Imagine this nightmare scenario: Your carefully manufactured goods cross oceans, only for the buyer to claim them using just a copy of the bill of lading while your payment remains outstanding. This "lose both goods and money" situation is what every exporter dreads. In international shipping, your choice of bill of lading directly impacts cargo control and release risks. Today we examine two common types—straight and order bills of lading—to help you navigate trade pitfalls.
1. Bill of Lading Types at a Glance
- Straight Bill of Lading: This "named consignee" document specifies the exact recipient in the consignee field. Its defining characteristic is non-transferability, locking cargo ownership directly to the named party.
- Order Bill of Lading: Offering flexibility, this version uses "To Order" or "To Order of ××" in the consignee field, allowing transfer through endorsement. It remains the dominant choice in global trade.
2. Cargo Control: Who Holds the Power?
- Straight B/L: Upon issuance, cargo rights immediately transfer to the designated consignee. Sellers relinquish control, unable to redirect shipments or change recipients. This resembles handing goods directly to buyers—a high-risk approach.
- Order B/L: Here lies the advantage—ownership transfers through endorsement. Sellers maintain control until properly endorsing the document to buyers or banks, enabling secure "payment against documents" transactions. This aligns with international trade norms while protecting sellers.
3. Release Risks: Where Danger Lies
- Straight B/L: Carriers need only deliver to the named consignee. In some jurisdictions (notably the U.S. and Brazil), cargo release may occur without original documents. The risk is clear: buyers might claim goods using copies or identification before full payment, leaving sellers uncompensated.
- Order B/L: Carriers must obtain properly endorsed originals before releasing cargo. While risks exist (forged documents, irregular endorsements, or wrongful releases), controlled transfer mechanisms make this significantly safer than straight bills.
4. Choosing Wisely: Protection Strategies
- Straight B/L: Reserve for exceptional cases—intra-company transfers, fully prepaid orders, samples, or zero-payment-risk situations. Absolute buyer trust is mandatory, and avoid open-account or collection payment terms.
- Order B/L: The preferred choice for letters of credit (L/C), documents against payment (D/P), or resale scenarios. Opt for "To Order of Shipper" to retain ultimate control, ensuring transaction security and preventing losses.