A straight bill of lading is a type of shipping document that is used to deliver shipments to a particular consignee. This type of B/L is paid upfront and comes with a non-negotiable clause. It means only the consignee can receive the delivered goods and the right to receive goods cannot be transferred to a third party.
It offers some security to the shipping company and the exporter. On the other hand, due to its non-transfer and non-negotiation clause, it can cause some risks to all parties involved in the trade deal as well.
A straight bill of lading is a shipping document that assigns a particular party to receive goods on delivery. It is often paid for in advance, thus makes the exporter financially secured against the default risk of the importer.
The bill includes details such as location, shipping details of goods, delivery location, and consignee. It can only be served to a mentioned consignee. It cannot be transferred or negotiated for a third-party receiver.
How Does a Straight Bill of Lading Work?
When two parties in a trade deal decide to ship through a third-party shipping company, they need to make formal contracts. A bill of lading is a shipping document that works in alignment with other trade documents such as a letter of credit. It is used to control the possession and shipment of goods as mentioned in the trade contract.
The exporter needs to present the bill of lading, LC, and other shipping documents to the bank for receiving payment. Its receiver bank then presents the documents to the issuing bank of the importer. The issuing bank clears the payment provided permissible as per the LC conditions.
It is particularly important at the time of receiving the shipment. The issuing bank of the importer keeps possession of the original straight bill of lading and LC until the payment is cleared.
The importer can then present the original straight bill of lading and LC to claim possession of the shipped goods. Under this bill, the shipment company cannot transfer the possession of the goods to any other third party. Only the consignee mentioned in the straight bill of lading (the importer) can receive the shipment.
Note: In some jurisdictions, it is compulsory to present the original straight bill of lading to claim the shipped goods. However, some jurisdictions allow the claim of goods with a copy of the straight bill of lading and by proving the identity only.
Special Considerations with a Straight Bill of Lading
A straight bill of lading works similarly to a common bill of lading except in a few ways. The most important distinction is that it is structured to a particular consignee. It means unlike a common bill of lading; it does not give rights of possession to a third party.
Another key consideration is the original bill of lading presentation to claim the shipment from the carrier. In most jurisdictions, it is required to produce the original bill of lading by the consignee to claim possession of the shipment. However, in some jurisdictions, it is permissible for the carrier to hand over the shipment by producing a copy of the bill. It is for the fact that the straight bill of lading is non-transferable, hence the receiver only needs to prove the identity.
Although it comes with a “named to a consignee” structure, the presentation of the original bill of lading clause can vary by country law. For instance, in the US, importers can receive the shipment without presenting the original bill. Contrarily, in the UK, the consignee must present the original bill of lading to claim the shipment.
Advantages of a Straight Bill of Lading
By default, a bill of lading is an important shipment document. It complements other trade documents such as invoices, letters of credit, etc. To facilitate international trade. It provides the added benefit of the non-transferability clause.
Often, a straight bill of lading is paid for upfront. No third party can receive the shipment except the consignee mentioned in the bill. Both of these factors provide added layers of security for all parties involved in the shipment process.
Disadvantages of a Straight Bill of Lading
The main drawback with a straight bill of lading is also its biggest advantage. The presentation of the original bill of lading can cause further delays in the shipment process. The importer may not agree to the terms as the delay is caused on the importer’s side. Both parties may need to agree on special terms in the letter of credit to align with the straight bill of lading terms.
A straight bill of lading comes with a little variation from the normal bill. It defines a particular consignee to receive the shipment without transferable rights to a third party. It is used for the shipment of goods often paid for in advance. However, it can cause a delay for the importer and the issuing bank for clearance of shipment and LC payment.