Understand the Reasons Behind the Tripartite Issue of Bills of Lading

In the realm of maritime transport, the issuance of bills of lading is a critical practice ensuring the smooth transfer of goods from one party to another. Interestingly, these documents are often issued in sets of three - a habit deeply rooted in the need to maintain proper records and safeguard cargo ownership throughout the transaction process. This article will explore the rationale behind this practice and clarify common misconceptions related to the different types of bills of lading.

Three Parties, Three Copies

The issuance of a bill of lading involves three key parties: the seller, the transporter, and the buyer. Each party plays a significant role, with corresponding copies of the bill of lading ensuring that all parties are accounted for and legally responsible. The primary copies are:

One for the Owner: Kept by the shipper as evidence of the transaction in case payment disputes arise. One for the Carrier: Retained by the shipping agent in case one of the other originals is lost, ensuring transaction integrity. One for the Ship’s Captain: Kept for internal records and reference.

These copies function as records of the shipment and are crucial for any audits or disputes that may arise during the transit of the goods.

TYPES OF BILLS OF LADING

There are two primary types of ocean bills of lading:

Express Release Bill of Lading

With an express release bill of lading, no original bills of lading are issued, and only non-negotiable copies are provided. Unlike the more detailed original bill of lading, an express bill of lading does not convey ownership of the goods simply by possession of the document. Instead, it is used primarily for regulatory or non-transferal purposes.

Original Bill of Lading

An original bill of lading is a proof of ownership of the cargo, serving as a key document in the transaction. It is standard practice, especially when the intent is to transfer ownership, to issue three original bills of lading along with non-negotiable copies. These original copies can be transferred by endorsement, allowing the rightful owner to claim and take delivery of the goods.

Ownership Transfer and Endorsement

Ownership of the cargo is transferred upon the endorsement of the bill of lading. Depending on the transaction terms, the endorsing party may be the seller, the authorized agent of the seller, the buyer, or a third-party seller. For instance, in the case of goods sold in transit to a third party, the authorized agent of that third party would endorse the bill of lading.

Key Functions of the Original Bills of Lading

The issuance of three original bills of lading serves multiple purposes:

To retain one original with the shipper for insurance against non-payment. To retain one original with the shipping agent to act as a backup if the other originals are lost. To send one original to the buyer, facilitating the delivery of the cargo at the destination.

Furthermore, in cases where goods are covered by a letter of credit or bank draft, the bill of lading intended for the buyer is instead sent to the bank. The bank will release the cargo after verifying that the buyer's payment terms have been met.

Conclusion

In conclusion, the tripartite issue of bills of lading is a cornerstone in the maritime transport industry, ensuring clarity in cargo ownership and facilitating smooth transactions. By understanding the roles of the different types of bills of lading and the process of endorsement, industry stakeholders can better manage their cargos and avoid potential disputes.