International shipping is a shared responsibility between the buyer and seller. The ICC’s INCOTERM gives an indication of which party bears the risk of transportation, and how the responsibility of transportation is shared between the buyer and the seller. Furthermore, the INCOTERM divides the costs of transportation clearly between the buyer and seller. Nevertheless, INCOTERMs are only a negotiating tool. In fact, buyers and sellers can have other forms of arrangement that suit their transportation needs. In this article, we will describe in general who pays for the bill of lading.
Who Pays for the Bill of Lading?
Generally speaking, in a CNF transport, the exporter is responsible to pay for the documentation of a Bill of Lading. It is commonly phrased as a “BL Fee”, and the price ranges depending on the country of origin. A shipping agent’s invoice to the contracting party does not only include BL fee, but also other fees such as Ocean Freight, Terminal Handling Charges, Electronic Data Interchange fee (EDI). Different countries would have different terms for those fees charged. In broad terms, a shipping agent will charge the exporter not only for the BL issue, but also freight services, port facility fee, and other related documentation fees.
What is a CNF Transport? CNF or Cost and Freight shipment is an ICC INCOTERM that indicates that the exporter is responsible for arranging transportation of the cargo up to the port of destination. Incidentally, the exporter bears all transportation risks and costs up to the port of destination too. From herein, the second leg of transportation is undertaken by the importer up to its door.
But, even though a CNF shipment clearly states that the BL fee is a cost the exporter has to bear, importers have to be mindful that the shipping agent also charges a fee for: –
1. BL release fee
2. Documentation Fee
3. EDI Fee
4. Port/Wharf/Warehouse Facility fee
So technically speaking, exporters are responsible to pay for a Bill of Lading issue, but importers have to be aware that the destination’s shipping agent has a fee too. In a CNF shipment, those destination charges are the responsibility of the importers.
It is now apparent that we cannot just view a bill of lading fee as a standalone charge. Actually, there are other related charges that may appear as a shipping cost that you have to be aware of. Furthermore, you have to be prepared to negotiate with your buyer or seller, and knowing the common INCOTERMs will help you in your negotiation.
Find out more below about other related documentation costs that you have to be aware of.
INCOTERM and Bill of Lading Fee
We listed on a table below for you rightfully determine who is responsible to pay for the bill of lading: –
|EXW – Ex-Work||✓|
|FCA – Free Carrier||Depends on the named destination||Depends on the named destination|
|CPT – Carriage Paid To||✓|
|CIPT – Carriage and Insurance Paid To||✓|
|DAP – Delivered at Place||✓|
|DPU – Delivered at Place Unloaded||✓|
|DDP – Delivery Duty Paid||✓|
|FAS – Free Alongside Ship||✓|
|FOB – Free on Board||✓|
|CFR/CNF – Cost and Freight||✓|
|CIF – Cost Insurance and Freight||✓|
Now we see that the answer is not as straightforward as we initially thought.
The more complicated answer to the question of who pays for the bill of lading lies in knowing which INCOTERM arrangement is agreed between the buyer and the seller.
In addition, certain INCOTERM requires buyers and sellers to agree upon a specific point of delivery.
Take INCOTERM 2020’s FCA term as an example, Free Carrier requires the seller to deliver the cargo to the buyer’s arranged carrier. The carrier in question could be the pre-arranged road haulage or seaport terminal. In this instance, the buyer is responsible for the cost of the Bill of Lading.
However, if the named destination is located in the country of the buyer, then the seller is required to arrange its own transportation up to the agreed location. For this case, it is the seller’s responsibility to take on the cost of the Bill of Lading.
Imbedding the Cost of Bill of Lading
INCOTERM elaborates in detail who takes on the cost of transportation, and incidentally, the cost of documenting a Bill of Lading. Despite that, it is not uncommon that sellers increase the selling price of the cargo to cover the transportation cost.
So, in a way, if the seller has factored transportation cost into the price of goods sold to the buyer, the buyer may be the final person that actually bears the cost of the Bill of Lading.
If you are a buyer, and you can always opt to request for a commercial invoice that has a CIF term arranged and compare it with a commercial invoice with a FOB term arranged.
The difference in price between a FOB commercial invoice and a CIF commercial invoice equates to the cost of transportation. Ergo, including the cost of bill of lading documentation.
The cost of Bill of Lading documentation, compared to other related shipping fees, is only a part of the cost of transportation. If you find yourself on this page, chances are you are trying to reduce the cost of transportation for your shipment.
As a matter of fact, the more prominent costs of transportation are often the Fuel Adjustment Factors, Bunker Fees, and Ocean Freight.
There are many other ways to reduce your shipping costs. We opine that determining who pays for the Bill of Lading is not necessarily the answer to that.
When is a Bill of Lading Issued
Difference Between FCA and CIF
Difference Between FCA and FOB