What Is a Negotiable Bill of Lading?

A negotiable bill of lading is a legal document that allows the transfer of goods from carrier to shipper to be endorsed by a third party in the transaction which can then take part, usually in the shipping process. A bill of lading, in general, also known as a BL, B/L, or BOL, is essentially a transport contract that refers primarily to the transfer of cargo on the open seas. It does not specify what the cargo actually is, but, instead, is simply a shipping agreement between a carrier agency at a port, the shipper itself, and the consignee at the receiving port. A variation on the agreement is also known as a through bill of lading, which includes transport of the cargo by other means besides just ship, such as by aircraft, truck, or train, to its final destination.

Goods transportation by a negotiable bill of lading involve several assumptions based upon the Hague Rules and Hague-Visby Rules for maritime shipping law. The Hague Rules were established by international convention in 1924 to govern maritime shipping procedures, and the Hague-Visby Rules were a series of 11 article amendments to the original rules put in place in 1968. They include the provision whereby the goods can be legally transferred to a third party in the shipping process. They are also considered valid legal documents by banks so that the shipper receives appropriate credit for delivery.

Non-negotiable bills of lading are less flexible and not governed by the Hague Rules, but have features that can expedite a shipping process. Among them is the fact that the shipper is guaranteeing that the cargo represented on the BOL is, in fact, accurate and in good condition when it is transferred to the consignee at the receiving port, but it does not necessarily specify an inspection is due. The documentation does not have to be presented to the receiving master at the destination, but the receiver or consignee has to prove their identity to take possession of the goods. If the receiver is named on the BOL and the condition of the goods is stated, the bill of lading is considered by default non-negotiable.

Where non-negotiable bills of lading prevent transfer of goods to third parties, they also have other restrictive clauses. They control the movement of goods more tightly, and are seen as less practical than a negotiable bill of lading. The non-negotiable form also has several other forms used by certain nations and ports, such as the Sea Waybill or Data Freight Receipt.

The chief advantage of a negotiable bill of lading is that it facilitates the movement of goods around the globe when several different types of shippers are involved on sea, land, or air that are components of different companies. For the transfer to a third party to take place, the negotiable bill of lading must be clean. This means that the document must accurately represent the quantity and quality of the goods being transferred, as well as their origin. The port receiving company or consignor also takes part of the responsibility for the transfer to a third party by stamping and signing the negotiable bill of lading as an additional layer of confirmation that the goods are as stated on the document by the shipper.