Ocean Bill of Lading: What It Is, How It Works

What Is an Ocean Bill of Lading?

An ocean bill of lading is a document required for the transportation of goods overseas across international waters. An ocean bill of lading serves as the carrier's receipt to the shipper as well as a collection document or an invoice. The contract is a legally binding document between both the shipper and the carrier of the shipment.

How an Ocean Bill of Lading Works

An ocean bill of lading is a legal document or contract between the shipper and carrier that details the type, quantity, and destination of goods being transported. The bill of lading serves as a receipt of shipment when the goods are delivered at the predetermined destination. There are different kinds of bills of lading, each with unique stipulations and conditions. 

It allows the shipper to move goods across international waters. The contract outlines details involving the nature of the shipment, including:

• What and how much material is being transported
• Where the goods will be shipped
• The value of the goods shipped
• The type of packing used during transport

The shipper receives the contract when the goods are picked up. The document must be signed by both the shipper and the carrier. Once the shipment is complete, the document is given to the receiver. The receiver must also sign the contract upon delivery and receipt. If a shipper has not sold the goods before they arrive, the bill of lading is a blank endorsement, considered negotiable, and the receiver's line may read "to the order of."

Special Considerations

An additional document is required if the goods are to be transported first over land. This is referred to as an inland bill of lading. This is typically the first document issued whenever international shipments must take place.

The document only allows the materials to reach the shore, while the ocean bill allows the goods to be transported overseas. Since there is no international transport of goods involved, the inland bill of lading is usually arranged with a third party rather than the foreign party involved in the contract.

Types of Ocean Bills of Lading

Several ocean bills of lading can be used by different parties in the transportation industry. The most common ones are the straight bill of lading, the negotiable bill of lading, and the negotiable bill of lading.

• The straight bill of lading is non-negotiable and is marked as such. The only person who has a claim to the goods when they reach the destination port is the person named on the bill. It generally involves parties with open accounts where the shipper may not require the funds from the receiver up front.
• The non-negotiable ocean bill of lading allows the buyer to receive the goods upon showing identification.
• A shipper's order is a negotiable bill of lading and is generally put into place when the shipper wishes to ensure certain terms and conditions are met before the shipment is released to the receiver. This is used when the receiver's payment is backed by a letter of credit.

Example of an Ocean Bill of Lading

As noted above, ocean bills of lading are used when goods are transported internationally over waterways. When a car manufacturer ships vehicles to a dealership overseas, it needs an ocean bill of lading to complete the transfer of goods.

If the vehicles must be transferred further into the destination country—so further from the port—it must have an inland bill of lading to move the vehicles. So a U.S.-based dealership will sign an ocean bill of lading with a Japanese carmaker for the transport of vehicles to the United States. An additional inland bill of lading is required if the shipment arrives in Seattle but is destined for Billings, Montana.

The Bottom Line

International shipping can be complicated. That's why there are legal documents that shippers and buyers can use to highlight details about shipments as well as the rights and responsibilities of every party involved. An ocean bill of lading is used when goods are being shipped internationally.