There are three legal functions of a bill of lading; 1. Evidence of Receipt of Cargo 2. Evidence of a Contract of Carriage 3. Documentation of Title to Cargo (only if its an order bill)

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International Business Law

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In International commerce, the Bill of Lading is an important document where there will be transportation of goods via sea carriage. The Bill of Lading can be traced back to being used as early as the 14th Century (Bennet, 1914).

There is no definition of a Bill of Lading through common law or existing legislation related to Bills of Lading, however Indira (2010, p174) suggests that it can defined by the functions that it assumes.

A Bill of Lading is a document issued by a shipper acknowledging that stated goods have been received on board as cargo for transportation to a designated place for delivery to the consignee who is usually known. There are three legal functions of a bill of lading;

  1. Evidence of Receipt of Cargo
  2. Evidence of a Contract of Carriage
  3. Documentation of Title to Cargo (only if it’s an order bill)

As a receipt, the Bill of Lading is signed by the carrier, approving whether the goods corresponding to the contract description have been received and in good condition. A Bill will be described as ‘clean’ if the goods have been received on board in apparent good condition and stowed ready for transport. The Bill of Lading acts either as evidence of a contract of carriage or if it has been signed over to a third party then it acts as the contract of carriage.  According to The Carriage of Goods By Sea Act 1992 S5(1), the contract of is contained in or evidenced by the Bill of Lading.  Specific conditions will be stated on the face with general terms being on the back. The Bill of Lading acts as a documentation of title only if it is an order bill. The goods will be transferred at the destination port on proof of an original copy of the bill.  If it is an Order Bill the goods can be sold during transit but the Bill of Lading must be received by the new purchaser before the goods can be released to them.

The use of electronic interaction in international commercial transactions has received significant attention in recent years. The term electronic data interchange (EDI) is commonly used to designate systems of computer-to-computer transfer of information in prearranged formats. In correlation to the ever-advancing technology of today’s world, the use of paper bills has come into question.

This essay will look at the functions of the Bill of Lading, the use of both paper and electronic bills of lading, their advantages and disadvantages as well as the issues that inhibit the use of electronic Bill of Lading and how these issues may be overcome.

Paper bills of lading have been around for centuries and therefore are a tried and tested method. There are many advantages of the use of paper bills, Yiannopoulos (1995, p17) highlights that they allow for the easy transfer of goods as well as being reliable documented collateral.

The easy transfer of the right of goods is an obvious advantage of paper bills, to allow buyers and sellers to go about every day trade in a beneficial way to both parties. A paper Bill of Lading also makes it very easy to see who has the title of the goods with a quick visual inspection of the Bill itself, therefore no confusion or wrongful passage of the goods should occur. The use of Bill of Lading forms mean that there will be a high degree of uniformity, this means that even with the vast differences in language and other barriers this standardisation of the Bills allow easier interpretation internationally and is therefore conducive to international trade.  As stated earlier the conditions are stated on the front and back of the bill, this means there is no confusion over the conditions of trade.

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As shown there are still distinct advantages of paper bills, however there are also a number of crucial disadvantages. The key disadvantage is that of the cargo being transferred faster than the Bill of Lading itself, thus having a hold up at the destination port, as the cargo cannot be passed on until the recipient shows proof of the bill of lading.  Jones (2000, p159.) suggest that inefficiencies of paper bills can lead to logistical issues at ports including congestion, delays in ship turnaround and as a result higher costs.

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