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

What Is an Ocean Bill of Lading?

An ocean bill of lading is a document required for the transportation of goods overseas across international waters. An ocean bill of lading serves as both the carrier's receipt to the shipper, and as a collection document or an invoice. The contract is a legally binding document between both the shipper and the carrier of the shipment.

A bill of lading is a legal document or contract between the shipper and carrier which details the type, quantity, and destination of goods being carried. The bill of lading serves as a receipt of shipment when the goods are delivered at the predetermined destination. There are different kinds of bills of lading, each with unique stipulations and conditions. 

How an Ocean Bill of Lading Works

An ocean bill of lading allows the shipper to move goods across international waters. This document or contract provides the specifics involving the nature of the shipment including what and how much material is being transported, along with where the goods will be shipped. Other information outlined in the contract includes the value of the goods shipped and the type of packing used during transport.

The shipper receives the contract when the goods are picked up. The document must be signed by both the shipper and the carrier. Once the shipment is complete, the document is given to the receiver. Upon delivery and receipt, the receiver must also sign the contract.

There is an additional document—known as an inland bill of lading—that is required if the goods are to be transported first over land. This inland bill only allows the materials to reach the shore, while the ocean bill allows the goods to be transported overseas.

Inland bills of lading are required if the shipment needs to travel further in the destination country after it arrives at the dock.

Example of Ocean Bill of Lading

Ocean bills of lading, as mentioned above, are used when goods are transported overseas through waterways. When a car manufacturer ships vehicles to a dealership overseas, it needs an ocean bill of lading to complete the transfer of goods. If the vehicles must be transferred further into the destination country—so further from the port—it must have an inland bill of lading to move the vehicles. So a U.S.-based dealership will sign an ocean bill of lading with a Japanese carmaker for the transport of vehicles to the United States. An additional inland bill of lading is required if the shipment arrives in Seattle, but is destined for Billings, Montana.

Key Takeaways

  • An ocean bill of lading is a document required for the transportation of goods overseas across international waters.
  • The contract is legal and outlines the type, quantity, and destination of goods being carried.
  • The shipper and carrier sign the ocean bill of lading upon shipment, and the receiver signs the document upon receipt.

Common Types of Ocean Bills of Lading

There are several different types of ocean bills of lading that are used. The straight bill of lading is non-negotiable and is marked as such. The only person who has a claim to the goods when they reach the destination port is the person named on the bill. These bills generally involve parties that have open accounts, where the shipper may not require the funds from the receiver up front. The non-negotiable ocean bill of lading allows the buyer to receive the goods upon showing identification.

A shipper's order is a negotiable bill of lading and is generally put into place when the shipper wishes to ensure certain terms and conditions are met before the shipment is released to the receiver. This is used when the receiver's payment is backed by a letter of credit.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.