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Definition of an Ocean Bill of Lading

An Ocean Bill of Lading (OBOL) is a legal document that represents a contract between a shipper and carrier of specified goods. The document acts as a receipt for the load of cargo, and as a legal contract between the shipper and carrier for their transportation.

To name this document an Ocean Bill of Lading indicates that the goods are being transported overseas. The type, quantity, condition and destination of the merchandise being shipped is detailed and confirmed by the carrier, so the instrument can serve as a receipt and also as an invoice with legal claim. As a negotiable OBOL represents ownership: it may be traded, bought or sold during cargo transport.

Origins

Providing records for a shipment of cargo is perhaps as old as shipping itself, but the advent of global trade in the Middle Ages made a flexible legal document of title necessary. This legal representation of ocean freight could be traded and sold to other parties without the actual goods on hand. The concept led to the Bill of Lading, making international transport of merchandise much more convenient.

England was an early center of mercantilism and its global trade was overseas—all bills of lading assume sea transport in British English. The term Ocean Bill of Lading is specifically used in the US to designate goods being shipped overseas, because a bill of lading in American English can mean any form of transport.

Purpose

The document can serve in three legal roles, each of which has a different purpose under the law.

Receipt of Cargo
The primary use of an OBOL is as a legal receipt for cargo. The document is prepared and issued by the shipper after the goods are loaded aboard the transporting vessel. This legal instrument provides proof of shipment for insurance and customs obligations, as well as confirmation of a contract’s fulfillment.

Evidence of Carriage Contract
An OBOL may also serve to provide legal evidence of the existence of a contract between a shipper and a carrier. The document is issued by a carrier once the goods are received and carries the obligation to deliver the goods. The shipper cannot receive an OBOL if the goods are not properly shipped, protecting third parties and also the carrier from misrepresentation.

Proof of Title
A properly-executed OBOL grants the lawful holder title to the ocean freight specified in the document. In this usage, the document provides a defensible legal claim.

There are two types of OBOL which can serve as documents of title. In the case of a straight bill of lading, the lawful holder is a named consignee—this type is not negotiable. An order bill of lading, the second type, does not name a specific consignee and can be negotiated with third parties.

Uses

The two forms have different uses. The straight bill of lading names the consignee, who can take delivery of goods upon arrival with the signed original document. The straight bill of lading is appropriate for paid in advance arrangements or open accounts.

An Order OBOL is negotiable once endorsed by the shipper, and can be traded or transferred to another party. In practice, the original document is usually endorsed and sent to a banking institution in the buyer’s country, where it is held until the terms of the transaction are fulfilled.