Bill of Lading

Legal Document
: Quantity, specific thing, and where to be delivered

Contract
: evidence of a contract that is made by the parties involved

Receipt
: states the information about the shipped products and serves as evidence of shipment.

History and Development

: 11th to 15th century in the Italian City States

- empire of Constantinople
- evidence of the transactions

Hague Rules 1924

: set the minimum risk of carriers
: shipper bears the cost if they cannot prove that the ship is unseaworthy
: carrier can remove liability if they exercised due diligence

Hague-Visby Rules
: impose some minimum affreightment obligations to the carrier
: advocates to the protection of the shipper

Hamburg Rules and Rotterdam Rules

: modern rules in terms of Bill of lading
: Hamburg are developed to right the criticism of hague rules
: Rotterdam is a treaty to revise the international rules
: apply to multi-modal transport
- more modern

Roles and purposes of Bill of Lading

- Cargo Receipt
: can be used as proof of shipment for customs and insurance purposes, and also as commercial proof of
completing a contractual obligation
: Clean bill of lading, loaded properly and there are no damages to the goods during the shipment process
: Dirty bill of lading, claused BoL, there are some damage to or loss of a good during transport
> they negotiate the price and proceed with the transaction
: Said to Contain - the cargo cannot be effectively examined because it is in a contained enclosure.
- Contract of Carriage
: serves as an evidence for the carriage contract containing the terms and condition under which the
transportation of the goods will be carried out
- Document of Title
: concern of the buyer
: bill of lading shows who own the cargo being delivered

Importance of Bill of Lading

- Manifestation/Evidence of the Contract of Carriage

: the carrier may carry out the goods
- Proof that the carrier received the goods in good condition
- Negotiable bill of lading, the holder of this document has the title of the goods
- Vital details of shipment

Negotiable and Non-negotiable bill of lading

Negotiable BoL
: the buyer must have the original copy of the bill and must present it to receive the goods
: to anyone who has the original copy of the bill.
: Claiming of the goods > buyer or his agent must acquire the bill and present it at the discharge port

Non-negotiable BoL

Execution

Straight BoL
: non-negotiable
: specific person that will receive of goods

Open BoL
: the name of the receiver of consignee can be changed

Bearer BoL
: the delivery is the one who holds the bill
: bulk cargo turned over in small amounts

Order BoL
: negotiable
: consignee can assign to whom the cargo can be delivered
: deliver as per the order of the consignee to the order of
Method of Operation
: received for shipment BoL
> ensures the shipper that the carrier has received the goods
> not evidence that it is still not on board

: Shipped BoL
> issued when cargo is on board

: Clean BoL
> Loaded on board in good order and condition

: Dirty BoL
> clause with remarks on the condition of the cargo
> torn packaging etc

: Through BoL
> allows direct delivery from point A to point B

: Combined BoL
> Cargo is transported by sea and land

Parts of Bill of Lading

The shipper may not be necessarily the owner
Consignee is the one who receiving the goods

Party to Notify: the one who is in the port of destination

: the consignee must be notified
: the arrastre operator is the

Bonita Ace is the pre-carriage

Ever Level is the ship vessel

Port Klang is port of loading/origin

Place of delivery: Felixstowe

Carrier: is the Chicago shipping

Shipping company may not own the ship.

> Liability, if nasira yung goods, who will be liable?

: ofcourse Chicago shipping, then it will run after Bonita Ace

:

Chicago shipping has handling

: pre-carriage in bonita ace (siya yung kumuha)
: then dinala nya sa port klang
: then on board sya sa Ever Level

Notify Party:
ABCD Company is the one who will handle in Port Felixstowe
From the time the goods are taken from the shipper upto the time it is loaded to the vessel and before
discharge, dapat reflected sa bill of lading

Shipment, hindi lang binigay mo yung goods mo.

Kailangan malaman who has custody and control of the goods before it is delivered to the consignee

Bill of Lading is the best evidence to prove liability.

Consignee, kung sira yung goods? Sino-sino liable, edi si carrier, pre-carriage, the ship,

Bill of Lading
FIRST ORIGINAL:
> napapalitan ba bill of lading? Can you amend?
> meron bang second original
> kung ano nakalagay sa bill of lading, yun na yun
> Merong invoice na kasama,

> IncoTerms in the BoL

: Freight, Collect
: Shipper’s Load and Count
> kinolekta nya na cargo ay binilang ni shipper, si shipper din nag load.

BL Number: Reference number

How Bill of lading works in international trade

Seller is the Shipper. Seller will give the goods to the shipping agent.

Shipping agent is the one who issue the BoL. The shipping documents is sent to the buyer.

Consignee – Authorize to get the cargo from the ship.

Consignor –

Shipper -

 INCO terms – are terms and conditions for the shipping of the goods that qualifies who bears the loss
or liability
o FOB (Freight on Board)
o DDP (Duties, Deliver, Paid)
o CIF (Cost, Insurance, Freight)
 In Bill of lading or separate document (LUNGE??), it states what incoterms govern the transaction from
start to end. From the time the shipper departs with the goods until the time the consignee receives
the goods.
o INCO terms will determine this
How Cargo is claimed
: The cargo owner, or his representative, collects his goods from the shipowner, or his agent, on the arrival

: The buyer should receive the good in good and apparent condition.

How Cargo Claims arise:

1. The goods are not available or short-landed

a. Part of the entire arrived at the destination
b. Warehouse issues a report of condition of the goods that certifies the short-landing.
c. Kulang yung na receive na cargo.
i. Jettison – throw or drop (something) from aircraft or the ship. Itatapon yung goods.
1. Ill-faithed ship berthing at the port.
2. Debarge, to tow the ship
3. If jettisoned, paano yun? The carrier should prove the basis of the jettison.
2. The goods are damaged or bad-order
a. Can be told in appearance
b. Cargo owner for the survey of the goods for the representative of the carrier
c. Entitled to make an investigation and searches
d. Claimant takes a lot of effort

How Cargo Claims are Settled?

(1) The claimant must prove his loss

(2) The carrier must then prove:
a. The cause of the loss
b. Due diligence was exercised to make the vessel seaworthy to guard against the loss
c. That he is not responsible by virtue of at least one of the exculpatory exceptions of the rule
i. When there is a claim made by the consignor, or shipper, the carrier will always
oppose it. They consignee will make a claim that is good.
ii. Kung ano yung naka-declare. If misdeclaration of goods, the shipper is liable.
(3) Claimant must put forwards any relevant arguments in rebuttal
(4) There is a middle ground where both parties may produce various additional proofs

Users of Pro forma invoce

Preliminary Bill of Sale

- Businesses
- International seller and buyers
o Understand each other and negotiate the terms

Elements of Pro Forma Invoice

- Seller’s name and address

- Buyer’s name and address
- Buyer’s preference
- Items quoted
- Weights and dimensions of quoted products
- Discounts, If applicable
- Terms of sale or Incoterm used in the sale
- Terms of payment
- Estimated shipping date
- Validity date
- Other costs on pro forma invoice
- Advise any special document or standards required to clear customs in your country
o Depending on the nature of the goods imported, here are some documents required.
- Signature by an authorized person from supplier’s company

: Label of the proforma invoice, it separates it from commercial invoice.

Things to remember in making a pro forma invoice

- Should contain the proforma invoice

o To clarify the terms of sale are not yet final
- Include date and price of goods
- Not a true invoice
o Custoemrs are not required to make payment
o No purchase made yet
- Not under accounts payable
- Not under accounts receivable

Inquiry of the Buyer – then the seller will send the pro forma invoice

Importance of Pro Forma Invoice

: Contains the detailed information to legally import a product

: Pro forma invoice and quotations are in practice the same
: Traditional invoice and pro forma invoice are not same.

: PRO FORMA INVOICE ARE NOT LEGALLY BINDING. Traditional Invoice confirms the sale.
: If Promo forma invoice is accomplished – commercial invoice will be sent by the shipper
: There could be difference in commercial invoice and pro forma invoice depending on the negotiation

PRO FORMA INVOICE

- Good faith estimate that what can be known from the items being requested
- idea of the customers expectred

Commercial Invoice
- Contains the final payments
- Used for accounts receivable

LETTER of CREDIT

: How you get paid is by the letter of credit.

> Seller and then the buyer, we don’t know them they not met. Hey mr. Santiago we saw your website
and it looks good and we want to purchase.
> Should I trust this buyer from south africe when we know there is a lot of scams?
> Seller inquires his capacity to pay, business and line of industry.
> The buyer may also look at the seller as dubious.
> When the seller knows the buyer and is comfortable. The seller will deal with the buyer (10 tractors
worth 100 million pesos). The seller will ship the products without being paid ahead.
> Buyers tells he’s gonna order, but when the goods are with me that is when I will pay.

> There is a spectrum of trust when the seller is parting with his goods.
> Will the seller get paid?
> Mr buyer, I will send you my tractors and goods, and it will be in 30 days. From the time receive your
irrevocable letter of credit/

> Why would I require an irrevocable letter of credit?

: Kung LC lang, the buyer can revoke it at anytime when the goods are in transit
: It is probable that when the goods are in transit, it can be revoked.
: By original instruction, my goods are discharged in South Africa.
: TO be wise I will need a irrevocable letter of credit. This letter cannot be withdrawn anymore by the
buyer.

: LC is an evidence of payment. LC will not be honored UNTIL the goods are received by the consignor
at the port of destination AT GOOD CONDITION.
: Assuming all those are equal, I will not part with my goods without LC as form of payment.
: Can be electronic LC/
: Seller will not part with the goods unless the buyers sends the irrevocable LC.
: The LC will not be honored or good until the one issued it transmits CONFIRMATION that the goods are
received in order. That is the time the bank will honor and release payment.
: letter of credit is a negotiable instrument
: to incash the LC, there should be a confirmation of goods that are in order. The buyer will now call his bank
: Letter of credit is a bank to bank transaction. Correspondent bank.
: Bank of South Africa, t6he buyer will tell the bank to issue an irrevocable letter of credit. Bank of south Africa
will call a partner or corresponding bank in the Philippines. They sent a letter of credit. BPI will then call
Santiago Corporation, they have a letter of credit from BSA and you are beneficiary of LC. Buyer will ask the face
value.

> Directives
Bank of the Philippine Isaland, Upon PRESENTMENT of payment or SURERNDER of LC to your bank. Please go
ahead and honor payment. Because Goods are received in order in South Africa per presentation of South
Africa or the applicant of LC.

: LC is a document evidencing payment if it is honored.

: There are different kinds of LC.
: Walang lamangan and there is matter of trust. Because there are triggering points, when the goods are deliver
and the goods are be paid.

: LC is a document of payment. It is not money. It is negotiable.

: guarantee na mababayaran ung seller. in case buyer fails to pay, ung bank ang magbabayad para sa kanya

: A letter of credit that is issued by a financial institution on behalf of the buyer, to the seller in order to
guarantee that the payment will be cleared even if the buyer fails to do so.

: Document evidencing payment when the obligations are HONORED. It is only given when the goods are
received in order.

: COMMERCIAL LC
> documentary credit, or regular of credit, promise to pay the holder when fulfill his obligation
> All LC are commercial letter of credit.

: EXPORT/ IMPORT LC (sino gumagamit)

> The letter of credit depends on the one who uses it.
: Import LC
> Issued by the importer’s bank on behalf of the importer with the exporter being the beneficiary
> Bank of South Africa, buyer applies for import LC

: EXPORT LC
> An importer issues an important letter of credit with the exporter being the beneficiary
> This is the one endorsed ni South African bank to Santiago Corporation in Philippines
> Same letter of credit but depends on who has it.
> He has now a document to support the goods abroad. To support purchase and payment.
> If it is now export LC, Santiago corp has now an assurance that he will get paid when there is a confirmation
that goods are received in order

: TRANSFERABLE LC
> allows the beneficiary to transfer all or part of the payment to another supplier in the chain or any other
beneficiary. The beneficiary is given the right to pass on the available credit to another party
> 4 parties: Beneficiary, Second Beneficiary, Final Buyer, and the Bank
> Discounting…
> Okay lang kahit 80 mil makuha ko

: UNTRANSFERABLE LC
> Does not allow any transfer of money to any third party. No transfer of beneficiary.

: REVOCABLE LC
> the issuing bank or the buyer can alter or make changes any time without alarming or notifying the seller or
the beneficiary

: IRREVOCABLE LC
> COUPLED WITH INTEREST, that is why it is irrevocable
> IMBUED WITH INTEREST, interest of the seller that parted with the goods

: STAND BY LC
> Guarantees that the beneficiary will be paid
> Stand by LC is when the goods are being transport. While not received it is in stand by.
> This is not issued. The bank will say the LC is holding here. Was opened in your favor, but once your goods are
received, we will honor

Letter of Credit v Stand By - stand by payment mode when the purchaser fails to pay the beneficiary

: Confirmed LC
> the seller or exporter acquires the guarantee of payment from a confirming bank (or second bank)
> Having a second bank as a back up
> avoid the risk of non-payment
! Mr SA opened a LC with BSA, it has a correspondent bank in PH. BPI. Both BSA and BPI confirmed the issuance
and validity of letter of credit.
! It is good to have a confirmed irrevocable letter of credit.
! If you are a selling corporation, you need to a CONFIRMATION in so far as letter of credit is concerned/

: Unconfirmed LC
> There is a guarantee of payment by the only one bank
> There is only one bank

: Revolving LC
! maraming involved na parties
> Covers multiple transactions. Use for certain period of time and certain number of transaction.
> avoids the need for repetitive arrangement. They do not need to issue LC for every transaction.
> 3 types: Cumulative, non-cumulative, Value-based

Cumulative – used per month. The remaining credit in past months can be used in future months

Non-Cumulative – remaining credit in past months cannot be used in future months

Value-based – The is certain value lang, the buyer can use in the future the set money until it is diminished
Back to Back LC
: Two letters of LC are used
: From buyer to intermediary bank. And intermediary bank to beneficiary.

Red Clause LC
: PARTIALLY pays the beneficiary before the goods are shipped or the service performed
: paid when there is written undertaking from the seller with receipt
: you need to give another undertaking

Green Clause LC
: in addition, proof of preshipment warehousing and its insurance

Sight LC
: demands payment on the submission of required documents.
: Bank reviews said requirements and only pays if beneficiary meets the conditions.
Less credit period for the buyer to bay.

Deferred Payment
: does not insure payment after a certain of period
: insure payment after submission of time
: even obligations are completed, the money will only be issued after a period of time

DIRECT LC
: Bank directly pays the beneficiary, then asks the buyer to repay.
: Beneficiary may not interact with the buyer.

Uses of LC

: ensures successful business transactions between sellers and buyer

: Since payment is bank-issued, especially in overseas transactions
: assurance to both buyer and seller that they will receive goods and payment

- Payment Assurance – helps non-established business deal with overseas companies, providing
beneficiaries the assurance that the company will pay through bank issues.
- Setting of Payment Terms – LCs usually include terms and conditions to which both parties must agree and
performed during the transaction
o Requires the completion of the contractual obligation
- Protection for both parties – since the bank essentially mediates between the transaction, a seller won’t
release the goods without the bank approval, and the buyer can be assured that the seller will ship the
goods.
- Reliable payment mechanism – Bc of nature of international transactions, distance, different laws, lack of
personal contact, LCs provide safety for every party whenever partaking in these kinds of transactions.
- Improves the stature of the Global Economy – companies can transact with each other. Everyone is assured
that they can be paid.
International Chamber of Commerce Uniform Customs and Practice for Documentary Credits
- there are standardized guidelines for the Letters of credit

Summary

Bill of Lading -proof that the goods are shipped already. Their quantity, quality their value, packaging.

- legal document that serves as a title of shopped goods, a receipt, and a contract
- Contract of carriage – evidence of the contract to the main parties. Materializxation
- Document of title – confers the prima facie title ocer the goods to the named consignee or lawful holder

- Negotiable BoL and Non-negotiable BoL

- Types of BoL: method

Pro forma invoice

- decalere the value of goods for customs
- sent in advance of the commercial invoice
- identical to a commercial invoice (final bill)
- usually considered a binding agreement although the price might change in advance of the final sale

Pro forma invoice that is attached in the bill of lading

: nilalaman nung pinadala
: BoL is evidence of contract of carriage.
: details ng pinadala na goods ay nasa Pro Forma invoice

: the evidence of the value and price of the goods

: galing to sa seller nay un yung laman ng pinadala
: Pro Forma invoice yung attached sa BoL
: pwede sya maging commercial invoice, final yung stipulations.

Hindi na sinseparate yung pro forma and commercial invoice -

: Reflected on that final commercial invoice.
: Pro Forma – temporary invoice
: main invoice will be your commercial invoice

Commercial Invoice
: final bill that buyer and seller use
: exact terms of the pro forma or different terms depending on the negotiation of the parties

Letter of Credit
: document issued by financial institutions that guarantees payment from the bank.
: ensures safety in global trade.
: assurance for both buyer and the seller

Shipped is evidenced by BoL

Pro Forma Invocie- value, price, and quantity of the goods

Sometimes there is a conflict between BoL, Pro Forma Invocie, and Letter of Credit

Ang detail of the BoL should be the Pro Forma invoice

Consolidated approach in handling of the documents

Who issues the BoL,it is the carrier

Who issues LC, the correspondent Bank upon the request of the Buyer

Who issues PFI, the seller

Documents are being handles by different parties. It is not impossible that there will be conflict in these
dicuments.

When conflict comes, there will be battle of the forms