American ExpressAmerican ExpressAmerican ExpressAmerican ExpressAmerican Express
United StatesChange Country

Everything You Always Wanted to Know About Bills of Lading

By Megan Doyle

Since the advent of mercantilism during medieval times, traders have used systems noting when and where goods were loaded and delivered and the condition of the goods at the time of loading – most often by maritime transport.1 Over time, these evolved into detailed receipts and legal documents that act as a title of goods. Today, such documents are known as bills of lading (BOLs).

This article explains what BOLs are, why they are important for businesses in international trade, potential problems to avoid, and the future of electronic bills of lading.


What is a Bill of Lading?


One of the most common international trade documents, a BOL has three primarily functions: it evidences the terms of the contract of carriage; is a receipt stating goods are properly loaded; and acts as a negotiable title to the goods.2 A bill of lading is issued by the carrier or their agent. BOLs include the following information: name and address of both shipper and carrier, name and nationality of vessel, loading and unloading port, name and address of the person notified on arrival of goods, condition of the goods, quantity of goods, relevant Incoterms, number of copies submitted, place, date, and signature of the carrier.3


There are several types of BOLs, including clean and claused bills of lading, both of which refer to the state of the goods. A clean bill of lading declares that there was no damage or loss of goods during the transfer, while a claused bill of lading indicates the opposite: goods were damaged or are missing.4 Unless a BOL is clean, the shipper (exporter) may have trouble getting paid.


It’s worth noting that a bill of lading is different from a sea waybill, which is sometimes known as a “straight bill of lading.” The difference is that a sea waybill transfers ownership of cargo immediately – in other words, a sea waybill does not transfer a title to ownership of the goods and is therefore a non-negotiable exchange, unlike a BOL.5 To add to the potential confusion, there is also an ocean bill of lading, which can be deemed a negotiable instrument, but is not automatically considered negotiable.6


Why are BOLs Important?


A bill of lading is a crucial aspect of successful international transportation of goods because it acts as a legal agreement between the carrier and shipper. Thus, a BOL can be used to resolve disputes associated with transportation of goods. Similarly, since BOLs act as titles for the goods being shipped, they can be used in negotiations or as collateral. For example, if a carrier has yet to be paid in full for transporting cargo, they have the right to hold onto the bill of lading – and the goods – until sales terms are finalized.7


Additionally, a bill of lading may indicate applicable Incoterms, which are internationally standardized trade stipulations that establish responsibilities for the transfer of risk when trading goods.8 Including Incoterms in a BOL can help assure clarity during international goods transfers.


BOLs can also help customs brokers correctly match commercial clearance documents, ensuring they are able to accurately declare all goods to customs on behalf of an importer, enhancing the customs clearance process.9


Potential Disadvantages of Paper BOLs


The top three disadvantages associated with paper BOLs are costs, security risks, and delays. The paper system is expensive. The cost of paper used for BOLs and similar paper documentation is estimated to be more than 15 percent of physical transportation costs, according to the UK P&I Club, a marine insurance provider.10 Additionally, modern transportation is often quicker than the “snail mail” delivery of a BOL. If a paper BOL doesn’t arrive by the time the goods do, title cannot be legally transferred and complications result, often increasing risk, cost, or both for one or more parties to the transaction.11


Further, paper BOLs have historically been prone to fraud because of the complicated shipping process involved, and the number of parties involved in an international trade finance transaction. Paper enables fraudsters, which can lead to cargo theft, illegal payments for non-existent cargo, and other fraudulent exchanges.12,13


The Future: The Electronic Bill of Lading


Compared to the switch from most paper to e-documents, electronic bills of lading have met some legal hurdles. For example, since a BOL is considered a document of title, it must be physically presented to transfer ownership. Because a digital bill of lading cannot be physically presented, it has not been considered a legal document of title until recently.14



But electronic bills of lading are on the rise. in 2015, BIMCO, the world’s largest international shipping association, added an electronic bill of lading clause to its NYPE 2015 time charter form, and the International Group of P&I Clubs approved three electronic trading systems: Bolero, e-title, and essDOCS.15,16 Each of the systems is capable of encapsulating the full nature of a BOL as a receipt, title, and contract of carriage. The three are also linked to major global banks, helping assist banks and supply chain participants make the switch to paperless trade.17


Electronic BOLs have the potential to address some of the setbacks of paper BOLs, including cost, fraud, and delays. Firstly, electronic BOLs can reduce the paper costs and administrative burdens of BOLs. In addition, digital bills of lading might be more secure, considering the three approved electronic bill of lading systems have multiple layers of security built in.18 Electronic BOLs also have the potential to be used in conjunction with blockchain or other distributed ledger technology, further increasing their security.19 Finally, electronic bills of lading can be sent to international locations instantly, reducing the administrative burden of trade and increasing efficiency. According to the UK P&I Club, in early trials of Bolero and essDOCs, complex commodity trades that normally take 20 days to complete were completed in four days, and a simple trade typically taking 4.5 days was reduced to 65 minutes.20


However, although electronic BOLs are covered for liabilities that could occur under a paper bill, they risk hacking, e-theft, viruses, and computer system issues – risks that are generally not covered by protection and indemnity clubs. This means shippers and receivers must issue protection separately, or accept the risks.21



Bills of lading have been around since the dawn of trade but are still evolving. A bill of lading’s unique threefold nature makes it crucial for international import and export trade. Acting as a contract, receipt, and title of goods, a BOL’s legal attributes can help assure accuracy and establish trust between buyer and seller, making trade a bit easier for international businesses.

Megan Doyle - The Author

The Author

Megan Doyle

Megan Doyle is a business technology writer and researcher based in Wantagh, NY, whose work focuses primarily on financial services technology.


1. “The Importance of a Bill of Lading,” Pacific Customs Brokers Ltd.;
2. “The Beginner’s Guide to Bill of Lading Documents,” Ship Lilly;
3. “What is the difference between a Bill of Lading and a Sea waybill?,” TIBA Group;
4. “Clean Bill of Lading,” Investopedia;
5. “What is the difference between a Bill of Lading and a Sea waybill?,” TIBA Group;
6. “Ocean Bill of Lading,” Investopedia;
7. “The Beginner’s Guide to Bill of Lading Documents,” Ship Lilly;
8. “The Importance of a Bill of Lading,” Pacific Customs Brokers Ltd.;
9. Ibid.
10. Legal Briefing: Electronic Bills of Lading, UK P&I Club;
11. Ibid.
12. Fraudulent Bills of Lading, Tamimi,
13. “Forgeries. (Fraud and bills of lading),” Ship Inspection;
14. Legal Briefing: Electronic Bills of Lading, UK P&I Club;
15. “Electronic Bills of Lading,” Ship Law Log;
16. Legal Briefing: Electronic Bills of Lading, UK P&I Club;
17. Ibid.
18. Ibid.
19. “Can blockchain revolutionize the bill-of-lading?,” Freight Waves;
20. Ibid.
21. “Electronic Bills of Lading,” Ship Law Log;

Related Articles

Existing FX International Payments customers log in here