To finalize any transactional process, an official closure and corresponding documentary evidence must be obtained. This requirement is no exception in the shipping industry.
The Bill of Lading is a common form used in the logistics industry to notify shippers that their goods have been received and offer information about the shipment’s quality. However, while this document enables shippers to retain cargo ownership in transit, it is necessary to transfer ownership to the consignee once the cargo reaches its destination. At this point, the surrender bill of lading becomes relevant.
What Is Surrender BoL
A surrender Bill of Lading or letter of indemnity (LOI) is a legal document used in international trade and shipping to transfer ownership of goods from a shipper or exporter to a consignee or importer.
The shipper typically issues the surrender BoL, which states that they surrender their rights to the goods in question to the consignee. The document also contains a statement of indemnity, meaning the shipper is legally obliged to compensate the carrier or any other shipping agent for any losses or damages that may arise from using the surrender bill of lading.
Sometimes, the surrender BoL can replace the original bill of lading when lost or unavailable. It allows the consignee to take possession of the goods but also carries certain risks and legal obligations for the shipper.
How Does It Work?
In international trade, exporters typically ship goods through a carrier. The carrier issues a bill of lading, evidence that the goods were received and are in transit. The shipper can hold this document and legally own the goods until the consignee makes payment.
After receiving payment, the shipper surrenders the original BoL and transfers the shipment’s ownership to the consignee. This is the typical shipping procedure in most cases and is safe and convenient.
However, in some cases, the original BoL may be lost or available for various reasons. It could be unavailable due to delays in transit or customs proceedings. If this ever happens, the consignee may request a surrender bill of lading from the shipper, which essentially replaces the original BoL.
Whichever the case, shippers should ensure the consignee completes payment before surrendering the bill. If a consignee receives the surrendered BoL before completing payment and claims ownership of the goods, the exporter might not get paid. Ultimately, every transaction is more favorable if the shipper establishes a reliable relationship with the consignee.
Purpose Of A Surrendered BoL
Using a surrendered bill of lading can benefit importers and exporters in international trade. Here are some benefits of using a surrender bill of lading;
- Faster Delivery
Typically, shippers use the bill of lading to transfer ownership of the foods to the consignee. Any issue with the original bill of lading can result in delivery delays, additional costs, and complications for the importer and exporter.
However, with the surrender BoL, exporters provide the importer with a letter of indemnity that serves as a replacement document for the original bill of lading. This document allows the importer to take possession of the goods upon arrival at the destination port, even without the original BoL.
As a result, using a surrender bill of lading can help prevent delays and ensure faster delivery. This is particularly important in tine-sensitive situations, where delays can cause significant financial losses and affect the overall success of the trade.
Shippers worldwide opt for a surrender bill of lading because of its flexibility in international trade transactions. First, with a surrender BoL, shippers can change the details of an original bill of lading during transit. For instance, if the quantity or description of a shipment needs to be adjusted, the shipper can issue a surrender BoL that reflects the changes.
It is also helpful when shipping goods to multiple destinations, as it allows for flexibility in how they are transported. A surrender BoL also matches the actual shipment of goods, even if the original bill does not accurately reflect the load.
- Cost Saving
The surrender BoL promotes a more cost-effective trade by fostering faster delivery and flexibility. Demurrage costs levied on delayed shipments become a non-factor as consignees can take possession of goods immediately. Furthermore, both parties can avoid costly legal proceedings with this document when the original bill of lading is lost or delayed.
Delayed shipments can incur additional storage costs for the importer, as they must keep the goods in storage until the original BoL arrives. The surrender BoL ensures importers take possession of goods immediately, avoiding high storage costs.
- Fostering Better Relationship
Both parties indicate trust and cooperation in a transaction by agreeing to use a surrender bill of lading. This can lay the foundation for a better relationship based on mutual respect and understanding.
Using a surrender BoL also requires communication and collaboration to ensure the transaction proceeds smoothly. All these can lead to better communication and a stronger working relationship.
Risks Associated With A Surrender BoL
While a surrender BoL offers several benefits to importers and exporters, its use still carries certain risks and should be employed cautiously. Some carriers may refuse to release goods without the original BoL, and there may be legal disputes if the goods are lost or damaged in transit.
If the shipper gives away the bill without receiving payment, they could encounter legal problems if the importer refuses to pay. Aside from importers not paying, several other issues can occur when using this document.
It is common for ports to handle administrative documents, often with a fee. In cases where importers deliberately avoid port personnel, they can take goods from the dock without paying the exporter. Additionally, the payment process can become prolonged and cause further delays.
The surrender bill of lading is a crucial tool in international trade. It offers several benefits for shippers and consignees, from providing flexible transactions to promoting faster delivery and streamlining the shipping process. However, it is essential to consider the potential risks and drawbacks before deciding whether to use a surrender BoL.
This bill works best if exporters have an extensive, trustworthy relationship with importers. Whichever the case, understanding the purpose, benefits, and risks of a surrender BoL can be important for any business involved in international trade.