How Long Should You Really Keep a Bill of Lading for?

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It is possibly a question such as this is looming in your mind but was never properly addressed, the question of how long should you keep a bill of lading, or how long a bill of lading is valid for. To begin with, a Bill of Lading serves one purpose and one purpose only, which is to facilitate the proper transfer of ownership of the goods from the exporter, to the importer, via transport service provider intermediaries. Once the transport deed has been done, the outstanding payments have been made, and the importer has received the goods in good order, do the importer and exporter still need to legally keep the bill of lading? If so, how long should they keep it for?

A conventional rule of thumb informs us to keep a bill of lading for 1 year until the cargo is discharged, however, this is largely misrepresented. The period to keep a bill of lading should mirror the bill of lading’s limitation of time for a cargo claim, some bill of ladings have a time bar of 1 year while others have a 2-year time bar. The bill of lading should also be viewed as an accounting document. Book-keeping practices maintain that an accounting document should be kept for at least 7 years.

Contingencies are requiring the bill of lading as a supporting document. Here in this article, we shall look into the different situations where keeping a BL for a longer period is the safer way.  

Keeping a Bill of Lading for Cargo Damage/Loss Claims

The most common scenario where a BL is required is where there is a cargo damage claim. 3 parties may be responsible for the cargo damage, it could be 1 party or 2 or more parties that may cause the cargo damage.

  1. Exporter and its appointed service providers
  2. Common Carrier (NVOCC or VOCC)
  3. Importer and its appointed service provider

Claims against Marine Cargo Insurance

When cargo damages or losses are covered by a dutifully purchased marine cargo insurance, the period of cover may be up to 60 days after the importer has taken delivery. Of course, the period of cover is dependent on the signed insurance cover. The documents required when notifying a claim are: –

  1. Certificate of Insurance
  2. Commercial Invoice and Packing List
  3. Original BL
  4. Supporting documents such as mate receipts
  5. Any correspondence between the carrier and other participating parties

Additional Reading: Benefits of Marine Cargo Insurance

The key document here is the Original Bill of Lading. Although the period where importers or exporters can file a claim is within 60 days of the transportation, the full process from when the insurance company has opened a case file, to full reimbursement, may take years to get done.

Normally, when an insurance claim is being processed, all the original documents will be surrendered to the insurance adjusters for processing. However, we believe that having a copy of the original BL can provide an added layer of assurance if in case there is another party requesting the supporting document. Here is how we can prepare for that contingency: –

  1. Seek to request for additional issue of original BL from the common carriers, an instruction can be placed during the booking confirmation phase.
  2. When the shipper “releases” the original BL, request the shipper to keep an additional copy of the BL until the cargo has safely arrived and was inspected thoroughly.
  3. If and when an insurance claim is filed, seek to keep a copy of the BL until the reimbursement has been made.

Claims against Common Carriers

We all know that a bill of lading is issued either by a Non-Vehicle Operating Common Carrier (NVOCC) or a Vehicle Operated Common Carrier (VOCC). What this essentially means is that the contract of carriage is either: –

  1. Between the cargo owner and the freight forwarder (3PL, 4PL)
  2. Between the cargo owner and the main carrier (airliner, rail-freighters, ocean carriers)

Either way, how long you should be keeping the BL copy is dependent on the period called “time bar”.

Conventional wisdom retains that the bill of lading should be kept for 1 year, but once we look into the terms and conditions of a bill of lading, we noticed that the 1-year rule is not a blanket rule for all types of bill of lading.

For a containerized cargo, whether LCL or FCL, a bill of lading’s term presents that the time bar is only 1 year from the time the cargo is discharged.  But there are cases where the time bar is less or more than 1 year.

A Master Bill of Lading’s term follows common rules such as: –

RuleHague Rule 1924Hague-Visby Rule 1968US-COGSA 1936Rotterdam Rule 2009Hamburg Rule 1978Chinese Maritime Code 1992
Time Bar1 year1 year1 year2 year2 year1 year

Interestingly, a master bill of lading has to adhere to maritime rules set above, however, a house bill of lading is largely less regulated.

In a competitive market, the freight forwarders, 3PLs, and 4PLs may entice more cargo owners to use their transportation services by providing competitive shipping terms and conditions.

Hence, we find that if the sole reason for keeping a bill of lading is to prepare for unforeseen events such as a cargo claim against common carriers, then the period you should keep the bill of lading is very much dependent on the time-bar on which the claim can be made.

Keeping a Bill of Lading for Accounting Matters

What if, a bill of lading no longer serves the purpose as a contract of carriage, proof of delivery, and a document of title?

Once a contract of carriage has been performed dutifully, it is now more of a bookkeeping question. Should you keep a bill of lading as an accounts document for bookkeeping purposes?

Yes, of course, a proper accounting record has supporting documents, while a commercial invoice is a primary document, a tax or accounts auditor may request additional supporting documents to validate the invoice. The bill of lading can serve as that supporting document because it is still, in fact, a contract of carriage.

There are incidents such as a breach of contract, a breach of fiduciary duty, and professional liability claims that require support documents.

The general rule of thumb is to keep supporting documents 1 year beyond the statutes of limitations for the claims above, which is for 7 years.

Conclusion

Discarding records has a wide range of problems that extends beyond the period of cargo carriage. There are also potential legal and tax claims which the cargo owner should prepare for. Therefore, we believe that instead of keeping a bill of lading for 1 year, it is safer to keep the bill of lading for 7 years.

Additional Resources:

https://www.ukpandi.com/fileadmin/uploads/uk-pi/Documents/Events/2016/legal_briefing_2.pdf
https://www.icpas.org/docs/default-source/tax-practice-procedures-files/records-retention-guidelines1a841fdf38106fba827cff0000493078.pdf?sfvrsn=dd94701d_0

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