A Bill of Lading is a legally binding document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried.
The Three Pillars of a B/L
- Receipt of Goods: It proves the carrier received the freight in apparent good order (unless marked "foul" or "claused").
- Contract of Carriage: It outlines the terms under which the goods are transported.
- Document of Title: (If negotiable) It represents ownership of the goods. Whoever holds the original B/L holds the cargo.
Straight vs. Negotiable (To Order) B/L
A Straight Bill of Lading is non-negotiable and consigned to a specific party. They take delivery by identifying themselves.
An Order Bill of Lading is consigned "To Order" (often of a bank or shipper). It is negotiable and can be endorsed to third parties. This is heavily used in Letter of Credit transactions where the bank retains title until the buyer pays.