The Bill of Lading, one of the most important documents in transportation logistics, is issued by the main carriers as a contract of carriage to its clients/agents. But, with third-party logistics providers, freight forwarders, and NVOCCs/Box Operators providing services as an intermediary agent, the contract of carriage will be between the intermediary agents and the shipper/importer. Despite not actually physically performing the transportation job themselves, can they issue a legal Bill of Lading?
Not only the main carriers but also Freight Forwarders and NVOCCs/LCL Consolidators can issue a legal bill of lading. The main carrier’s bill of lading is called a Master Bill of Lading, whereas other third-party service providers issue a House Bill of Lading. In addition, where the logistics service involves multi-modal transportation, the main contracted service provider can also issue a legal multi-modal bill of lading.
Nevertheless, even if any freight forwarder or NVOCC can issue a legal bill of lading, the shipping details, and the terms and conditions set on the Bill of Lading may differ from the Master Bill of Lading.
The main carriers, such as Maersk Line, CMA-CGM, OOCL, or COSCO, are guided by strict conventions and laws when it pertains to the carrier’s liability as a transporter. If the freight forwarders and the NVOCCs were to issue a legal bill of lading, they too are taking on the liability as the main carrier.
We need to ascertain that the conditions on the Bill of Lading they issue are legal, and mirrors the Master Bill of Lading issued by the main carriers, in order to ascertain that that Bill of Lading is a legitimate contract of carriage.
Issuing a Legal Bill of Lading
There is a marked difference between the carrier’s bill of lading and the freight forwarder/NVOCC’s bill of lading. The main carrier issues a Master Bill of Lading whereas the latter issues a House Bill of Lading.
To elaborate on what an NVOCC is, it is a Non-Vehicle Operated Common Carrier, which means that the operator does not physically own the ships, trucks or rail locomotive that transport the goods, they merely act as an agent to the cargo owners and subcontracts the VOCCs.
Nevertheless, a House Bill of Lading is also a legal contract of carriage.
But the contracting party in the Master Bill of Lading and the House Bill of Lading is different. Because the cargo-owner is effectively NOT a ‘customer’ of the main carrier, the contract of carriage needs to reflect that fact accordingly.
Issuing a House Bill of Lading
For cargo owners, when you engage with a freight forwarder to transport goods, it means that the ocean freight charge is provided by the freight forwarder.
The freight forwarder makes money from a mark up from the ocean freight charge. Importantly, once the freight forwarder commits to provide freight service, they have to undertake the risks and liabilities associated with the transportation of goods, and not the main carriers.
Therefore, the terms and conditions of a House Bill of Lading, often written at the back of the document, are similar to the Master Bill of Lading.
The way you can ascertain that your House Bill of Lading is legitimate is to compare a standard Bill of Lading’s terms and condition with the one your freight forwarder has given to you.
We are not saying that this is common practice, but many freight forwarders and NVOCCs make changes to the terms and conditions of the House Bill of Lading in order to limit the liability they assume.
This does not mean that the Bill of Lading is outright illegal, but as cargo owners, you just need to ensure you get the most value out of your contract with the freight forwarder/NVOCC. As detailed in this article here, as long as all involved parties agree to the terms of the Bill of Lading, the issuing party can issue a Bill of lading.
More importantly, a House Bill of Lading is always prepared and issued in lieu of the Master Bill of Lading. The freight forwarders or NVOCCs do not have the information necessary to prepare a House Bill of Lading alone, apart from details such as: –
- Shipper Details
- Consignee Details
- Notify Party Details
- Cargo Description
- Weight Descriptions
- Port of Loading
- Port of Discharge
The House Bill of Lading relies on the Master Bill of Lading’s details below in order to complete the bill of lading set.
- Container Number
- Vessel Details
- Estimated Time of Departure
- Master Bill of Lading Number
In this blog post, the author has placed 2 Bill of Ladings side by side. As a cargo owner, you will be looking only at the House Bill of Lading to the right
Without these details above, a freight forwarder/NVOCC could not properly prepare a House Bill of Lading, and therefore as a cargo owner, if you stumble upon an ISSUED Bill of Lading that do not cover, among others, the detail above, the Bill of Lading cannot be deemed a legal contract of carriage.
Certainly, there are limits to how far can a freight forwarder/NVOCCs can restrict their liability as a carrier. But for your reference sake, we have included a list of terms and conditions below that must be similar to a master bill of lading.
Issuing a Master Bill of Lading
A Master Bill of Lading, in comparison, is a contract of carriage that is laid out between the carrier and its agent/cargo owner.
If your contract of carriage is between a freight forwarder/NVOCC, chances are you won’t be seeing this particular document.
As we mentioned before, a Master Bill of Lading is guided by strict terms and conditions that layout the liabilities of both the carrier and the contracting party in the Bill of Lading, stipulated in the shipper details.
In turn, Carriers are mandated to issue a Master Bill of Lading.
Liability of the Issuer of Bill of Lading
We mentioned that Freight Forwarders and NVOCCs can issue a House Bill of Lading, whereas the carrier must issue a Master Bill of Lading, and we mentioned that the terms and conditions of the House Bill of Lading and Master Bill of Lading must mirror each other.
Additional Reading: Terms and Conditions of a Bill of Lading
Here are some of the international rules that govern a contract of carriage: –
- Hague Visby Rule
- Hamburg Rule
- Rotterdam Rule
- US COGSA
- Maritime Code of the People’s Republic of China
As an example, a shipment to-and-fro either the USA or China are to adhere to the US Carriage of Goods at Sea and the Maritime Code of the PRC respectively.
Therefore, the preparation and issuance of the bill of lading have to adhere to the rules of the contract of carriage above.
What you don’t want to see is that a House Bill of Lading, prepared to the USA or China, are not in line with the international rules above. In shipments where accidents happen, the terms and condition of the Bill of Lading may not cover the liabilities apportioned to the contractor.
When a particular issue of Bill of Lading is not accepted?
Granted, that freight forwarders and NVOCCs can issue house bill of lading, but a shipper/consignee can opt not to accept a house bill of lading.
One of the reasons why a Master Bill of Lading is preferred over a House Bill of Lading is required by the Banks in a letter of credit for financing purposes.
Another reason is that the shipper/consignee may not trust the freight forwarder/NVOCC entirely to act accordingly during a crisis where we need to rely on the terms of the Bill of Lading. In Contrast, ship carriers are a large entity and with that comes a high level of trust in performing their responsibility dutifully as a contracted carrier.
Additional Reading: Bill of Lading with Letter of Credit
Preparation vs Issuing a Bill of Lading
There is a difference between who can issue a Bill of Lading and who can prepare a Bill of Lading.
As presented by this link here, it is of no consequence to who prepares the Bill of Lading.
As long as both contracting parties agree to the terms of the contract of carriage, and there is no violation of any domestic and international rules and regulations, anyone can prepare a Bill of Lading but it has to be endorsed by both parties.
Do you need a license to issue a House Bill of Lading?
In some countries yes, a freight forwarder or NVOCC has to register with local customs in order to legally issue a House Bill of Lading.
In the USA, any freight forwarder or NVOCC operating as an Ocean Transportation Intermediary (OTI) is required to register and acquire an OTI license.
The purpose of this registration, in part, is to ascertain that the OFFs and NVOCCs are qualified operators and therefore qualified to undertake the risk and responsibilities that come with issuing a House Bill of Lading.
In summary, all Freight Forwarders, NVOCCs and Ocean Carriers can issue a Bill of Lading. The main concern is that: –
- The terms of the Bill of Lading do not contradict international and domestic rules and regulation
- The issuer of the Bill of Lading has to be qualified or at least deemed qualified to undertake the risks involved in issuing a Bill of Lading.
- Cargo owners have to confer with other stakeholders of the shipment, such as the trade financing banks to make sure that the type of issue of the Bill of Lading is accepted.