Confusing Legal Jargon

Different types of documents explained

The moment one’s valuable cargo is loaded on a ship, the carrier (often via an agent) will usually provide a set of documents that are necessary to claim the goods once they have arrived in the port of destination (effectively being put into storage in a warehouse).

Typically three bills are issued—one for the shipper, one for the consignee, and one for the banker, broker, or third party assisting in the delivery. There is no restriction on the number of bills of lading that can be issued, but the number of bills issued must be stated on the bill itself. Because the bill of lading is a document of title, it evidences and confers ownership.

In practice different sets of documents are issued each having their own specific characteristics. This briefing note will explain the fundamental differences between the three main types of documents used in trade: the Bill of Lading, the Sea Waybill and the more recently introduced E-Bill (of Lading).

The Bill of Lading

There are many different versions of the ‘Bill of Lading’, but since a Bill of Lading is a document of title it means that however turns up with this document is deemed to be the owner of the goods. The Warehouse will hence release the goods to this person. One of the main disadvantages of this document is that it can be lost by a courier or other postal service. The problem then becomes two-fold: if someone else finds the bill he can then (fraudulently) present himself as the owner of the goods, or the cargo simply cannot be released, thereby incurring extra warehouse costs and a lot of frustration.

The Sea Waybill

A Sea Waybill is used when the shipper decides to release ownership of the cargo immediately. This means that the goods can be delivered to the person mentioned in the document, and they will only have to identify themselves instead of presenting a document to prove ownership. Through the Sea Waybill the ownership has effectively already been transferred to the person (or company) named in the document.

It is important to mention that a Sea Waybill is only documentary evidence of ownership and is not a document of title; it hence does not confer ownership to the goods (another word for this is a ‘non-negotiable’ bill). In case one wants to have the flexibility to trade the goods during transport, it is probably better to use a Bill of Lading as it will be difficult, if not impossible to transfer ownership without a document of title.

From a security perspective a Sea Waybill is a better alternative when used in combination with an escrow service as the title to the goods cannot be lost in the post and end up in the hands of an unscrupulous third party. By using a Sea Waybill, the Mercurion platform offers the possibility to settle a transaction safely without running the risk of a document of title (and hence the ownership) getting lost. The way this is done is by using a proof of delivery document at the port of destination. The seller and the escrow agent then know that the goods have arrived and are ready for collection. An important consideration is that the goods will not be tradable during transport.

E Bill of Lading

The E Bill of Lading (offered for example by WAVE BL) replaces the physical Bill of Lading and is hence also a document of title. With the help of block-chain technology the ownership can then be transferred safely to the buyer without running the risk of lost documentation. To settle the transaction one will still need a proof of delivery document to prove to the buyer that the goods have arrived and the money can be released to the seller.