The majority of the world’s cargo is transported on sea using ships. Therefore, shipping is very central to commerce and any businessperson would be at loss if he/she didn’t know the common shipping documents and terms that are used in sales contracts. Ethiopian importers and exporters should know the various shipping documents and especially in regards to the Ethiopian Shipping context.
We have included the common used Shipping documents (Bill of Lading, Mate's Receipt, Letter of Indemnity (LOI), Cargo Manifest, Freight Manifest, Airway Bill) on this page and the most used shipping terms on another page. Some of the shipping terms overlap with INCO Terms.
- Bill of lading
- Mate’s Receipt
- Letter of Indemnity (Indemnity Bond)
- Cargo Manifest
- Freight Manifest
- Air Waybill (Air Consignment Note)
Bill of Lading
It’s a document that serves as an evidence of the contract of carriage of goods and signed by a carrier (the transporter of goods) or the carrier's representative and issued to a consignor (the shipper of goods) that evidences the receipt of goods for shipment to a specified destination and person.
The Bill of Lading is ought to contain the name of the consignor (shipper); the name of the consignee (receiver); the name of the master of the ship; the name of the ship and the voyage number; the place of departure (Port of loading) and destination (Port of discharge); the price of the freight; the date of loading; the marks and numbers of the things shipped.
Bill of Lading is negotiable since it can serve as a document of ownership which allows ownership to the goods to be transferred by endorsement and delivery of the bill of lading. The Ethiopian Shipping Lines issues 3 (three) original set of Bill of Lading and the bearer of all the three Bills is understood to be the owner of the cargo mentioned in the bills.
Presentation of a Bill of Lading to the Bank
In Ethiopia, a letter of credit usually allows for 21 days for document presentation counted from the date of loading. The date of loading is written on the Bill of Lading as “clean on board on such date” assuming a clean bill. Sometimes a letter of credit may mention less number of days for presentation. Mentioning the presentation limit in the credit has reduced the problem of Bills of Lading reaching the consignee much later than the date of unloading of the goods at the port of discharge. This - the lateness of the Bill - causes a problem for the consignee in the form of port storage charges. Such Bill is known as Stale Bill of Lading and the receiver may reject the Bill stating that it’s “stale”.
Ocean Bill of Lading versus Through Bill of Lading
Ocean Bill of lading is issued by shipping lines covering only port to port shipments of conventional cargo and sometimes containerized cargo. The "through" bill of lading concept allows door to door shipments to be covered by a bill of lading. This concept is more common for containerized cargoes and is carried out using multi modal transportation (road/ rail + sea + road/rail). Usually the sea transporter issues this kind of bill and may subcontract inland transporters to carry the cargoes in land. The construction of a dry port in Modjo town, Ethiopia and the establishment of the Dry Ports Enterprise will allow the Ethiopian National Carrier, ESL, to start a form of multimodal transport and issue a through Bill of Lading.
Groupage and House Bill of Lading
In this containerized shipment age, it may be difficult to ship a less than full container load (LCL) from point A to B. Either the shipper or receiver has to pay the whole freight for the Full Container Load (FCL), which is obviously very expensive, or has to wait till they find a ship that takes conventional cargo, which is very rare these days.
But there is a solution to this: if there are enough shippers or receivers that have LCL cargoes at point A to be shipped to point B, the freight can combine their LCL cargoes and ship them as FCL cargo. The shipping Lines will issue a grouapge bill of lading to the sending forwarder/agent as the shipper and the receiving forwarder/agent as the consignee. The forwarder then issues its own house bills to individual shippers. These house bills become the controlling document for the release of the cargo at destination and enable the shipper to negotiate these with its customer in return for payment of the goods.
Clean Bill of Lading
It declares that the goods have been received in an appropriate condition, without the presence of defects and is issued by the product carrier. In Ethiopia, one of the conditions stipulated in the letter of credit is that the Bill of Lading has to be clean to release the payment to the shipper – Clean on Board Bill of Lading.
Unclean Bill of Lading
It’s a bill containing reservations as to the good order and condition of the goods or the packaging or both. Examples: "bags torn," "drums leaking,'' and "one case damaged".
An acknowledgement that the ship owner has received the goods in the condition stated therein, but usually has no further legal relevance. Possession of the mate's receipt is evidence of title but it is not conclusive, so the ship owner is not bound in all cases to deliver the bill of lading to the person who delivers up the mate's receipt.
Letter of Indemnity (indemnity bond)
It’s a written undertaking by a third party (such as a bank or insurance company), on behalf of one of the parties (the first party) to a transaction or contract, to cover the other party (the second party) against specific loss or damage arising out the action (or a failure to act) of the first party.
Sometimes in shipping a Letter of Indemnity is issued by the shipper to indemnify the carrier of any damage that may arise from the carrier’s issuing Clean Bill of Lading even though the Mate’s Receipt is remarked as ‘unclean’ – if the remarks are not serious. A good example to this is a remark stating atmospheric rust for steel that has been waiting in the port for some time.
A manifest that lists only cargo, without freight and charges. This document is more relevant to port authorities and for customs purposes.
A (cargo) manifest including all freight particulars: This document is more relevant to the agent or the finance department of the carrier.
Air Waybill (Air Consignment Note)
A receipt issued by an international courier company for goods and an evidence of the contract of carriage, but it is not a document of title to the goods. It’s non-negotiable.