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

By
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 25, 2023
Reviewed by Eric Estevez
Fact checked by Kirsten Rohrs Schmitt

Negotiable Bill of Lading

Lading is the process of loading cargo onto a ship or vessel, and a negotiable bill of lading is one kind of bill of lading. The bill of lading is a legal document between the shipper and carrier, detailing the type, quantity, and destination of goods being carried. The negotiable bill of lading is distinguished by the fact that it is a contract of carriage that can be transferred to a third party.

How a Negotiable Bill of Lading Works

The bill of lading serves as a receipt of shipment when the goods are delivered at the predetermined destination. That is, the recipient acknowledges that the goods have been delivered by signing the document. Of course, there are different kinds of bills of lading, each type with unique stipulations and conditions. For example, the ocean bill of lading applies only to cargo that is shipped across international waters.

Key Takeaways

  • Lading is a term that refers to loading cargo onto ships.
  • A bill of lading is a document outlining the agreement between shipper and carrier as well as the type, quantity, and destination of goods being carried.
  • Also known as an order bill of lading, the negotiable bill of lading transfers control (title) of the goods to the order of the entity named on the document.
  • A clean bill of lading acknowledges that goods have been received in the appropriate condition, without defects.
  • A straight bill of lading spells out how a carrier can limit their liability.

A negotiable bill of landing can be transferred to a third party through consignment. This happens when the consignee (the person or entity that is the buyer and is financially responsible for the goods) signs or endorses the document and delivers it to the new consignee (the third party). To transfer the negotiable bill of lading, the consignor (the person or business shipping the goods) must stamp and sign the bill. Then the carrier must deliver it. A negotiable bill of lading must be written to the order of the consignee. It must be a clean bill of lading.

Clean Bills of Lading vs. Straight Bill of Lading

A clean bill of lading is issued by a carrier declaring that goods have been received in the appropriate condition, without defects. The product carrier issues a clean bill of lading after inspecting the goods. If the bill of lading is "claused" or "fouled" when it notes that the products or goods are damaged or defective.

A uniform bill of lading or straight bill of lading was first adopted in 1909 and spelled out how a carrier can limit its liability. It may not be transferred and is only deliverable to the named consignee (recipient). Like any bill of lading, the uniform bill of lading also lists the goods being transported and serves as a contract of the terms of the shipment.

Article Sources
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  1. University of Miami Law Review. "History and Development of the Bill of Lading," Pages 704–707. Accessed June 10, 2021.

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