What is an Ocean Bill of Lading?

An ocean bill of lading is a receipt and invoice between a carrier and a shipper.

How Does an Ocean Bill of Lading Work?

For example, let's assume that Company XYZ is in Seattle and it wants to purchase goods from Supplier ABC in China. The supplier gives the goods to a transpacific shipping company for transportation to Seattle. Because Company ABC is in another country, it must obtain an ocean bill of lading from the transportation company in order for its goods to be transported overseas.

The ocean bill of lading specifies the quantity and type of goods being transported, as well as the goods' final destination and the vessel on which they will travel. In many cases, the bill of lading details whether the recipient (Company XYZ in our example) must pay for the goods upon receipt, whether certain terms must be met before the recipient's bank will secure the shipment with a letter of credit, and/or whether the goods are damaged or in the wrong quantity upon arrival.

Why Does an Ocean Bill of Lading Matter?

A bill of lading is a contract. It covers the specific terms of the transportation agreement between a shipper and a carrier. A bill of lading is also a receipt, because it proves that the carrier accepted the goods and agreed to take them to their agreed-upon destination. As a result, some bills of lading can be bought, sold or traded when the goods are in transit. In some cases, the recipient of the goods (Company XYZ in our example) can authorize its bank to take title of the goods if it defaults on a payment.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

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