Letter of Credit Documents

Bill of Lading

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bill of lading

The transport document covering the carriage of goods by sea is called a bill of lading. B/L is the most frequently used abbreviation of the bill of lading.

Actually, the bill of lading is the generic name of the transport document, which is used in sea shipments.

There are several types of bills of lading in circulation such as multimodal bill of lading, charter party bill of lading and non-negotiable bill of lading etc. Each type of bill of lading has unique characteristics.

On this page you can find information regarding the bill of lading that is mostly used containerized, port to port shipments.

Although most banks define this type of bill of lading as marine bill of lading or ocean bill of lading, we better to use the exact definition from the letter of credit rules and call this transport document simply as bill of lading.

What are the Functions of a Bill of Lading?

The bill of lading is the authentic receipt delivered by a carrier, confirming that the goods therein specified (markings, types of goods, number of packages, etc.) have been loaded or taken in charge for loading on a designated vessel for carriage to a specified port. (1)

A bill of lading is an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight be delivered to the order or assigns of a specified person at a specified place. (2)

functions of a bill of lading

The bill of lading fulfills three basic functions :

  • bills of lading are receipts for the goods;
  • bills of lading evidence the terms of the contract of carriage (by way of clauses usually printed on one side of the document);
  • they are said to be “negotiable documents of title” (except for the nominative or “straight” bill of lading) (3)

Important Note: Letter of credit rules, UCP 600, define the bill of lading as a transport document used only port-to-port sea shipments. Which means that you can not use the bill of lading with air or land shipments. Also if transportation take place more than one mode of transport, then letter of credit should call for a multimodal bill of lading or combined bill of lading.

How to Use Bill of Lading in Letters of Credit Transactions:

The rules related to the multimodal bill of lading can be found under article 20 of UCP 600.

A bill of lading, however named, must appear to:

  1. 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.
  2. 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.
  3. indicate shipment from the port of loading to the port of discharge stated in the credit.
  4. 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.
  5. 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).
  6. contain no indication that it is subject to a charter party. (4)

Special Hints Regarding the Bill of Lading From ISBP (International Standard Banking Practice):

  1. To comply with UCP 600 article 20, a bill of lading must appear to cover a port-to-port shipment but need not be titled “marine bill of lading”, “ocean bill of lading”, “port-to-port bill of lading” or similar.
  2. If a credit requires presentation of a bill of lading (“marine”, “ocean” or “port-to-port” or similar) covering sea shipment only, UCP 600 article 20 is applicable.
  3. If a credit states “Freight Forwarder’s Bill of Lading is acceptable” or uses a similar phrase, then the bill of lading may be signed by a freight forwarder in the capacity of a freight forwarder, without the need to identify itself as carrier or agent for the named carrier. In this event, it is not necessary to show the name of the carrier.

Bill of Lading Example?

You can find a bill of lading example below, that is evidencing a frozen meat shipment from Poland to Saudi Arabia.

bill of lading example

Multimodal Bill of Lading

Ozgur Eker (CDCS) Bill of Lading, Letter of Credit Documents ,
multimodal bill of lading

Multimodal transportation is the movement of one unit load from origin to destination by several methods or transportation under one document without breaking up the unit load.

A very good example of a multimodal transportation is that containers loaded in continental Europe travel by train to Rotterdam, then ship on a vessel to Dar Es Salaam, then are delivered inland in Tanzania by truck. (Source: UNDP Shipping and Incoterms Practice Guide, Page: 6)

Multimodal bill of lading is a transport document that is evidencing more than one mode of transport, one of which is typically by sea shipment, although it is not required.

Bill of lading for combined transport is another name of the multimodal bill of lading.

MMBL (Multimodal Bill of Lading) or MMTD (Multimodal Transport Document) are the most frequently used abbreviations.

Types of Multimodal Transport Documents:

Multimodal bills of lading can be classified under two main types: multimodal transport bill of lading and through bill of lading.

types of multimodal bill of lading

Multimodal Transport Bills of Lading: These types of multimodal bills of lading are issued by a multimodal transport operator and mostly printed on FIATA (International Federation of Freight Forwarders Associations) standard pre-printed form.

Multimodal transport operator (MTO) means any person who concludes a multimodal transport contract and assumes responsibility for the performance thereof as a carrier for the whole journey.

Through Bills of Lading: Through Bills of Lading are virtually identical to the Multimodal Transport Bills of lading but with one major difference.

The Multimodal Transport Bill of Lading is issued by the Multimodal Transport Operator (MTO) (shipping lines, freight forwarders, NVOCC Operators) who takes responsibility of the goods (e.g. shortages, losses, damages) during the entire period of transport, thus not only for the sea passage but also for the other transport modes as well.

The Through Bill of Lading is issued by the sea carrier but the carrier states on the contract of carriage that he is only responsible of the goods for that part of the carriage he takes care of, such as the sea passage only. (Source : www.maritimeknowhow.com )

How to Use Multimodal Bill of Lading in Letters of Credit Transactions:

The rules related to the multimodal bill of lading can be found under article 19 of UCP 600.

A transport document covering at least two different modes of transport (multimodal or combined transport document), however named, must appear to:

  1. 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.
  2. indicate that the goods have been dispatched, taken in charge or shipped on board at the place stated in the credit.
  3. indicate the place of dispatch, taking in charge or shipment and the place of final destination stated in the credit,
  4. be the sole original transport document or, if issued in more than one original, be the full set as indicated on the transport document.
  5. contain terms and conditions of carriage or make reference to another source containing the terms and conditions of carriage (short form or blank back transport document).
  6. contain no indication that it is subject to a charter party. (Source : UCP 600)

Special Hints Regarding the Multimodal Bill of Lading From ISBP (International Standard Banking Practice):

  • In all places where the term “multimodal transport document” is used within this document, it also includes the term combined transport document.
  • A document need not be titled “Multimodal transport document” or “Combined transport document” to be acceptable under UCP 600 article 19, even if such expressions are used in the credit.
  • If a credit requires presentation of a transport document covering transportation utilizing at least two modes of transport … the transport document must not indicate that shipment or dispatch has been effected by only one mode of transport.

Multimodal Bill of Lading Example:

You can find a multimodal bill of lading example below, that is evidencing a soybean shipment from USA to Japan.

multimodal bill of lading example

Above multimodal bill of lading evidencing both road and sea transportation. It is most probably issued by a freight forwarder, because of the fact that the transport document has been signed “As CARRIER”.

Letter of Credit Documents

Ozgur Eker (CDCS) Air Waybill, Bill of Exchange, Bill of Lading, Certificate of Origin, Charter Party Bill of Lading, Commercial Invoice, Featured, Inspection Certificate, Insurance Policy, Letter of Credit Documents, Packing List, Road Transport Document, Sea Waybill , , , , , ,
letter of credit documents

After reading this post, you should understand why documentation is very important under letters of credit.

Additionally, most frequently used document links have been supplied on later parts of this article.

There are many important points in a typical letter of credit transaction that need to be taken care of professionally.

However, documentation is much more important than any other aspects of the letters of credit transactions, because the documentation forms the backbone of the letters of credit structure.

In order to understand the importance of the documentation, please assume that you are an exporter, whom has just shipped an order.

How can you prove to the issuing bank that you have make the shipment according to the letter of credit terms?

Which means that;

  • you have shipped the goods on time, not late
  • you have shipped the right goods, not wrong ones
  • you have shipped the goods in good condition, no apparent defect on the packing
  • you have delivered the goods to the carrier for transportation from port of loading to the port of discharge indicated in the credit etc.

In order to prove above points to the issuing bank, you have to supply a relevant transport document.

Furthermore, let us also consider that the delivery term was CIF Incoterms 2010, which obligates the exporter, which is you, to arrange and pay the insurance for the shipment.

Once again, you have to supply an insurance policy to fulfill your insurance responsibility.

The examples can be extended, but perhaps the main idea is very clear. Letters of credit transactions are related to the documents only, not actions.

importance of letter of credit documentation

The importance of the documentation is stated in UCP 600 article 5 as follows:

Banks deal with documents and not with goods, services or performance to which the documents may relate.

In addition, every condition stated in the letter of credit must be connected to a document. This point is also clearly indicated in UCP 600 article 14 as below.

If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it.

Documents Most Frequently Used Under Letters of Credit Transactions:

Transport Documents:

Insurance Documents:

Financial Documents:

Commercial Documents:

Official Documents: