A blank endorsement on a bill of lading is an indication that there is no specified recipient of the endorsed bill. A bill of lading is a receipt showing a list of a shipment of goods. The list contains details of the shipment and is compiled by the carrier of the goods and given to the person or company that consigns the goods.

Key Takeaways

  • A bill of lading is a legal contract between a shipper and a carrier of goods that details the type, quantity, and destination of the goods being transported.
  • The shipper is the seller or exporter of the goods, while the carrier is the company that transports the goods from one destination to another for a fee.
  • A blank endorsement on a bill of lading indicates the seller has not specified a recipient or buyer for the goods.
  • If a seller or exporter does not have a buyer for their goods at the time of shipment, they can indicate "to order" or "to order of" in the consignee section of the bill of lading.
  • The carrier now becomes responsible for the delivery of the goods and for any ancillary costs related to the shipment.

Bill of Lading

A bill of lading acts as a legal contract between the shipper (who is the seller or exporter of the goods) and the carrier (the company that transports goods from one place to another for a fee). A bill of lading also functions as a document of title and a receipt for shipped goods. It acts as a transfer document and is administered in the same way as an actual shipment. When a bill of lading contains a blank endorsement, there is no specified recipient for the bill. The carrier becomes the owner of the bill and can thus claim ownership of the goods listed in the shipment.

For example, a carrier may agree to transport goods for a person or company. The person or company will then stamp and sign the ocean bill of lading for the goods and make it out to order, thereby endorsing the bill of lading to the carrier. The carrier now becomes responsible for the shipment of goods and must act as a representative to obtain and then release the delivery of the goods. The carrier also assumes responsibility for any ancillary, freight, or accounting costs related to the shipment.

A bill of lading can be negotiated and the carrier is bound to the terms of the bill, regardless of the owner of the goods. To be valid, a bill of lading must contain a description of the goods, the weight of the shipment, the name of the shipping company, the flag of the nationality of origin of the goods, the name of the shipper, freight measurements, and the notify and order party of the shipment.

Why Use a Blank Endorsement?

There are several reasons to use a blank endorsement on a bill of lading. In international trade, the exporter (seller) of goods may not have a buyer at the time the goods are loaded on the vessel for transport. The seller anticipates having a buyer by the time the goods arrive at the destination. Since the recipient of the goods is yet to be determined, the consignee section of the bill of lading will simply state "to order" or "to order of."

The bill of lading is now classified as negotiable, which means the ownership of the goods is being negotiated while the cargo is being transported. This process enables the seller to transfer the title of the goods once the seller has come to terms with a buyer. Additionally, a negotiable bill of lading, also known as a transferable bill of lading, allows the ownership of goods to be transferred multiple times while the goods are in transit. Commodities are frequently sold multiple times during transit, a situation known as "string sales."

International Commercial Terms

The rules and language regarding international shipping and trade can be confusing, especially since buyers and sellers in different countries can define terms in various ways. Knowing what a bill of lading is and what a blank endorsement means is just one step in understanding the contracts surrounding international trade.

International Commercial Terms—also known as Incoterms—refers to a set of international commercial terms that help buyers and sellers clarify the language used in international trade. The International Chamber of Commerce (ICC) began publishing these terms in 1936 and now regularly updates them to reflect changes in trade practices. These terms are a useful resource for anyone interested in learning more about foreign trade and the obligations of buyers and sellers.