FAQ: What is the Difference Between a Negotiable Bill of Lading and a Nonnegotiable Bill of Lading?

First, let us discuss the term, Bill of Lading (BL). This is a document that establishes the terms of a contract between a shipper and a transportation company. It can serve as a document of title, a contract of carriage, and a receipt for goods. Different types of BL exist and are used in varying situations.   

NEGOTIABLE BILL OF LADING

A Negotiable Bill of Lading is considered a document of title that can be used to transfer ownership of commodities from one party to the next. The original consignee transfers title of the goods to another party by signing, or ‘indorsing’ the back of the bill. Once this has been done, the new consignee can then transfer title to someone else, and so on.

A bill of lading must be “Clean” and drawn “to Order” of the consignee to be considered negotiable. The bill is a document of title in favor of the party to whom it has been endorsed, and the carrier should discharge the cargo to the entity who presents the properly indorsed original bill of lading as well as valid confirmation that they are the endorsee or authorized by them to receive the shipment.

NONNEGOTIABLE BILL OF LADING

A Nonnegotiable Bill of Lading is not a document of title and cannot be used to transfer ownership from one party to another as mentioned earlier. The words “nonnegotiable” or “not negotiable” must appear on this kind bill when issued by a common carrier. When original, nonnegotiable bills of lading have been issued, the freight can only be released to the specified consignee after at least one of the original bills has been presented at destination. Indorsing this bill does not grant further rights to a transferee or make the contract negotiable.

U.S. Government Title 49 -Transportation 

80103. Negotiable and nonnegotiable bills

(a) Negotiable Bills. — (1) A bill of lading is negotiable if the bill—

(A) states that the goods are to be delivered to the order of a consignee; and

(B) does not contain on its face an agreement with the shipper that the bill is not negotiable.

(2) Inserting in a negotiable bill of lading the name of a person to be notified of the arrival of the goods—

(A) does not limit its negotiability; and

(B) is not notice to the purchaser of the goods of a right the named person has to the goods.

(b) Nonnegotiable Bills. — (1) A bill of lading is nonnegotiable if the bill states that the goods are to be delivered to a consignee. The indorsement of a nonnegotiable bill does not—

(A) make the bill negotiable; or

(B) give the transferee any additional right.

(2) A common carrier issuing a nonnegotiable bill of lading must put “nonnegotiable” or “not negotiable” on the bill. This paragraph does not apply to an informal memorandum or acknowledgment.

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