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understanding-the-role-of-the-bill-of-lading-in-securing-export-payments-a-guide-for-indian-exporters

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Understanding the Role of the Bill of Lading in Securing Export Payments

Understanding the Role of the Bill of Lading in Securing Export Payments

Posted on November 20, 2024

What is Bill of Lading?

The Bill of Lading (BL) is an important document in international trade and logistics. Its full form is "Bill of Lading," but it is also referred to as BOL, short for Bill of Lading.

What is a BL in shipping?

The Bill of Lading is a legal contract between the shipper and the carrier, providing evidence of a contract of carriage and a receipt for goods shipped. The document safeguards the good handling and delivery of goods on one's way to an exporter's destination and an importer's destination.

The functions of a Bill of Lading are multifaceted, ensuring smooth logistics and legal compliance in export transactions.

  • Receipt of Goods

The BL acts as a receipt issued by the carrier, acknowledging that the goods have been received in good condition. It includes details about the type, quantity, and condition of the cargo at the time of shipping.

  • Proof of Carriage Contract

The Bill of Lading is considered a proof of agreement between the shipper and the carrier. As such, it details both parties' obligations along with the conditions governing the transport and delivery terms and time. Also, it details liabilities.

  • Evidence of Title

The uniqueness of the Bill of Lading is that it serves as a document of title. This means the holder of the BL can claim ownership of the goods during transit or even upon delivery to ensure that the transfer of goods and payments in export transactions are safe.

The shipping bill of lading is usually issued by a carrier or his authorised agent. The document is drafted after the cargo has been loaded on the ship. In a few cases, freight forwarders or NVOCC may also issue BLs.

Indian exporters must ensure that all details in the BL match their shipping documentation so that there are no disputes or delays.

Types of Bill of Lading

Understanding the types of Bill of Lading (BL) is vital for an exporter to decide on the appropriate one depending on the needs of shipping.

Straight Bill of Lading

This is a non-negotiable BL whereby goods are consigned to a particular recipient. The consignee has to be the party whose name appears on the document so as to collect the goods.

Order Bill of Lading

Negotiable document, this type can transfer goods to a third party. It is flexible and is mostly used in international trade.

Bearer Bill of Lading

In this BL, whoever presents the document can claim the ownership of the goods. This is seldom used because of a high likelihood of loss or theft.

Clean BL: It assures that the shipment has arrived at the destination without any damage or irregularity. This increases further security for buyers and banks in the transaction.

Claused (Foul) Bill of Lading

A Claused BL occurs when there is damage or quantity discrepancy with the shipment. This type states the irregularities on the BL.

House Bill of Lading

This is issued by a freight forwarder and made for consolidated shipments. As a rule, such a BL is issued to the exporter by intermediaries.

Master Bill of Lading

This one is issued by the main carrier and represents the entire shipment, usually involving multiple House BLs concerning consolidated cargo.

Main Contents of a Bill of Lading

The contents of a Bill of Lading is standardised for most types and gives clarity and legal validity.

  • Shipper and Consignee Details

Names and addresses of the shipper and the consignee with contact information are essential to establish the parties' identities participating in the transaction.

  • Goods Description

Detailed description of the commodities, including their nature, quantity, and packaging, would ensure transparency and compliance with customs regulations.

  • Quantity and Weight

Accurate measurement of the weight and volume of the goods helps in calculating the freight charges and for smoother movement.

  • Port of Loading and Discharge

The BL indicates the ports at which the goods are loaded and discharged; this ensures thorough tracing of the shipment's journey.

  • Terms and Conditions

In the BL, there is all the information on the terms and conditions of carriage such as liability clauses delivery timelines, and both parties' responsibilities.

About Importance of a Bill of Lading in Shipping

Even more, a Bill of Lading is an indispensable importance for ensuring secured payments of export in respect of Indian exporters.

  • Legal Protection

The BL offers legal proof of shipment and protects an exporter against all cases of disputes that may arise over the condition of shipment or delivery.

  • Facilitating Trade

The BL works as a negotiable instrument that streamlines trade operations by handing over the title to ownership without physically checking the goods.

  • Risk Management

A BL reduces risks because it has detailed documentation about the shipment; frauds or miscommunication are less likely to occur.

Common Terms Associated with Bill of Lading

  • BL in Export

The term "BL in Export" refers to the role of Bill of Lading in the export stage, ensuring documentation and a legal framework for exports.

  • Shipping Bill vs. Bill of Lading

Here, a shipping bill is a customs document to enable export clearance. In this aspect, the Bill of Lading is issued by the carrier; however, this document focuses on transportation and ownership of goods.

Conclusion

In a nutshell, Bill of Lading (BL) is considered an important document in international trade. It ensures the safe and secure movement of goods. Be it an Indian exporter who is coming fresh into the market or any professional, understanding the definition, functions, types, and importance of BL would be highly relevant.

By leveraging the BL effectively, exporters can streamline their operations, safeguard payments, and establish stronger trust with global partners.

Learn more about the Exporting payment terms.



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Business Banking for cross-border SMBs and Startups

A Subsidy of Scalifi Wealth Private Limited

Financial Products and Services for Businesses are being built and provided by Scalifi Wealth Private Limited and its group companies/ affiliates/ third party service partners.

Contact us

Scalifi Wealth Private Limited

514, Shobha Quartz, Bellandur,

Bengaluru, Karnataka-560103.

CIN number: U66190WB2023PTC2628387

Need a Demo?

Help us Provide you a quick demo of our Product.

© 2024 Scalifi Wealth Pvt Ltd.

Disclaimer: Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing. Past performance is not indicative of future returns. Please consider your specific investment requirements before choosing a fund, or designing a portfolio that suits your needs.