What is B/L in Shipping? | Template & 8 Most Common Types

The Bill of Lading (BL) was once used exclusively in sea shipping, but now it applies to any mode of shipping. When referring to the BL, it is generally meant as a marine or ocean BL. It is a crucial document that can help regulate international trade and shipping risks. Anyone involved in international trade is expected to have a thorough understanding of the BL. Therefore, I have written this guide to focus on the following six aspects.

• Understanding the Bill of Lading in Shipping
• Bill of Lading Example: Important Information to Keep in Mind
• Most Common 2 Bills of Lading: House BL and Master BL.
• Original BL, Surrendered BL, Seaway BL | When to Use It?
• 3 Common BL Types That are Easy to Confuse.
• FCR

Understanding the Bill of Lading in Shipping

Definition and Functions

A bill of lading, commonly referred to as B/L or BOL, is a document issued by carriers that is used to pick up goods. These carriers can either be shipping companies or freight forwarders, the latter of which are more commonly encountered in business dealings, as shown in the image below.

When it comes to shipping, a Bill of Lading (BL) typically serves three main purposes.

1. Demonstrating ownership of shipped goods.

This is the most important function of the BL. It’s similar to a certificate of real estate ownership, but with more flexibility. Like a bill of exchange, a BL can be transferred but requires endorsement. Generally, whoever has the original BL is considered the owner of the shipments listed on it.

2. Confirming the receipt of shipments.

A BL is a receipt issued by carriers to shippers, essentially from the freight forwarder to the seller. Forwarders use it to confirm that they have received goods.

3. Providing evidence of the transport contract.

The BL specifies the type of goods, quantity, and destination, and sometimes includes specific terms of shipment. It’s important to remember that while the BL provides evidence of the transport contract, it is not an actual contract in and of itself.

Who Gets the Bill of Lading Under Different Incoterms?

Under all Incoterms, freight forwarders issue the Bill of Lading (BL) to the sellers who are the owners of the goods and the shippers in most cases. For example, under the CIF, DDP, and DDU terms, sellers arrange for delivery as the shipper and receive the BL usually 2-3 days after the vessel leaves.

The FOB term, however, is somewhat controversial. Under this term, buyers book the shipping container space as the shipper while sellers are responsible for loading the goods on board as the cargo owner. In this case, freight forwarders issue the BL to the seller, that is, the cargo owner. Buyers can only receive the BL with authorization from the seller. Sellers will give the forwarder authority to do that only when they have received the full payment before shipping.

Under the EXW term, there are two situations. If buyers want to make the payment within a negotiated period or sellers need a drawback for export duties paid, BL will be given to sellers. If there is no need to control goods, BL will be given to buyers by default.

Bill of Lading Example: Important Information to Keep in Mind

Although the form of a BL may differ depending on the shipping company or freight forwarder, its contents are essentially the same. Any bill of lading should include a series of critical information.

Please see below for an example of a BL and a breakdown of its key contents.

1. Supplier

This is usually the company that supplies your product, which can be a factory or trading company. Include your supplier’s company name and address here.

If you are using the L/C payment term, this information must match the L/C’s, as the bank will strictly check the BL.

2. Consignee

The consignee is you, so include your company name and address here. If necessary, you can also add telephone, fax, or code.

If it is the Order BL, write “to order” or “to order of XXX” here. If you are using the L/C payment term, this information must match the L/C’s, usually the bank. If it is an airway bill, this column must specify the information of you or your agent.

3. Notify Party

The notify party is the person who will be notified to pick up the cargo when it arrives at the destination. Usually, you’ll see “same as consignee”.

If you are using the L/C payment term, this information must match the L/C’s, usually the buyer + bank.

4. Bill of Lading Number

You will generally see this in the upper right corner of the BL.

5. Vessel/Voyage

This is the name of the vessel, the sea route, and the number of voyages. Knowing this information, you can easily find out when the vessel starts shipping and arrives, including what port it passes through in the process.

If it is an air waybill, this column displays the air flight number and BL number, with which you can check the logistics information on the airline website.

6 & 7. Port of Loading, Port of Discharge

These are the names of the departure port and discharge port. If your goods need to be transshipped, the transit port can be listed after the port of departure or destination.

If you are using the L/C payment term, this information must match the L/C’s.

8. Shipping Marks & Number, Packages, Description of Goods, Gross Weight, Measurement

These are all cargo details.

• Marks: These refer to the signs, numbers, and text information marked on the outer package boxes. Fill it out as required by the L/C, if there is. Otherwise, keep it the same as the shipping mark information on the commercial invoice. If there is no shipping mark, write “N/M” here.
• Packages: In the case of FCL, usually the quantity and model of containers. In the case of LCL, generally the number of packages.
• Description of Goods: If you are using the L/C payment term, the description here must be in line with the L/C’s requirements.
• Total Gross Weight and Volume of Goods: This information must be in line with the L/C’s requirements. Otherwise, the gross weight is generally shown in kilograms, and the total volume is listed in CBM.

9. Date of Issue

This is the date when the goods are actually loaded. In the case of L/C, this date must be consistent with or prior to the date of shipment required. If your supplier cannot make it, they will notify you to change the L/C.

10. Original B/Ls

You need three (3), as shown in the sample, which means the third of the three BL originals. If you are using the L/C payment term, there is a clause that requires a full set or even 3-3 full sets of BL.

For buyers, there is no need to fill out the bill of lading. Usually, your supplier or the freight forwarder will deal with it for your shipments.

Most Common 2 Bills of Lading: House BL and Master BL.

Master bill of lading (MBL) and house bill of lading (HBL) are two categories of ocean bills of lading, also called marine bills of lading. Under L/C, if an ocean bill is required, it is necessary to submit the MBL to the bank. But, if a marine bill is required, it is acceptable to submit HBL to the bank.

What is the difference between a house BL and a master BL? In general, MBL and HBL are different in terms of the issuer, cargo received at the destination port, and fees.

Issuer

• Shipping companies such as Maersk and COSCO issue MBL. Typically, the bottom seal shows “as carrier”.
• Freight forwarders issue HBL on the basis of MBL obtained from shipping companies. Typically, the bottom seal shows “as agent for the carrier”.

Not all freight forwarders are able to issue HBL. In China, forwarders have to present themselves to the Ministry of Transport of the People’s Republic of China (MOT) and obtain the qualification of NVOCC, Non-vessel operating common carrier. After paying the deposit of $120,000, forwarding agents are qualified to issue HBL. However, this does not mean that all of them are reliable.

Cargo Received at Destination Port and Fees

After receiving the bill of lading from your product supplier, you shall use it to receive goods at the destination port. In this respect, there exist some differences between MBL and HBL.

• With MBL, you can directly pick up goods. Take it to the shipping company or its agent at the destination port, and get a delivery order (D/O) for customs clearance, tax payment, and receipt of goods.
• With HBL, you should take it to the agent of forwarders at the destination port to switch it for MBL. The next steps are the same as above.

As you can see, HBL requires an extra step — switch bills. This requires fees, usually $75-$100. In contrast, there is no such charge in the case of MBL.

Find a reliable forwarder who will charge you a reasonable fee and tell you that price when quoting. If you receive several different freight quotations, it is better to put the freight quote and the fees at the destination port together, and then compare to know which one is really lower in the total shipping price.

From the above, we know MBL is more convenient for buyers to receive their cargo. Moreover, MBL is safer than HBL. Figuratively speaking, MBL is like the document acknowledging debt given by the bank, while HBL is that given by small companies.

Why is HBL still widely used in global trading and shipping? Actually, there are three major reasons. Keep reading.

3 Reasons to Use HBL

LCL Shipments

For FCL shipments, it is permissible to issue MBL or HBL. While for LCL shipments, only HBL is available.

Document Requirements

For shipping companies, when issuing the MBL, it is difficult to display some kinds of information as required by the L/C of buyers. For example, some shipping companies can only show the specific port of departure on the MBL, such as Yantian, Shekou, and Chiwan. They are all docks in Shenzhen. But the L/C requires that the departure port must be Shenzhen. In this case, you can choose to modify the L/C, but there is a charge, or you can choose to use HBL, which is more flexible and can meet L/C requirements.

Freight Rates

By using HBL, freight forwarders can apply to shipping companies for lower freight rates.

In short, compared to shipping companies, forwarders approach BL more flexibly and usually offer discounts. Most cross-border sellers, especially e-commerce sellers, often choose freight forwarders and HBL.

Original BL, Surrendered BL, Seaway BL | When to Use It?

For sea transportation, it is common to see original BL, surrendered/telex release BL, and seaway bill. In general, it is necessary to use the original BL under L/C. Otherwise, it is acceptable to choose any of the three shipping document forms and write it down in the contract. For sellers, original BL is less risky. While for buyers, surrendered/telex release BL, and seaway bills are less risky.

Original Bill of Lading

Generally, BL is issued in a full set, three originals plus three copies. To pick up goods, it must be the original BL. Sellers can transfer it to buyers through the bank or express delivery. In the process, the issue of being lost or delayed may occur, which will lead to a series of troubles. This is why the original BL is usually in triplicate, each of which has the same legal effect.

How Many Original B/Ls Should Sellers Send?

It is up to the requirements to take delivery of goods at the port of destination. Generally, the freight forwarder will confirm that. If it requires only one original bill of lading, there is no need to send three originals and three copies. The remaining two originals and three duplicates will automatically become invalid after you switch bills at the port of destination. In case the original is lost in the process of sending, you can ask your supplier to send the remaining two originals and three copies.

Once three originals are all lost, there will be many troubles. In terms of MBL, there is a need to issue an L/G (letter of guarantee), announce its loss in the newspaper, and even pay a deposit according to the value of goods, often twice the cargo value.

In addition, the regulations for switching bills vary by country and shipping company. Previously, some importers encountered such a situation: at the same destination port, the first shipping company required one original to pick up goods, but the second shipping company required three originals and three copies. Without confirmation, only one original was sent. To help solve this issue, the supplier handed over the remaining two originals and three duplicates to the Chinese shipping company and asked for a certificate, which was used to receive the cargo. This process takes a long time, which would affect your receipt of goods in time. So, it is essential to confirm it in advance.

What If You Found Something Wrong with the Original BL?

First, changing MBL is more problematic than changing HBL. Suppose there is something wrong with MBL. If you found errors one week before the vessel arrives at the destination port, it is convenient to amend the BL. Because the departure port puts data of shipments into the customs system seven days before the vessel arrives at its destination, then, the destination customs officers check it.

At this point, you need to write an L/G to your forwarder and ask him to help you revise the BL. Of course, you bear certain expenses. If you found errors on BL after the vessel arrives at its destination, it is difficult to make changes. Basically, the number of packages or weight cannot be changed, as the former affects the handling of goods at the port and the latter relates to tax payment.

Surrendered or Telex Release Bill of Lading

There is “Surrendered” or “Telex Released” on BL. When using such BL, there is no need to send the original BL. So the problem of “goods waiting BL” won’t occur. Especially for short-distance ocean transportation, for example, from ports of China to South Korea, it is easy to encounter the issue — goods have arrived at the destination while the original BL has not arrived yet. This results in a delay in the cargo receipt, followed by extra costs like cargo storage charges, etc.

How Does It Work?

Knowing the following three steps, we’ll understand how Surrendered or Telex Release BL works.

• 1.Sellers write an L/G, saying that they have received payments and goods can be released. Usually, the forwarder will offer an L/G template to fill out.
• 2.Sellers put the official seal to make it valid, then give it to the forwarder.
• 3.The forwarder submits it to and communicates with the shipping company for a scanned BL copy with the seal of “Surrendered” or “Telex Released”.

With the L/G, the shipping company will notify the destination port by means of e-mail or fax, of which shipments (BL NO.) can be released without any need for Original BL. In other words, buyers can take over goods using Surrendered or Telex Released BL.

Note: if shipping companies have issued the original B/L, they’ll require a return of it with the full set, then issue Surrendered or Telex Released BL. Of course, shipping companies will charge telex release fees, usually $30-$75/MBL. There is usually no telex release charge for LCL sea freights.

One more thing, for the surrendered or telex released BL, there must be a specific company name in the “Consignee” column, which can’t be “To order”. So, it is neither necessary nor possible to endorse this kind of BL.

Seaway Bill

Seaway Bill, abbreviated as SWB, is also a document used to pick up goods, not a document of title to goods. With SWB, buyers can take over the cargo without the original BL or telex release BL. Just like receiving a parcel, buyers sign it directly without the seller’s consent. In global business, parent companies and subsidiaries will use SWB. Or buyers and sellers, who trust each other very much, might use it as well.

From the above, we can see SWB is convenient for the receipt of goods but accompanied by a high risk. With regard to SWB, shipping companies are very cautious about issuing it, which is usually confined to freight prepaid shipments. Few freight forwarders dare to do that.

Usually, it is necessary to apply SWB before the vessel leaves. After the vessel leaves, you can change SWB to telex release BL, but you cannot change telex release BL to SWB.

3 Common BL Types That are Easy to Confuse.

In this section, we focus on three essential BL types that many clients tend to confuse.

• Order BL, Straight BL, and Bearer BL
• Switch Bill
• FCR

Order BL, Straight BL, and Bearer BL

When transporting goods by sea, there are three common forms of shipping documents: original BL, surrendered/telex release BL, and seaway bill. Typically, using the original BL is required when dealing with a letter of credit. However, for other types of contracts, any of the three forms can be used. Sellers tend to prefer the original BL due to its lower risk. Conversely, buyers often opt for surrendered/telex release BL or seaway bills, which carry less risk. For more information, please continue reading.

Order BL

If the client does not make full payment, it is best to issue an Order BL. We’ll see the “Consignee” column to be “To Order” or “To Order of XXX”. And we can transfer it throughout endorsement. There are two common kinds of Order BL.

• To Order: Freight forwarders deliver goods according to the seller’s instructions. In practice, the person holding the original “To Order” BL can take over shipments.
• To Order of XXX: Freight forwarders deliver goods to the designated person, XXX. It is often a bank under L/C or D/P payment terms, i.e. “To Order of XXX Bank”. That is, the bank will endorse the BL, then hand it over to buyers or their agent for the receipt of goods.

Straight BL

On straight BL, there must be specific info in the “Consignee” column. That means only the listed consignee can take over goods. Besides that, sellers can’t transfer the straight BL to other people. According to the conventions of some countries like the US, as long as the person can prove that he is the consignee listed on the straight BL, he can pick up goods even if he doesn’t have the original BL. Therefore, straight BL is proof of the cargo receipt and transportation contract, not a document of title to goods.

Bearer BL

On bearer BL, there is no specific info in the “Consignee” column. And we can transfer this BL form without any endorsement. So it is very easy to take delivery of goods. However, it is highly risky, as whoever holds it can pick up goods. In practice, it is rare to use bearer BL.

Switch Bill of Lading

In the tripartite business, trading companies usually use “switch B/L” to set a firewall between the purchaser and original manufacturer, thereby protecting its business info.

Here is an example to help you better understand how it works.

• Example: Retailer A in the US placed an order of ＄500,000 LED lights to a Hong Kong trading company. The trading company located a factory in Foshan for order production and packing. The destination port is Los Angeles.

In this case, the Hong Kong trading company will use a switch BL. Here are the steps:

• Step 1: Foshan XXX Factory loads products into containers locally, and then sends shipments to the port for loading, Yantian port in Shenzhen, which is close to Foshan.
• On the BL, the shipper column is “Foshan XXX Factory”, and the consignee column is “Hong Kong trading company”.
• Step 2: Once goods are loaded on the vessel, the factory will receive B/L, usually 2-3 days after sailing. The factory will send the original BL to the Hong Kong trading company after receiving the order payment.
• Step 3: Hong Kong trading company will return the first set of original BL to the shipping company and request a new set of BL. This time, the shipper will be the “Hong Kong trading company” and the consignee will be “Retailer A”. Then, they will send the new original BL to Retailer A.
• Step 4: After shipments arrive at the port of Los Angeles, Retailer A uses the original BL to take over their goods.
• In this way, Retailer A will never know the real manufacturer information from the original BL they receive.

FCR

FCR is short for Forwarders Certificate of Receipt. In practice, it is easy to confuse FCR with BL. FCR is only a receipt from freight forwarders, not a document of title to goods. It only means forwarders have received your cargo and will transport it as required by the FCR. It has nothing to do with picking up goods. FCR is mostly used under FOB and EXW terms.