Bill of Lading

Issued by a carrier for goods received for shipment, a bill of lading does three jobs at once, and confusing them causes more trouble than almost any other document in trade.

• A receipt. It records what the carrier received and the condition it appeared to be in.
• Evidence of the contract of carriage. Its terms govern the carrier’s obligations and limits of liability.
• Potentially a document of title. Where it is made out to order and endorsed, whoever lawfully holds it can claim the goods.

That third function is what makes the document commercially powerful and operationally dangerous. Because the goods are released against the original document, control of the paper is control of the cargo - which is what allows a bank to finance a shipment - and losing an original is a serious problem rather than an administrative one.

A straight or non-negotiable bill consigns goods to a named party and is not a document of title, behaving more like an air waybill. A clean bill carries no adverse notation about the goods’ condition; a claused or dirty one does, and letters of credit routinely refuse the latter.