Bill of Lading

THE BILL OF LADING - B/L: Core instrument in Export Transactions

Nobody likes to pay for something until it's received. To avoid an L/C (see a previous blog on LC's), ship & collect on basis of a draft. A draft is a payment demand through the bank that has connected to it a B/L. The B/L has the delivery of the goods tied to the phrase "Order of Shipper". The draft is presented to the buyer who authorizes the payment and the goods are then reclaimed from the carrier. The B/L is signed as "Paid" by the bank. Without this B/L the buyer cannot get the goods.

Do you see how the mdse. remans in your control until your customer pays? The "Order of Shipper" (that's you) controls the ownership. This cannot be done with Air Frt. In effect you have extended credit to your customer under the belief they will pay when the draft is presented to them by the bank. This is called a Sight Draft - payment when your buyer sees it.

The Order of Shipper uses the carrier to hold the goods in your behalf. No charge except storage. To avoid problems, make sure you do due diligence on the credit of your customer. (see a previous blog on credit & collection).

ALTERNATE DRAFT COLLECTIONS
Another draft collection method tied to the B/L is a "time draft". Here the draft stipulates payment at some future date. It can be any arrangement up to 1 yr. The draft is appended to the Order of Shipper B/L. The bank is instructed to obtain an I O U for a specific time in the future and hands over the B/L. When the I O U matures up to date the bank requests the buyer to transfer the payment to you. These type of drafts can be for one single payment or several remittances known as "Split Drafts"
NOTE: Obviously here extremely careful credit research is indicated as the buyer has absolutely no obligation to pay and the bank cannot make them.

AIR FREIGHT DRAFT COLLECTIONS.
Because air shipments are time sensitive, the airlines will not hold mdse. pending collection. There is no Order of Shipper B/lL available. You can still use the draft system but your goods must be consigned directly to some destination that will accept to hold them until a draft is paid or accepted for future payment. You will need the services of a freight agent in the destination country who will hold the goods just like the steamship line. They are given instruction to hand the goods over upon proof of payment or acceptance of payment by your buyer.

To learn more about "How to Export"; contact SCORE.ORG
Hank Samuel Certified Counselor
hank.samuel2@gmail.com

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