Bill of Lading is a very crucial transport document in international trade. This document works as a receipt, as well as confirms the details of the shipment. Moreover, the exporter and the importer can also use it to give any specific instructions in relation to the shipment. One way they can do so is by issuing a To Order Bill of Lading.
A point to note is that To Order BOL is not a separate BOL. But, if the term “To Order” is added to a normal BOL, it becomes a To Order Bill of Lading. The term “To Order” appears in the consignee field of a BOL. The addition of the term makes the Bill of Lading negotiable, which means the ownership can be transferred.
When the BOL is consigned, as per the instructions of the Shipper, it is called a To Order BOL. In this case, the shipper will decide who would receive the shipment at the discharge port after submitting at least one original copy to the carrier.
To Order Bill of Lading – Explanation
It usually takes a long time to ship goods via sea. So, it is possible that during the transit, the ownership of the goods may change several times. In commercial language, that is known as transactions on the High Sea. This is why it is crucial that a Bill of Lading is negotiable. It basically means that the ownership of the goods is still under negotiations when the goods are in transit. And the ownership can change hands before it reaches the destination port.
To facilitate such transactions, the Bill of Lading needs to be flexible, and that is why the consignee column in BOL doesn’t carry a name and remains blank as to the ultimate consignee. Instead, the consignee column carries the words “To Order Of.” It means that the consignee can negotiate the sale to another party, and the delivery will be made on the order of the consignee. Along with being negotiable, such BOLs are transferable as well.
In contrast, a “Non-Negotiable” BOL is the opposite of a “To Order” BOL. So such a BOL could be a “Straight Bill” or “Telex Release Bill.” In such BOLs, the consignee column carries a name. And, thus no other person can claim the cargo, and thus, they are not negotiable and non-transferable. Simply it is a single and direct transaction between the buyer and seller. No transfer of ownership can happen in between, like the transactions on the High Sea. Any change is possible only at the instance of the buyer.
When the transactions involve a Letter of Credit (LoC), then the To Order BOL will have the name of the bank in the consignee column. For example, if Bank A issues a Letter of Credit, the consignee column will carry the words “To Order of Bank ABC.”
In such cases, the letter of credit will carry the instructions regarding documents that the exporter needs to follow. Once the seller fulfills all requirements, the bank will instruct the seller bank to make the payment.
In one more case, a BOL can carry the term “To Order,” and it is when it is a bearer bill of lading. Such BOLs are rare and are hardly in use now. Such a BOL allows any person holding the BOL to receive the delivery of the shipment. Any usual To Order BOL needs endorsement from the consignee, but a Bearer BOL doesn’t require any such thing.
Importance of To Order Bill of Lading
From the above, we already know that To Order BOL makes the BOL negotiable and transferable. And this helps to transfer the ownership of goods in case of any change in ownership during the transit. This helps trade as the prices may fluctuate, and the buyer may not be willing to continue to hold the ownership for such a long period of transit. Or he would like to use the opportunity to earn profit even during the period of transit. Not only there can be multiple trades during the period of transit by such To Order BOL.
For example, Importer A contracts with Exporter B for the supply of mobile chips. A, however, instructs B to mention “To Order” in the consignee column of BOL because A would directly send the chips from the destination port to his production plant in another country. In this case, once the chips arrive at A’s destination port, A would re-send the shipment to his production plant by endorsing the BOL.
There are more instances when To Order BOL is useful.
Usually, a ship stops at many foreign ports. Every port has different procedures and languages, which may create issues in cargo delivery. Also, it might result in fraudulent activities.
Thus, to address such issues, the consignee or its agent, or the holder has to show the bill of lading at the discharge port. Only after the ship’s agent verifies the genuineness of the BOL they would issue the delivery order. In such cases, if the BOL is “To Order,” then anyone whom the consignee assigns would be able to take the delivery without any hassle.
Types of To Order Bill of Lading
There are generally two types of To Order BOL when the shipment is on credit:
To Order, Blank Endorsed
Such BOLs don’t carry any name but are ‘To Order’ of the consignor. The name of the intended consignee is under the ‘notify party.’ It is crucial for the consignor to properly sign and stamp this BOL for smooth transfer of title.
To Order, Bank
In a Letter of Credit (LOC) transaction, this is the most popular and frequently used BOL. In this, a bank endorses the BOL to a consignee against a payment.
To Order Bill of Lading is an important part of international trade. It helps to make international trade convenient for all parties – exporters, importers, and carriers.
Visit Bill of Lading and its Types for more details on other types of BOL.