
  3. Alan E Branch, Elements of Shipping (8th edn, Routledge 2009) 117.

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