Under a typical international sales arrangement, the seller does not want to part with possession of the goods unless they have some form of guarantee of payment from the buyer. The buyer on the other hand will not want to get their bank involved in providing any form of payment guarantee unless the seller provides some proof that the goods have been delivered and that the buyer has been given the authority to collect the goods.
This is done by the use of shipping documents from the seller which show the buyer that goods have been delivered according to order. Letters of credit issued by banks in favour of a seller will solve any concerns they may have that they may not get paid after the goods are shipped.
Which shipping documents are involved would vary from transaction to transaction and from carrier to carrier. The most commonly used shipping document, which can confirm delivery on board a named ship, and record the carriage terms whilst at the same time being transferable by the buyer, is a bill of lading. The following features are found in any bill of lading:
A bill of lading is a document that records the fact that goods have been shipped or received for shipment. Obviously, a buyer will prefer to have a 'shipped' bill rather than a 'received for shipment' bill since the former means that the goods are already in transit. The bill has to be signed by the shipowner or by the master or other agent on the shipowner's behalf.
In many standard liner bill of lading a detailed set of printed contractual terms or a reference to a 'long form' bill can be found in which such terms are set out in full. In many cases it is the contract of carriage itself, though sometimes it will merely be confirmation of a contract entered into some time earlier.
Negotiable bills of lading originated in sea transport because the voyages were normally lengthy. The cargo owners required a document of title to raise credit for an international sale or to take advantage of an opportunity to sell the goods in transit. A bill of lading will only operate as a document of title if it is drafted as an 'order' bill, i.e. a bill under which the carrier agrees to deliver the goods at their destination to a named consignee or to their 'order or assigns'.
The buyer under an international sale of goods contract has to pay attention to the following before they accept the bill:
In situations where a negotiable document of title is not required, a waybill can be substituted for the normal bill of lading. These documents were first developed for use in land and air transport where negotiable documents of title were not necessary as the journeys involved were normally so brief that little opportunity was provided for the consignee to sell the goods in transit.
A waybill is different from a bill of lading in that, while it acts as a receipt and provides evidence of the contract of carriage, it lacks the third characteristic in that it does not constitute a negotiable document of title.