Bill of Lading for Letter of Credit
A bill of lading is a receipt issued by a carrier for goods to be transported to a named destination, which details the terms and conditions of transit. In the case of goods shipped by sea, it is the document of title which controls the physical custody of the goods. There are two different types of bill of lading.
A STRAIGHT BILL OF LADING is one that names a specific consignee to whom goods are to be delivered. It is a non-negotiable document.
An ORDER BILL OF LADING is one that is written “to order” or to order of a named party making the instrument negotiable by endorsement. Letters of credit usually call for an order bill of lading blank endorsed, meaning the holder of the bill of lading has title to the goods.
Given that each bill of lading must be either “straight” or “order”, the following is a list of more common types of bill of lading.
An OCEAN BILL OF LADING is one issued by an ocean carrier in sets, usually three signed originals comprising a complete set, any one of which gives title to the goods. Ocean bills of lading may be issued in “straight” or “order” form.
A SHORT FORM BILL OF LADING is one issued by a carrier which does not indicate all the conditions of the contract of carriage. This is acceptable unless otherwise specified in the letter of credit.
A CHARTER PARTY BILL OF LADING, is one which shippers may, when large or bulk cargoes are concerned, lease the carrying vessel for a stated time or specific voyage under a charter party contract with the owner. Goods carried are then covered under a form of bill of lading issued by the charterer and indicate as being shipped, subject to the term and conditions of the charter party. Charter party bills of lading are not acceptable unless specifically authorized by the letter of credit.
A MULTIMODAL TRANSPORT DOCUMENT is one covering shipments by at least two different modes of transport.
Ensure that the port of loading and port of discharge are as stipulated in the letter of credit.
The shipment must be consigned in the manner stipulated in the letter of credit.
A general description of the goods is acceptable if consistent with but not necessarily identical with the description specified in the letter of credit and other documents.
If the letter of credit calls for an “on board” bill of lading, it must be evidenced by a “shipped on board” bill of lading, or by marked or stamped “on board” notation indicating the date the goods were loaded on board.
If the letter of credit stipulates that freight is to be prepaid; or if the invoice is priced CIF or CFR; or if the ocean freight has been added to the FOB or FAS value: the bill of lading must be marked “freight paid” or “freight prepaid”. Expressions such as “freight to be paid” or “freight payable” are not acceptable.
The bill of lading must be “clean”. Any superimposed marking indicating a defect in the packaging or condition of the goods renders the bill of lading “unclean” and unacceptable.
Bills of lading indicating goods shipped “on deck” are not acceptable unless specifically allowed in the letter of credit.
The total number of packages comprising the shipment, shipping marks and numbers, and any gross weight must agree with those on the commercial invoice and other documents.
Letters of credit should stipulate a period of time after date of issue of the bill of lading or other shipping document for presentation of drawings. If no such period is specified, banks will refuse documents and consider them to be stale dated if presented later than 21 days after the date of “on board” endorsement, or, in the case of a shipped bill of lading or other shipping document, 21 days after the date of issue.
The bill of lading is to cover only goods described in the invoice and specified in the letter of credit.
Any correction or alteration must be initialed by the party signing the bill of lading.
The name of the carrier must appear on the front of the bill of lading where the particulars of the
shipment are shown.
If the bill of lading is signed by an agent, the name of the agent as well as the name of the carrier must be shown.
Bill of Lading for Letter of Credit
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