Clean Bill of Lading: What it is, How it Works

What Is a Clean Bill of Lading?

A clean bill of lading is a document that declares there was no damage to or loss of goods during shipment. The clean bill of lading is issued by the product carrier after thoroughly inspecting all packages for any damage, missing quantities, or deviations in quality.

The clean bill of lading is a type of ocean bill of lading, which is a contract for shipment between a shipper, carrier, and a receiver for goods shipped overseas by water.

A bill of lading is a legal document between a shipper and carrier detailing the type, quantity, and destination of the goods being carried. The bill of lading also serves as a receipt of shipment when the goods are delivered at the predetermined destination.

Understanding Clean Bills of Lading

A clean bill of lading is one type of bill of lading signed by the carrier and the shipper. It guarantees the goods received and placed on the vessel are in good condition with no apparent damage or defect. The clean bill of lading also guarantees the quantity of goods are as ordered before the goods are actually shipped.

The carrier inspects the quantity of goods in the shipment, the packaging, and any other details pertaining to the freight before issuing the clean bill of lading. If there are any anomalies in the shipment, the carrier issues a claused or foul bill of lading to accompany the freight. Any and all damages, defects, and/or changes in quantity are outlined in the claused or foul bill.

A carrier will issue a claused or foul bill of lading if there are quantities missing from the shipment or there is some damage to the cargo.

Since the receiver has no other way to verify the shipment before it arrives, the clean bill of lading is the only way to ensure the goods are delivered as per the original agreement with the shipper.

Claused Bills of Lading

Importers can refuse a shipment of goods if there is no accompanying clean bill of lading, or if a claused bill of lading comes with the shipment. That's because the entity that receives the goods—the importer—pays the shipper for a certain quantity of goods in a specific condition. If there are goods missing and/or they are damaged, this will cause a loss to the importer. This party can refuse acceptance. They may also refuse it because they will not receive funds for the shipment if a bank has issued a letter of credit.

This means a clean bill of lading must often be issued to fulfill the requirements set forth in letters of credit. Many purchasers rely on letters of credit to pay for imports and banks may refuse to supply the funds if a claused bill of lading is presented. A claused or foul bill is issued when the received product is damaged or does not meet specifications.

Key Takeaways

  • A clean bill of lading is a document that declares there was no damage to or loss of goods during shipment to the recipient.
  • This bill of landing is issued by the product carrier who inspects the shipment for damages or missing quantities.
  • The receiver can refuse a shipment if there is no clean bill of lading or a claused bill, which outlines damage to or missing quantities of goods in a shipment.
  • Banks can refuse to advance funds if shipments come with a claused bill of lading.
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