All posts by : Sayem Mohammad Hanif

It is to be noted that shortly before arrival of the goods at the destination port, the carrier’s(ocean vessel) destination office or agent transmits the manifest information (i.e., the bill of lading information of all the shipments on board that particular vessel) to the local customs office and issues arrival notices to the consignees and/or their agents.

The importers or their agents (a freight forwarder and/or customs broker) file the customs entry and the documentation required for customs clearance with the local customs authorities.

Upon receipt of the customs release, payment of relevant charges (i.e., ocean freight, terminal handling and the customary local charges, if they were not prepaid at origin) and the original bill of lading (duly endorsed, if issued to order), the carrier’s local agent/office releases the shipment to the consignee or his agent.

If a sea waybill or an express bill of lading was issued at origin, no original bill of lading is required at destination to pick up the shipment.

In addition to the customary freight and related charges, there could be demurrage and detention charges. These occur when you exceed the allowed free time. The free time period varies according to the trade lane and local conditions. Usually, it is between a few days and a week.

It is a good practice, if you foresee a delay in picking up your container, to be informed about it ahead of time and request an extension.

Demurrage is generally charged by the port/terminal operator to cover the storage of the container at the facility, whereas detention is charged by the carrier, it is a “rental” fee, if you keep its container(s) longer than agreed.

The importer’s agent releases the goods by taking the DO (Delivery Order) from the freight forwarder and releases the goods from the port. The goods are then trucked to the destination place.

What is Bill of Lading in Shipping ?

Bill of lading acts as a contract between the shipper, carrier and consignee stating what goods are being shipped, where the shipment is coming from, the origin and where it’s headed to, the destination.

The Bill of Lading is only issued after vessel departure from the Port of Loading and after the exporter has provided with all the details, such as the exporter details, consignee, notify party, commodity, weight, cargo description, etc.

Bill of lading also serves as a receipt, i.e., an acknowledgement that the goods have been loaded in the vessel and contains or evidences the terms of the contract of carriage.

Table of Contents

• What is Bill of Lading in Shipping ?
• Original bill of lading
• “Straight” or “Straight consigned bill of lading”
• “to order bill of lading”
• combined transport operator (C.T.O.) and a multimodal transport operator (M.T.O.) bills of lading
• “shipped” or “shipped on board bill of lading”
• “sea waybill”
• Ocean Bills of Lading vs. Sea Waybills or Express Bills of Lading

Types of Bill of Lading

Original bill of lading

Can be identified by the word “ORIGINAL” imprinted or stamped and initialed. There are normally three originals issued.

One of the main purposes of issuing an original bill of lading is to give the vendor the right to control ownership of the goods until the last possible moment.

“Straight” or “Straight consigned bill of lading”

A non-negotiable document stating that the goods are consigned to a specific person, i.e., the named consignee.

The carrier still issues a set of three originals, one of which must be surrendered by the named consignee at destination. They can be sent to the consignee or held by the shipper until payment is received or sent to the bank for documentary collection.

“to order bill of lading”

Provides for the delivery of goods to the order of a specified person (or an organization), which might include a bank.

This type of bill of lading is called “negotiable,” as it is part of a commercial transaction of ownership transfer.

The main purpose of negotiability is to give the shipper and/or the bank full control of the merchandise up to the point when payment is received.

combined transport operator (C.T.O.) and a multimodal transport operator (M.T.O.) bills of lading

Commonly used by freight forwarders who arrange for transportation from inland locations utilizing more than one mode of transportation, e.g., rail-ocean-truck, or air-truck-ocean. This bill of lading is equivalent to an ocean bill of lading.

“shipped” or “shipped on board bill of lading”

Issued by the shipping line once the goods have been confirmed to be loaded aboard the ship.

“sea waybill”

Also known as an express bill of lading is a non-negotiable receipt issued upon receipt of the goods by the carrier.

It is inscribed with the words “non-negotiable.” This document does not convey title, as delivery of the goods is made to the named consignee without the need to present original documents. This assumes the consignee is identifiable by the carrier.

Such a document facilitates international trade, as it is not dependent on the production of documents, nor are consignments delayed while documents are obtained. It is the most practical document between common entities (same companies, etc.).

Ocean Bills of Lading vs. Sea Waybills or Express Bills of Lading

An ocean bill of lading has three functions:

• It is a receipt for the goods
• It is a contract of transport
• When issued in original form, consigned to order or to order of shipper and bank endorsed, it becomes a transferable title of ownership, i.e., whoever holds the original bill of lading, first the shipper, then subsequent parties to the transaction (bank, buyer) can claim the goods from the carrier.

When a bill of lading is issued as an “original,” it says so in the body (original stamp), it is signed and dated on behalf of the carrier and issued in a set of three (the fine print says so on the front of the bill of lading).

One of the originals must be surrendered to the carrier’s agent at destination in order to claim the goods (the remaining two originals become void).

When an original bill of lading is issued at origin, it is usually handed over by the carrier to the shipper (or its agent), so the shipper can use it to secure the payment from the buyer. It has a “blocking” effect, i.e., an original must be presented at destination in order to pick up the goods.

A sea waybill (or express bill of lading) fulfills only the first two functions of the original bill of lading but not the third function.

It is not an “original” bill of lading. It is not a negotiable document and the cargo will automatically be released to the named consignee against proof of identity and payment of relevant applicable charges (similar to air waybills).

Sea waybills (or express bills of lading) will therefore tend to be used when the shipper does not need the “blocking” effect of the original bill of lading and does not need to secure the payment from the buyer.

It follows therefore that original bills of lading will be used when goods are payable against a letter of credit and sea waybills will be used when goods have been paid in advance.

It is to be noted that care should be taken to ensure that the cargo description in a bill of lading matches the description required in a letter of credit.

“On board” notation in Bill of Lading is recommended (and compulsory for letters of credit).

Here are the ways to load cargo in export and import shipments in a 20ft or 40ft Container:

• The container must be sound (no holes, protrusions on sides or floor, etc.)
• Cargo must be secured to prevent any movement in any direction
• Heavy cargo must not be stowed above lighter cargo
• Liquids must be stowed below dry cargo
• Empty spaces must be avoided; when there is empty space, cargo must be well-secured to prevent its movement into the space
• Weight should be evenly distributed

There are various service configurations in the container trade. These include:

• FCL (full container load), where the cargo occupies a complete container, the exclusive use of the full container by one shipper.
• LCL (less than container load), where cargo does not fill or occupy a complete or full container and that is shipped with other cargo in a shared container with many shippers.

A further description of services includes:

• CY (container yard), referring to either a facility at the ocean port or an inland rail or truck facility for the handling, receiving or release of containers
• CFS (container freight station), referring to a facility at an ocean port or, more commonly, at an inland location where LCL cargo is handled (packed into or unpacked from a container). Freight forwarders frequently operate such facilities to accommodate their customers’ needs.

Consolidation of goods is used to solve the small parcels shipments problem. Shipping agents began to play a more active role than just arranging shipments, booking cargo and issuing export documentation, as they developed consolidated (or Groupage)  container services.

So what is consolidation of the shipments?

Consolidation is grouping of small shipments from various shippers to achieve the optimal load in a container, providing for competitive pricing, local pick-up and delivery (as needed), thereby offering the benefits of containerization for smaller shipments.

The shipping agents do the pricing to the shippers (exporters or importers) in CBM or MT of the amount of volume or weight that the shipper occupies in the full container.

For example, a 20ft container has a capacity volume of 28CBM. But an exporter has only 5CBM. So the shipping agent rates the exporter for 5 CBM and provides the shipping service. In this way the exporter benefits to only pay for the required CBM he or she needs and not for the full container. The shipping agent gains for the extra margin that it charges from his cost per CBM.

For the shipping agent, operating a consolidated service is a demanding job as great care must be taken to plan the loading operations, taking into account the types of packages, weights, sizes and nature of the various shipments in the consolidation.

The packages must be loaded, blocked and braced in the container in a secure and safe way for the voyage, and in a way to allow efficient unloading at destination.

There is a term in consolidation called “buyer’s consolidation,”

This is where the freight forwarder receives shipments from several suppliers at an overseas consolidation point, loads them and ships them as a full load destined to a single consignee in import destination.

For example: A buyer from UK imports garments from several suppliers from Bangladesh. Let’s say supplier X,Y,Z.

So now, all the 3 suppliers send the garments to the Container Freight Station (CFS) in Bangladesh. X has 10CBM, Y has 4CBM and Z has 14CBM. So in total 28CBM.

So now the freight forwarder nominated by the buyer consolidates the 3 goods to total 28CBM to a full container in a same destination in UK. This consolidation which is done is called buyer’s consolidation.

To find the Verified Gross Mass (VGM):

Method 1: Weigh the loaded container as a whole.

Method 2: Weigh all the items loaded into the container (including dunnage, securing material, etc.) and add the tare mass of the container to the sum of those single masses.

In marine transportation, rate charges are known as “freight rates.”

The way to charge the ocean freight costs for less than container load (LCL) shipments is per metric ton or cubic metre, whichever yields the higher revenue.

Table of Contents

• When is LCL ( Less than Container Load )shipments done?
• How FCL (Full Container Load) rates are quoted ?
• Some of the “Standard” Surcharges
• What is “ALL IN” freight rates

When is LCL ( Less than Container Load )shipments done?

LCL shipments are done when cargo loads are not large enough to fill a full 20ft or 40ft shipping container. Since LCL shipments fill less than a full 20ft or 40ft shipping container, these are grouped with other cargo from other suppliers and combined and send.

For example, an ocean rate from Chittagong to Toronto could be US$100.00 per metric ton (MT) or cubic meter (CBM).

For example, for a shipment of 2,500 kg (2.5 tons) and two CBM, the cost would be US$100.00 x 2.5 = US$250.00.

For a shipment of 2,500 kg (2.5 tons) and 5 (five) CBM, the cost would be US $100.00 x 5 = US$500.00.

How FCL (Full Container Load) rates are quoted ?

FCL rates are quoted per specific size of container, e.g., US$2000/20-ft container or US$3000/40-ft, depending on the commodity being moved.

Some of the “Standard” Surcharges

It is note that in addition to the basic ocean freight rate, there are a variety of surcharges that can come into play and change the overall cost of a particular shipment, be it LCL or FCL.

Some of the “standard” surcharges that apply all the time are:

• Terminal handling charges, at both origin and destination
• Fuel surcharge (based on the fluctuations of the price of bunker oil)
• Currency surcharge (based on the fluctuations of the U.S. versus the Canadian dollar)
• Security surcharge

Depending on the lane and on the carrier, some of the above charges may be included in the base ocean rate and some may be charged separately.

The terminal handling charges are usually fixed for some time and do not vary much, whereas the fuel and currency surcharges are re-evaluated monthly or quarterly.

One cannot look at just the base ocean rate when comparing the prices of different carriers; one also has to verify what surcharges the carriers will apply on top.

What is “ALL IN” freight rates

It is prudent for an importer or exporter to ask the “ALL IN” price of the ocean freight including all the surcharges to the shipping agent/Freight Forwarder while taking the freight rates.

“ALL IN” freight rates from different shipping agents are important for comparing prices as all the surcharges are included with the base ocean rate in “ALL IN” freight.

Ocean carriers also charge separate bill of lading fees and security filing fees either as a lump sum per shipment or per bill of lading. If one needs to amend a bill of lading after it has been issued, most carriers charge amendment fees, as well.

Letters of indemnity is used to give protection or coverage to the line or carrier.

Instances where bills of lading are lost or damaged warrant the need for a letter of indemnity.

To have a duplicate set of bills of lading issued, the requesting party needs to provide a letter of indemnity, countersigned by a first-class bank, indemnifying the carrier in full for any costs or liabilities that may arise.

The letter of indemnity shall be unlimited in time and value, due to the unlimited liability for breach of contract that the carrier faces by issuing another set of original bills of lading.

Let us see the circumstances where the Letters of indemnity may be issued for Bill of Lading:

• When a carrier notates an exception on a bill of lading, he may, in certain circumstances, agree to issue a clean bill of lading against a letter of indemnity or guarantee, holding it harmless in case of subsequent claims in the context.

For example, in a shipment of 500 cartons of t-shirts, 498 cartons were received in perfect condition and 2 were slightly torn. There was no apparent damage to the content of the 2 cartons. The carrier may be asked to issue a clean bill of lading in order for the shipper to be able to present documents to the bank under a letter of credit

• When an original bill of lading has been lost or missing, a carrier may agree to issue a duplicate set of the bill of lading to the shipper against a letter of indemnity
• In an import context, a carrier may agree to release a shipment without presentation of the original bill of lading, when it has been delayed or has gone missing, against a letter of indemnity.

Usually, such letters of indemnity are issued and signed by the merchant (shipper or consignee, depending on the circumstances) and countersigned/guaranteed by a bank, although some carriers may require a separate bank guarantee.