1. Three documents, three risk profiles
A letter of credit names a bill of lading. Which bill of lading?
Three forms exist, and the choice determines both the risk and the cost.
2. Original bill of lading
A full set of original bills, typically three, issued by the carrier.
The consignee must present an original to take delivery.
Release of goods is controlled by physical possession of the document.
The credit usually requires a full set of originals.
3. Telex release
The carrier releases the goods at destination without an original bill of lading being presented, on the strength of a release instruction from the origin office.
The shipper surrenders the originals at origin, and the carrier confirms release to the destination agent.
Faster, cheaper, and dependent on the shipper’s instruction being properly executed.
4. Sea waybill
A non-negotiable document naming the consignee, who takes delivery on identification.
No original is required. No transfer by endorsement is possible.
Used where the shipper and consignee are the same group, or where payment has already been settled and no documentary security is needed.
5. The credit’s requirement
Where a credit requires a full set of original bills of lading, a sea waybill does not satisfy it, even where the commercial reality would permit it.
The credit’s document requirement governs.
6. The risk profile
Original bill
Best documentary security. Slower, more expensive, more administrative.
Risk: the original set is lost or delayed in transit, and the goods arrive before it.
Telex release
Faster. Secured by the carrier’s release instruction.
Risk: the release is issued before payment is received, and the buyer collects the goods.
Sea waybill
Simplest. No documentary security at all.
Risk: the goods are delivered to the named consignee regardless of payment status.
7. The payment terms determine the choice
Cash in advance: any form works.
Letter of credit: the credit’s terms decide, usually original bills.
Documents against payment: original bills, since the bank releases them against payment.
Open account: sea waybill or telex release, since there is no documentary security anyway.
8. The Incoterms interaction
Under FOB and CFR, the buyer arranges carriage, and the question of which bill of lading form is used is often the buyer’s.
Under CIF and CIP, the seller arranges carriage, and the seller decides.
Where the seller arranges carriage but the buyer is unsecured, the seller should consider retaining control by the bill of lading form.
9. Common errors
Sea waybill where the credit requires originals
Discrepancy.
Telex release before payment
Goods released to an unpaid buyer.
Bill of lading consignee mismatch
The named consignee differs from the invoice.
Notify party omitted
The carrier cannot reach the party to notify.
10. Closing view
The bill of lading form is a commercial decision about who bears the risk of non-payment, dressed as a documentary formality.
Where payment is unsecured, the documentary control is worth the administrative cost.
*This article is based on standard international trade practice and documentary credit rules. Exporters should consult their bank and carrier on specific transactions.*