Claused Bill of Lading

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Will Kenton
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Will Kenton is an expert on the economy and investing laws and regulations. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU.
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Updated January 29, 2023
Reviewed by
David Kindness
David Kindness
Reviewed by David Kindness
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David Kindness is a Certified Public Accountant (CPA) and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. David has helped thousands of clients improve their accounting and financial systems, create budgets, and minimize their taxes.
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What Is a Claused Bill of Lading?

A claused bill of lading is a specific kind of bill of lading in the shipping of goods. A claused bill of lading shows a shortfall or damage in the delivered goods. A bill of lading is a legal document that tracks a shipment from start to finish. When a bill of lading is claused, it means that the legal bill of lading shipment did not provide what was promised.

Key Takeaways

  • A claused bill of lading is a type of bill of lading that shows that the bill of lading did not provide delivery as stated in the contract.
  • A bill of lading is a legal document that tracks a shipment from start to finish.
  • A claused bill of lading would indicate that the delivery included a shortfall or damaged goods.
  • A claused bill of lading can result in a financial loss for the exporter and it is primarily the exporter's responsibility to prevent a claused bill of lading.

How a Claused Bill of Lading Works

When an item is being shipped, a bill of lading is filled out. The bill of lading specifies all the pertinent information related to the shipment and tracks it from the point of origin till its final point of delivery. It is signed by all parties involved in the shipment process.

A claused bill of lading is used when shipped products deviate from the delivery specifications or expected quality laid out in the original bill of lading. People also call a claused bill of lading a "dirty bill of lading" or "foul bill of lading."

In a situation that produces a claused bill of lading, the receiver, not the shipper, declares the claused bill of lading.

If an individual receiver issues a claused bill of lading, the exporter may face future difficulty. For example, if the goods arrive and the receiver deems them damaged or determines some of the goods went missing, the exporter may experience trouble receiving payment.

When shipping goods, purchasers rely on letters of credit for payment. However, most banks refuse to accept any claused bills of lading. Thus, if a receiver files a claused bill of lading and the exporter relies on letters of credit to pay for the goods originally, they will not receive repayment for the goods, and thus will experience a loss.

How to Prevent a Claused Bill of Lading

The responsibility to prevent a claused bill of lading falls primarily on the exporter of the goods. The most important way for an exporter to avoid a claused bill of lading is to be transparent in every process of the transaction.

For example, if the bill of lading stipulates the delivery of 1,000 widgets, yet the exporter's production for the month falls short and it can only ship 900 widgets, it is in its best interest of all parties to notify the buyer before shipping. This will avoid any hassles or discrepancies when the buyer receives the goods.

Furthermore, the exporter should rely on well-known and well-respected shippers in the delivery process. Sending the goods through a shipper that has a proven track record as opposed to one that is new or unheard of will reduce the chances of the goods being lost, stolen, or damaged.

Bill of Lading vs. Claused Bill of Lading

In general, a bill of lading is a legally binding document that includes both the shipper and carrier. These documents detail the type, quantity, and destination of the goods being carried. For example, if a shipping company ships any cargo, a completed bill of lading containing all the details of the cargo will accompany the shipment.

The shipping company uses the bill of lading upon delivery as well. When the company delivers the shipment to its destination, the shipping company must deliver the bill of lading at the same time, and the receiver must sign it upon completed delivery.

In the case of a claused bill of lading, the delivered goods either have not all arrived or have arrived damaged in some way. There are several kinds of bills of lading that cover various situations that may occur during shipping.

For example, a through bill of lading for a bill of lading covers the transportation of goods in both domestic markets and across international borders. Governments often require a through bill of lading when a company exports goods to another country. By comparison, an inland bill of lading describes a contract for the overland transportation of goods, as opposed to overseas shipments.