Types and Implied Meanings of Bill of Lading Endorsement

Types and Implications of Bill of Lading Endorsements

As a document of title, the ocean bill of lading holds unparalleled importance among foreign trade documents. Therefore, understanding the types of bills of lading and their endorsements is essential. The following article was written by a friend of mine, and I believe readers will gain a clearer understanding after reading it, which will also serve as a useful reference for your future operations.

In export business: 

Endorsement of a bill of lading only applies to order bills of lading (ORDER B/L). Other types, such as straight bills of lading (STRAIGHT B/L) and bearer bills of lading (BEARER B/L), do not require endorsement. 

Digression: 

A straight bill of lading lists the consignee's name in the consignee column, and the goods can only be delivered to the named consignee. This type of bill of lading loses the convenience of representing goods and being negotiable or transferable, but it also avoids risks that may arise during the transfer process. 

A bearer bill of lading does not list the consignee's name, also known as an open bill of lading. This type of bill of lading can be transferred or used to take delivery of goods without any endorsement—it is extremely simple. The carrier must deliver the goods to the holder of the bill of lading. Whoever holds the bill can take delivery of the goods, as the carrier delivers goods based solely on the document, not the person. If this bill of lading is lost or stolen, the risk is great. If it falls into the hands of a malicious third party, disputes can easily arise. Therefore, it is rarely used internationally. Additionally, according to the regulations of some liner conferences, when using a bearer bill of lading, the name and address of the notify party at the port of discharge must be indicated in the copy of the bill of lading provided to the chief mate. 
Back to the main topic. To understand bill of lading endorsements, one must first understand order bills of lading. An order bill of lading does not list the consignee; it is transferred by endorsement, which facilitates capital turnover, so it is widely used in international trade. Order bills of lading are divided into the following three types based on the method of indicating the order party: 

1. Shipper's order bill of lading: Only the words "TO ORDER" are filled in the consignee column. It is transferred after endorsement by the shipper, also known as a blank endorsed bill of lading. Before the shipper designates a consignee or transferee, the ownership of the goods still belongs to the seller. Under documentary credit payment terms, the shipper transfers the bill of lading to obtain payment by designating the negotiating bank or consignee as the transferee. Unlike a special order bill of lading (see 2), this type has no restriction requiring endorsement by a specified person; it can be transferred solely with the shipper's blank endorsement, offering greater negotiability. 

2. Special order bill of lading: The consignee column is filled with "TO ORDER OF ..." Depending on the party specified, it can be in favor of the shipper (SHIPPER), the consignee, or the importer's bank. It requires endorsement by the shipper, consignee, or the importer's bank respectively before it can be transferred or used to take delivery, also known as an order endorsed bill of lading. 

3. Optional order bill of lading: If the consignee column reads "… or order," it is called an optional order bill of lading. "…" in a special order bill functions similarly, while "or order" corresponds to the shipper's order.

An order bill of lading can be transferred once endorsed, meaning the endorser confirms the transfer of ownership of the bill. Endorsements for order bills of lading come in two types: blank endorsement (BLANK ENDORSEMENT) and special endorsement (SPECIAL ENDORSEMENT). A blank endorsement requires the transferor to sign the endorser's company name and responsible person's seal on the back of the bill without specifying the endorsee's name. This method is widely used due to its high liquidity. A special endorsement, in addition to requiring the endorser's signature as in a blank endorsement, also indicates the endorsee's name. If the endorsee needs to transfer again, an additional endorsement is required (e.g., in export business under a letter of credit, the exporter, as the shipper, makes a special endorsement to the issuing bank; the letter of credit may stipulate the bill beneficiary as the negotiating bank. Before sending the documents, the negotiating bank makes a special endorsement to the issuing bank. When the importer pays to redeem the documents, if the bill holder or endorsee is the issuing bank, the issuing bank endorses it to the importer. ). 
Based on the analysis above, endorsed bills of lading can be classified into the following three types: 

1. Special order bill of lading with blank endorsement (TO ORDER OF …, without specifying the endorsee): The shipper, consignee, or importer's bank, as the first endorser, transfers the bill's ownership to unspecified others. 

2. Blank order bill of lading with blank endorsement (TO ORDER, without specifying the endorsee): The shipper, as the first endorser, transfers the bill's ownership to unspecified others. 

3. Special order bill of lading with special endorsement (TO ORDER OF …, specifying the endorsee): The shipper, consignee, or importer's bank, as the first endorser, transfers the bill's ownership to a specific other person.

Supplementary: In import business, delivery of goods under a straight bill of lading requires an endorsement bearing genuine seal consistent with the consignee's name. For an order bill of lading, an endorsement with the holder's genuine seal is required for delivery.