Claused Bill Of Lading

In international trade, importers and exporters who were thousands of miles away from each other needed to develop a protocol by which goods could be shipped and purchased...in a way that would keep both parties relatively protected. Buyers prefer to pay once goods are inspected to confirm that they are not the wrong product and that the cargo is intact, complete, and undamaged. Sellers are likewise wary of assuming the cost of shipping goods, only to wind up getting stiffed and taking a hit on non-recoverable, stolen merchandise.

Since medieval times in Western Europe, ocean freight trade has been conducted with Bills of Lading, which are contracts listing all of the items to be shipped, along with confirmations of loading, to be signed off by the importer upon the ship’s captain confirming arrival and, in some cases, a cargo inspection. The Bill of Lading from the exporter is presented along with insurance documents and other confirmation paperwork as specified and sent to the Buyer’s bank, which has issued the Letter of Credit, confirming funds have been placed in a form of escrow to pay for the goods. The bank then compares both documents to make sure that all of the terms and cargo details in both the Bill of Lading and the Letter of Credit are identical before releasing the funds in the Letter of Credit.

In the case of a claused Bill of Lading, there is usually a problem with the shipment. It could be incomplete in volume, damaged, erroneous, packaged improperly and not according to spec defined in the contract, or other kinds of irregularities that the receiver can cite as violating the original agreement and terms under which the Letter of Credit was issued.

There are also shippers around the world who pay fees to people to move their freight privately and without a Bill of Lading. These people are called smugglers. Or...something even worse, as long as there are no small children around.