Letter of Credit Documents

Short Form/Blank Back Bill of Lading

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Short Form/Blank Back Bill of Lading

A bill of lading is a generic name of a transport document, which is used in sea shipments.

As a transport document a bill of lading is expected to fulfill three basic functions:

  • it evidences that the goods have been received by the carrier;
  • it evidences the terms of the contract of carriage
  • it is expected to allow transfer of ownership of the goods

There are several types of bills of lading in circulation such as multimodal bill of lading, forwarder bill of lading, charter party bill of lading, negotiable bill of lading and non-negotiable bill of lading etc.

Each type of bill of lading has unique characteristics. Different types of bills of lading may not be able cover all functions.

As an example, non-negotiable bill of lading does not allow transfer of ownership of the goods.

Bill of Lading and the Contract of Carriage

If you look at the reverse side of a bill of lading, you will probably see a contract written in small font size. This contract known as the contract of carriage.

It is ordinary that a bill of lading contains the contract of carriage on the reverse side. Especially in container shipments.

Every container liner has a standard bill of lading contains the contract of carriage on the reverse side.

But some bills of lading are issued with empty reverse sides.

These kind of bills of lading are called Blank Back Bills of Lading or Short Form Bills of Lading.

Examples:

Long Form Bill of Lading Example:

Hapag-Lloyd Bill of Lading: Hapag-Lloyd is one of the biggest container carriers in the world. Hapag-Lloyd uses a standard bill of lading contains a contract of carriage printed on the backside of its bill of lading. It is also possible to see an excerpt of carriage terms on the right bottom of the front page.

Short Form Bill of Lading Example:

BIMCO Blank Back Form of Non Negotiable Liner Waybill: BIMCO is the world’s largest international shipping association, with around 1,900 members globally. BIMCO produces ready to use shipping contracts.

BIMCO Blank Back Form of Non Negotiable Liner Waybill is a perfect example for a short form bill of lading.

What are the Risks Associated with Short Form/Blank Back Bills of Lading

The parties on a bill of lading such as consignee, notify party and shipper can not reach to  carrier’s contract of carriage with ease under Short Form/Blank Back Bills of Lading.

Hiding the contract of carriage by carrier can attract some sort of unpleasant questions to the minds of the parties on a bill of lading.

The main risk may associate with a blank back bill of lading would be a third party interference on delivery of goods to the consignee, by claiming that his interests have not been fulfilled by the carrier.

Of course there must be a secret contract had to be signed between the third party and the carrier, on which the parties of the bill of lading have no information about.

Shipper of a Bill of Lading

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Shipper of a Bill of Lading

What Does the Shipper Mean?

Shipper means a person that enters into a contract of carriage with a carrier. Shipper also known as consignor.

In most cases shipper is the exporter.

What are the Roles and Responsibilities of the Shipper?

Shipper prepares the goods for sea carriage, makes sure that the goods are packed in seaworthy manner, loads the goods into containers if needed and send them to the carrier’s warehouse or terminals located at the port of loading.

All details regarding the shipment are given to the carrier by the shipper via Shipping Instructions.

Carriers can issue bills of lading with the data they have received from the shippers.

Under some certain incoterms shippers also arrange and pay for the sea freight (such as CFR, CPT) and cargo insurance (such as CIF, CIP).

Shipper Example:

Shipper is the Exporter:

Under a cash against documents payment a Greek olive oil exporter makes a shipment to an importer located in Australia.

The importer agrees to pay the contract amount in full against presentation of documents.

The goods have been shipped under CFR trade terms and shipment takes place between Thessaloniki Port, Greece and Melbourne Port, Australia.

As freight will be paid by the seller the freight notation that is mentioned on the bill of lading is Freight Prepaid.

The bill of lading consigned to order of the importer’s bank in Australia, which is ANZ (The Australia and New Zealand Banking Group Limited). The bill of lading is issued in negotiable form.

After production stage, shipper gets freight quotations from several container lines and freight forwarding companies in Greece, books the container and prepares the Shipping Instructions document.

Carrier states description of goods, number and kind of packages, consignee field, notify party field, shipping marks and remaining details as per shipper’s instructions.

Export formalities also are handled by the shipper.

Points of Consideration When Filling Out Shipper Field:
  1. Shipper enters into a contract of carriage with the carrier.
  2. Shipper informs almost all of the details stated on the bill of lading to the carrier. Any mistake at this stage may create painful problems.

Related Articles:

What are the Differences Between Consignee and Shipper Fields of Bills of Lading?

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What are the Differences Between Consignee and Shipper Fields of Bills of Lading?

Bill of lading is a transport document covering the carriage of goods by sea.

Consignee means a person entitled to take delivery of the goods under a contract of carriage indicated on a bill of lading.

Shipper means a person that enters into a contract of carriage with a carrier. Shipper also known as consignor.

On today’s post I explain the main differences between the consignee and shipper fields of bills of lading.

Differences Between Consignee and Shipper

Seller versus Buyer:

Usually consignor is the exporter and consignee is the importer in any shipping document used in international trade. Bill of lading is not an exception.

Position Against Goods:

Consignor hands out the goods to the carrier at the port of loading. Consignee takes delivery of the goods from the carrier at the port of discharge.

Title of Goods:

Consignee field determines how title of goods will be delivered from the shipper to the consignee.

  • Consignee field determines if the bill of lading issued in straight, negotiable or bearer format.

Shipper determines how consignee field is completed by giving necessary instructions to the carrier.

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Letter of Credit Condition: Bill of Lading with Multiple Notify Party

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Letter of Credit Condition: Bill of Lading with Multiple Notify Party

Letter of credit, in a broad perspective, is one of the payment methods in international trade.

Bill of lading is a transport document covering the carriage of goods by sea.

Notify party means a person that should be notified by the carrier along with the consignee when the shipment arrives at port of discharge.

Letter of credit is a conditional payment method.

The beneficiary of a letter of credit will receive the payment as long as he presents documents in comply with the terms and conditions of the letter of credit.

Some letters of credit especially the ones issued in Bangladesh request bills of lading that contain not one but multiple notify parties.

On my previous post I have explained that multiple notify parties on a single bill of lading is possible.

Let me explain the situation with an example.

Multiple Notify Party Example:

A textile fabric paint exporter in Italy signs a trade deal with an importer in Bangladesh.

According to the national law of Bangladesh all imports must be paid by letters of credit. As a result an issuing bank in Bangladesh issues a letter of credit against the proforma invoice of the Italian exporter.

The letter of credit contains a condition as below:

Full set original clean on board ocean bills of lading, plus three non-negotiable copies issued by the carrier or its agent drawn or endorsed to the order of Bangladesh Islamic Bank showing ”Freight Prepaid” marked notify applicant and the issuing bank.

The bill of lading must show two notify parties:

  • Notify 1: Applicant (importer company)
  • Notify 2: Issuing bank

Related Articles:

What are the Differences Between Consignee and Notify Party Fields of Bills of Lading?

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What are the Differences Between Consignee and Notify Party Fields of Bills of Lading?

Bill of lading is a transport document covering the carriage of goods by sea.

Consignee means a person entitled to take delivery of the goods under a contract of carriage indicated on a bill of lading.

Notify party means a person that should be notified by the carrier along with the consignee when the shipment arrives at port of discharge.

On today’s post I explain the main differences between the consignee and notify party fields of bills of lading.

Differences Between Consignee and Notify Party

Delivery of Goods:

Carriers hand over goods to the entity stated on the consignee field. Notify party can not claim goods from the carrier under sea shipments.

Optional versus Mandatory Field:

Notify party can also be used as an optional field and need not to be completed. On the other hand consignee field is mandatory and needs to be completed in all occasions.

Title of Goods:

Consignee field determines how title of goods will be delivered from the shipper to the consignee. Notify party has no connection with the title of goods.

  • Consignee field determines if the bill of lading issued in straight, negotiable or bearer format.

Single versus Multiple Entries:

It is possible to enter multiple company names under the notify party field. On the other hand consignee field always completed with single entities.

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Notify Party of a Bill of Lading

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Notify Party of a Bill of Lading

What Does Notify Party Mean?

Notify party means a person that should be notified by the carrier along with the consignee when the shipment arrives at port of discharge.

Notify party has no effect on the title of goods, which determines delivery of the goods to the consignee.

Notify party is mostly importer, importer’s forwarder or importer’s customs broker.

Notify Party Examples:

Notify Party is the Importer:

Under an advance payment terms a Belgium dessert exporter makes a shipment to an importer located in Saudi Arabia.

The importer pays the contract amount full in advance before shipment takes place.

The goods have been shipped under FOB trade terms and shipment takes place between Antwerp Port, Belgium and Dammam Port, Saudi Arabia.

As freight will be paid by the buyer the freight notation that is mentioned on the bill of lading is Freight Collect.

The bill of lading consigned to the importer company. The bill of lading is not issued in negotiable form, but in straight form.

Notify Party is the Importer’s Forwarder:

Under a letter of credit payment a German machinery exporter makes a shipment to an importer located in Hong Kong.

The letter of credit is payable at sight.

The goods have been shipped under CFR trade terms and shipment takes place between Hamburg Port, Germany and Hong Kong Port, Hong Kong.

As freight will be paid by the seller the freight notation that is mentioned on the bill of lading is Freight Prepaid.

The bill of lading consigned to order of the issuing bank. The bill of lading is issued in negotiable form.

Points of Consideration When Filling Out Notify Party Field:
  1. Notify party has no connection with the title of goods.
  2. Selected payment method may affect notify party field completion.
  3. Under open account, cash in advance and cash against documents payment methods notify party field is usually filled out by the shippers without any restrictions.
  4. Under letters of credit payment methods notify party field must be completed according to the letter of credit terms and conditions.

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Consignee of a Bill of Lading

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Consignee of a Bill of Lading

What Does Consignee Mean?

Consignee means a person entitled to delivery of the goods under a contract of carriage indicated on a bill of lading.

Consignee is one of the most important parties on a bill of lading.

The way that consignee field is completed can affect how the goods are to be transferred from shipper to consignee.

There are three possible consignee field instructions available on a bill of lading.

Straight Bill of Lading: Bill of lading states the consignee’s actual name. Depending on the commercial law of the destination country, consignee may clear the goods with or without needing to present an original bill of lading.

Straight bills of lading may create a risk factor for the shippers if they have not received the payment in advance of the shipment.

Especially under letters of credit and cash against goods payment methods, this option should be used with caution.

Negotiable Bill of Lading: Negotiable bills of lading are the ones that are consigned to order of a named party such as to order of the shipper, to order of the issuing bank or to order of the importer etc.

Title of the goods can be transferred through endorsement by stamp and signature.

Negotiable bills of lading generally used under letters of credit and cash against documents payment methods.

Bearer Bill of Lading: This option states that the goods must be delivered by the carrier to the party,whose in possession of the original bills of lading.

Points of Consideration When Filling Out Consignee Field:
  1. Consignee field determines how the title of goods are to be transferred from shipper to consignee.
  2. Completing consignee field may have direct effect on delivery of goods in which may have negative effect on shippers financial interests.
  3. Selected payment method is also affecting consignee field completion.
  4. Under open account and cash in advance payment methods consignee field is usually filled out in straight form.
  5. Under letters of credit and cash against payment methods consignee field is usually filled out in negotiable form.

Related Articles:

How to Complete a Bill of Lading under a Letter of Credit Payment?

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How to Complete a Bill of Lading under a Letter of Credit Payment?

Bill of lading is a transport document covering the carriage of goods by sea.

Letters of credit rules define 4 different types of bills of lading:

  • Multimodal Bill of Lading: (UCP 600 article 19) A type of bill of lading covering at least two different modes of transport such as sea shipment + road transportation.
  • Bill of Lading: (UCP 600 article 20) In general it refers to the transport document which is used in port to port containerized sea shipments, usually issued in negotiable form.
  • Sea Waybill: (UCP 600 article 21) Non negotiable bill of lading. Can not be issued in a negotiable form. Consignee can clear the goods at the port of destination by proving identity.
  • Charter Party Bill of Lading: (UCP 600 article 22) A bill of lading containing an indication that it is subject to a charter party contract. Used in bulk cargo shipments.

On this port I will explain how to complete a bill of lading as it is explained under letters of credit rules UCP 600 article 20.

Step 1 : Analyzing the Letter of Credit:

All documents must be issued according to the conditions of the letter of credit. Bill of lading is not an exception.

As a result a beneficiary who would like to submit a discrepancy free bill of lading must analyze the letter of credit at first instance.

I have already explained how to check a letter of credit as an exporter. This post will be focused on a bill of lading.

Understanding Swift Message Fields Which are Related to the Bill of Lading

Below fields are directly related to the bill of lading and each one must be reviewed carefully.

  1. Field 50: Applicant: Applicant is the importer. Usually issuing banks require that bills of lading show applicants’ details under notify party fields.
  2. Field 59: Beneficiary: Beneficiary is the exporter. Although letters of credit rules state that the shipper or consignor of the goods indicated on any document need not be the beneficiary of the credit, it would be a wise move to mention exact beneficiary details under consignor / shipper fields of the bills of lading.
  3. Field 43P: Partial Shipments: This field determines whether partial shipments are acceptable or not.
  4. Field 43T: Transhipment: This field determines whether transhipment are acceptable or not.
  5. Field 44E: Port of Loading/Airport of Departure: This field indicates the port of loading.
  6. Field 44F: Port of Discharge/Airport of Destination: This field indicates the port of discharge.
  7. Field 44C: Latest Date of Shipment: This field indicates latest date of shipment. Please be careful that date of shipment is a technical term in letters of credit rules. You should understand how date of shipment is determined on a bill of lading.
  8. Field 45A: Description of Goods &/or Services: According to the letters of credit rules in documents other than the commercial invoice, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit.
  9. Field 46A: Documents Required: One of the articles under this field usually determines the requirements of the bill of lading.
  10. Field 47A: Additional Conditions: This field may include additional conditions that must be stated on the bill of lading.

Step 2 : Analyzing the Letters of Credit Rules:

Although all of the UCP 600 articles can be related to the document preparation one way or another, it would be meaningful to drill down to the UCP 600 articles that are directly regulating the bills of lading.

Understanding UCP 600 Articles Which are Related to the Bill of Lading

UCP 600 article 20 states that:

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.

Any signature by the carrier, master or agent must be identified as that of the carrier, master or agent.

Any signature by an agent must indicate whether the agent has signed for or on behalf of the carrier or 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.

The date of issuance of the bill of lading will be deemed to be the date of shipment unless the bill of lading contains an on board notation indicating the date of shipment, in which case the date stated in the on board notation will be deemed to be the date of shipment.

If the bill of lading contains the indication “intended vessel” or similar qualification in relation to the name of the vessel, an on board notation indicating the date of shipment and the name of the actual vessel is required.

iii. indicate shipment from the port of loading to the port of discharge stated in the credit.

If the bill of lading does not indicate the port of loading stated in the credit as the port of loading, or if it contains the indication “intended” or similar qualification in relation to the port of loading, an on board notation indicating the port of loading as stated in the credit, the date of shipment and the name of the vessel is required. This provision applies even when loading on board or shipment on a named vessel is indicated by pre-printed wording
on the bill of lading.

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). Contents of terms and conditions of carriage will not be examined.

vi. contain no indication that it is subject to a charter party.

b. For the purpose of this article, transhipment means unloading from one vessel and reloading to another vessel during the carriage from the port of loading to the port of discharge stated in the credit.
c.

i. A bill of lading may indicate that the goods will or may be transhipped provided that the entire carriage is covered by one and the same bill of lading.

ii. A bill of lading indicating that transhipment will or may take place is acceptable, even if the credit prohibits transhipment, if the goods have been shipped in a container, trailer or LASH barge as evidenced by the bill of lading.

d. Clauses in a bill of lading stating that the carrier reserves the right to tranship will be disregarded.

Step 3 : Make Sure That Data on Bill of Lading is not Conflicting with Data on Other Documents:

Data in a document, when read in context with the credit, the document itself and international standard banking practice, need not be identical to, but must not conflict with, data in that document, any other stipulated document or the credit.

For example description of goods, gross weight, net weight, product classification codes, shipping marks, packaging, quantity of goods etc. as stated on the bill of lading must not conflict with data in any other stipulated document.

Example: Letter of Credit and Presented Bills of Lading

Sample Letter of Credit

F50: Applicant

BAHRAIN ELECTRONIC MACHINES IMPORTING COMPANY W.L.L. P.O.BOX:33078 KINGDOM OF BAHRAIN

F59: Beneficiary

Name and Address:

ILKE MAKINA TAAHHUT MADEN SANAYI VE TICARET-LIMITED SIRKETI, OSTIM SANAYI SITESI BAGDAT CADDESI NO.392 OSTIM/ANKARA/TURKEY

F43P: Partial Shipments

NOT ALLOWED

F43T: Transshipment

ALLOWED

F44E: Port of Loading/Airport of Departure

TURKEY

F44F: Port of Discharge/Airport of Destination

BAHRAIN

F44C: Latest Date of Shipment

161115 2016 Nov 15

F45A: Description of Goods and/or Services

SPARE PARTS AS PER PROFORMA INVOICE REF: T16-100 CFR: BAHRAIN (INCOTERMS 2010)

F46A: Documents Required

ARTICLE 3- FULL SET OF SHIPPED (ON BOARD) MARINE BILLS OF LADING IN 3/3 ORIGINALS ISSUED BY SHIPPING CO’S ON IT’S LETTER HEAD FORMAT ISSUED TO THE ORDER OF THE HOUSING BANK FOR TRADE AND FINANCE, BAHRAIN BRANCH SHOWING FREIGHT PREPAID AND MUST INDICATE ONLY THE APPLICANT AS A NOTIFY PARTY AND MUST INDICATE NAME AND ADDRESS OF THE SHIPPING COMPANY’S AGENT IN BAHRAIN.

THE MARINE B/L MUST CLEARLY INDICATE THE NAME OF THE CARRIER AND CLEARLY STATES ITS FUNCTION/QUALITY IN THE FOLLOWING STRICT MANNER: ”THE CARRIER” AND NOT ”AS CARRIER” AND BILL OF LADING MUST SHOW PACKING OF THE GOODS IN SEAWORTHY PACKING AS PER ISO STANDARD.

B/L MUST SHOW THAT GOODS SHIPPED IN CONTAINERS.

F47A: Additional Conditions

ALL DOCUMENTS MUST BE DATED AND INDICATE THIS L/C NUMBER AND THE HOUSING BANK
FOR TRADE AND FINANCE,BAHRAIN BR. NAME AND ISSUANCE DATE.

B/L MUST SHOW THE CONTAINER(S) AND SEAL(S) NUMBER(S) ALWAYS WHENEVER SHIPMENT
EFFECTED BY CONTAINER(S).

B/L ISSUED AND/OR SIGNED BY FREIGHT FORWARDER IS NOT ACCEPTABLE.

SHORT FORM B/L IS NOT ACCEPTABLE.

SHIPPER OR CONSIGNOR OF THE GOODS INDICATED ON ANY DOCUMENTS MUST BE THE
BENEFICIARY OF THE CREDIT.

ALL REQUIRED DOCUMENTS MUST BE ISSUED IN ENGLISH LANGUAGE.

DOCUMENTS APPEARING DATE OF ISSUANCE PRIOR TO THAT OF THIS CREDIT ARE NOT
ACCEPTABLE.

ALL ORIGINAL TRANSPORT DOC’S REQUIRED UNDER THIS L/C MUST BE PRE-PRINTED
THE WORD ”ORIGINAL”

BILL OF LADING MUST APPEAR A SEPARATE NOTATION STATING ”CONTAINERS ACTUALLY LOADED ON BOARD+VESSEL NAME+PORT OF LOADING NAME+DATE”DULY  SIGNED BY THE SAME SIGNOR OF THE BILL OF LADING ”

Bill of Lading Page 1

Bill of Lading Page 2

Related Articles:

Importance of Bill of Lading Title: Ocean or Marine Bill of Lading

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bill of lading title. ocean or marine bill of lading

Issuing banks often require an ocean bill of lading or a marine bill of lading under letters of credit as a transport document.

The question is whether the title of the bill of lading is important or not when checking the documents?

Letter of Credit Examples:

Ocean Bill of Lading Example

  • Full set of clean shipped on board ocean bills of lading drawn or endorsed to the order of issuing bank ltd, Sana’a Yemen showing freight prepaid and marked notify
    a.applicant (giving full name and address).
    b.issuing bank ltd Sana’a Republic of Yemen.

Marine Bill of Lading Example

  • Full set of clean on board marine bill(s) of lading issued or endorsed to the order of Issuing Bank PLC, notify applicant showing freight prepaid and showing full name and address of the shipping company agent or his representative in Bahrain.

Each shipping line has a pre-printed form of bills of lading.

Some shipping lines are using ocean bills of lading and others are using marine bill(s) of lading.

It is highly likely to be working with a shipping company who has a marine bill(s) of lading pre-printed form where credit calls for an ocean bill of lading or vice versa.

According to latest letter of credit rules

“A bill of lading need not be titled “marine bill of lading”, “ocean bill of lading”, “port‐to‐port bill of lading” or words of similar effect even when the credit so names the required document.”

As a result title of the bill of lading is not important when checking the documents under the letter of credit transactions.

Document Issued or Countersigned by the Applicant: What are the Risks?

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document issued or countersigned by the applicant

What are the risks of a document which is to be issued, signed or countersigned by the applicant in a letter of credit transaction?

In some occasions importers would like to divide letter of credit payments into two or three parts in order to make sure that they will be receiving ordered goods in proper condition.

We call it mixed payments under letters of credit.

Mixed payments is used extensively in bigger projects such as capital machinery sales, construction plant installations etc.

On the below example I will be demonstrating a possible scenario as follows:

An exporter and importer have signed a sale contract which is stating that the payment will be done by an irrevocable letter of credit for 100% of the contract amount.

  • 90% of letter of credit amount will be paid at sight against complying shipping documents.
  • 10% of letter of credit value will be paid after the importer accepts the quality of goods by presentation of the installation certificate which is issued and signed by the authorized officers of the importer.

What are the risks of a document which is to be issued, signed or countersigned by the applicant in a letter of credit transaction?

Letters of credit issued with similar conditions as stated above may bring some uncertainties to the exporters, mainly because of the fact that they may not be able to secure their balance payment, which is payable after the acceptance of the goods by the importers.

Exporters may find these clauses confusing and risky. They may want to know what would be their risks under these kinds of letters of credit?

In order to answer this question properly once again we should check ICC’s view.

ICC banking commission explains their stance in this regard at the latest version of the International Standard Banking Practices publication which is known as ISBP 745.

ISBP 745 states that “a credit or any amendment thereto should not require presentation of a document that is to be issued, signed or countersigned by the applicant.”

On the above example 10% of the balance payment requires presentation of a document issued and signed by the applicant, which is openly against the ICC’s stance.

Beneficiaries should remove such clauses from the letters of credit via amendments. If they fail to do so, they may increase their non-payment risk of the balanced payment.