A negotiable bill of lading is a legal document that allows the transfer of goods to be approved by a third party. It is a contract of carriage between a carrier agency, shipper, and consignee. Non-negotiable bills of lading are less flexible and have more restrictive clauses. The main advantage of a negotiable bill of lading is that it facilitates the movement of goods around the world.
A negotiable bill of lading is a legal document that allows the transfer of goods from the carrier to the shipper to be approved by a third party to the transaction who can then participate, usually in the shipping process. A bill of lading, in general, also known as a BL, B/L or BOL, is essentially a contract of carriage which mainly relates to the transfer of goods on the high seas. It does not specify what the cargo actually is, but, instead, it is simply a shipping agreement between a carrier agency at a port, the shipper itself, and the consignee at the port of destination. A variation of the arrangement is also known as a through bill of lading, which includes transporting the cargo by other means than by ship, such as an airplane, truck or train, to its final destination.
Carriage of goods by negotiable bill of lading involves several assumptions based on the Hague Rules and the Hague-Vis Rules for the law of maritime navigation. The Hague Rules were established by international convention in 1924 to govern shipping procedures and the Hague-Visor Rules are a series of 11 article amendments to the original rules enacted in 1968. They include the provision that the goods can be legally transferred to a third party in the process of shipment. They are also considered valid legal documents by banks so that the sender receives adequate credit for the delivery.
Non-negotiable bills of lading are less flexible and not governed by the Hague Rules, but have features that can speed up the shipping process. Among these is that the shipper guarantees that the cargo represented on the BOL is, in fact, accurate and in good condition when transferred to the consignee at the port of destination, but does not necessarily specify that an inspection is due. Documentation does not need to be presented to the receiving master at the destination, but the consignee or consignee must prove their identity in order to take possession of the goods. If the consignee is named on the BOL and the status of the goods is indicated, the bill of lading is considered non-negotiable by default.
Where non-negotiable bills of lading prevent the goods from being transferred to a third party, other restrictive clauses also apply. They more tightly control the movement of goods and are seen as less practical than a negotiable bill of lading. The non-negotiable form also has many other forms used by some countries and ports, such as the Sea Waybill or the Data Freight Receipt.
The main advantage of a negotiable bill of lading is that it facilitates the movement of goods around the world when different types of sea, land or air shippers are involved which are components of different companies. In order for the transfer to a third party to take place, the negotiable bill of lading must be clean. This means that the document must accurately represent the quantity and quality of the goods being transferred, as well as their origin. The port or shipper company also receives part of the responsibility for the transfer to a third party by stamping and signing the negotiable bill of lading as an extra layer of confirmation that the goods are as declared on the document by the shipper.
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