Chapter 6 The use of documents in trade
alongside a letter of credit, where
payment is made on the maturity of the
draft. When the bill of lading is handed
over to the importer, ownership of the
goods passes to the importer, who is
then permitted to sell the goods even
if payment (under the terms of the
associated draft) has not yet been made.
When preparing a bill of lading, the seller will
usually prepare a number of copies of the
document. Signed sets of the bill of lading will
usually give title to the goods. Any unsigned
copies are only used as records as they
cannot be documents of title.Benefits
There are a number of advantages to the use
of bills of lading.
They are evidence of the contract of
shipping. This is particularly important to
the seller trading on open account, who
loses control of the goods once they are
shipped.
The bill also provides full details of the
shipment and the parties to the shipment.
Under the terms of some contracts, the
importer will demand the right to inspect
goods prior to shipment to check they
match their description in the bill. If this
check is performed, the inspector will
usually seal the shipment.
Finally, as a document of title, it facilitates
import and export of goods by easing
the passage of the goods through any
customs controls.Potential problems
Users of bills of lading also need to be aware
of some of the potential problems which can
and do arise.
Because the bill of lading is the document
of title, its loss can cause significant
problems for the importers of the goods.
At the extreme, the loss of a bill of lading
will mean the importer cannot take
delivery of the goods. If the bill of lading
is not available, this often means the
importer will be faced with significant
storage costs (known as demurrage).
Because of this risk it is normal practice
to forward more than one signed copy of
the bill of lading to the importer (althoughthis differs if the transaction is made
using letters of credit).
Any delay or refusal of delivery can also
pose problems for the importer. This is
because the importer is not a party to the
contract signified by the bill of lading, which
is between the exporter and the carrier.
Bills of lading provide no protection in the
event of any damage to, or loss of, the
goods. Importers may need to arrange
insurance to cover the effect of damage or
loss in transit (see Incoterms, above).
Great care should be taken in the
preparation of bills of lading, as errors can
cause serious problems for the importer
who needs to take control of the shipment.
Common errors include discrepancies in
detail between the bill of lading and other
accompanying documentation (especially
where a letter of credit is used), alterations
made to the bill of lading without appropriate
authorisation and authentication, absence
of the exporter’s endorsement if the bill of
lading is drawn to order, and shipped on
board notation not having been completed
by the shipping line or agent.Waybills
Waybills are a form of bill of lading typically
used by shipping companies (sea waybills)
or air cargo companies (air waybills – AWB).
Where land transportation is used, a similar
consignment note is used.Core characteristics
The air or sea waybill sets out the conditions of
transport between the shipper and the airline or
shipping company. In the case of air transport,
the Cargo Services Conference (CSC) of the
International Air Transport Association (IATA)
sets a series of standards covering many of
the elements of air cargo. One of these covers
AWB specifications. Under the terms of CSC
resolution 600b, which lists IATA’s preferred
conditions of contract and which became
effective in 2010, international air shipments
are subject to limits of liability.
As with a regular bill of lading, sea and air
waybills are evidence of the shipping contract.
The waybills include a full description of the
goods and all the applicable charges. Waybills
also acknowledge receipt of the goods for