What is a Bill of Lading?

By March 23, 2020 Invoice Auditing, News, Shipping Knowledge

A bill of lading performs an outsized role when it comes to communications between the shipper, carrier, and receiver. What is a bill of lading and what is its purpose? The bill of lading has many purposes, including as a document conveying shipment details, like proof of shipment and proof of delivery. It also helps the carrier process that freight shipment. The bill of lading is a title document, showing ownership of the goods, and sharing the terms and conditions for transporting the freight.

The term “bill of lading” could really be “bill of loading,” as it’s an old English term that means “list of cargo.” Just as the current English term is understood, lading is the process of loading cargo onto the transport vehicle. Originally it was a term just used for ships transporting goods in the water.

Carriers require the bill of lading, sometimes known as a BOL or B/L, to move freight. As a legally binding document, it gives the driver or shipping staff the necessary details to process the cargo or freight, and for invoicing. The bill of lading is typically given to the carrier or driver when it’s picked up and is also attached to the freight. Shippers should keep a signed copy of the bill of lading after the carriers receive the shipment for transport. It is considered proof of carrier liability, in case of damage or loss of the freight. 

Without clear understanding of the bill of lading and shipping consulting, you’re likely getting mischarged or overcharged in shipping costs. Read on as we break down the bill of lading and what’s included in this shipping document.

Breaking Down the Bill of Lading

A bill of lading should include all the details needed to identify not only the shipped freight, but the parties involved. Tracking information is included along with shipping details. More specifically, here’s what to look for on a bill of lading as the specifics could differ for FOB shipping point vs. destination.

Names and Contact Information 

The shipper and receiver, called the consignee, are both included in the bill of lading, along with their addresses. The shipper may be the freight forwarder, who is sometimes also a customs broker. It could also include contract information for the carrier, and the port of loading and the destination, if traveling by water. The vessel name may be listed as well.

Reference Numbers

What is a bill of lading number? Bills of lading carry reference numbers, like purchase order numbers, so both parties can identify the freight at pickup and delivery.

Dates

The pick-up date is noted. It is often used as a reference not only for identification and tracking (especially for international cargo), but the date is also important for financing purposes. 

Item Descriptions

The items should be described in an obvious way, including how many shipping units, their weight, dimensions and other identifying information. Packaging types might be included here as well, whether pallets, crates, cartons or drums, for example.

Instructions

The bill of lading may carry special instructions, about delivery notification or the need for specific services.

Freight Class

Carriers use freight classes based on factors like dimension, weight, storage capability, handling ease, liability, density, and others. They will be listed on the bill of lading.

Hazardous Material Designation

The Department of Transportation (DOT) requires that hazardous material shipments be identified, and the DOT rules must be followed for these shipments as well.

Charges

The bill of lading may note freight charges and whether shipping was prepaid or to be collected on delivery.

The freight forwarder and customs broker should be able to give you additional information on all sections of a bill of lading. Depending on the cost breakout, there may be an opportunity to negotiate discounted shipping rates.

How a Bill of Lading is Used?

The bill of lading serves as a receipt for the shipment, and can also serve as a commercial invoice. It is signed by the various parties, including representatives from the shipper, the carrier and the receiver, at the appropriate times. It’s a title document for the goods. The bill of lading acts as a commercial invoice, so when freight arrives in good condition, and the receiver signs for it, the seller can then be paid for the goods.

If goods are damaged or stolen during the transport, the bill of lading acts as a receipt of goods to help the shipper or receiver recover the value. It’s required when filing claims for compensation for loss or damage, but also can be used in ownership disputes.  

Carriers may use the bill of lading as a starting point for inspecting and weighing the freight. They want to ensure they have the proper information, including shipping class designation, before it is transported. If the bill of lading contains errors, it can delay the delivery and result in additional fees and accessorials. Inspection can help decrease surprises for the customs broker at the destination, and will make customs clearance easier.

Terminology for issuing the bill of lading can be confusing. The bill of lading is issued by the carrier, when the driver or authorized carrier representative signs it. It’s issued by them because it’s a receipt. However, the shipper prepares the bill of lading. It’s entered into their computer system, and may even contain a corporate logo.

Bill of Lading: Example

Let’s assume a retailer receives weekly shipments of goods to sell. The buyer chooses the goods from a specific supplier and fills out a purchase order. The manager approves the purchase, and the supplier fills the order. The supplier prepares a bill of lading, which they sign when the driver loads it onto the truck. The driver signs the bill of lading as well.

The driver delivers the goods to the retail store, and the receiving department reviews the bill of lading, to ensure that the correct number of boxes and items are there. A visual inspection shows no damage to the order, and the receiving department signs the bill of lading, as proof of delivery for the receipt of goods. The manager later reviews the bill of lading and purchase order, and upon finding a match, approves the invoice for payment.

Types of Bill of Lading 

There are many nuanced versions of the terminology used for a bill of lading. Here are some of them.

Straight Bill of Lading

This is the most common type of bill of lading, used most often to ship prepaid goods to a customer. This shipping document may also specify how the carrier limits its liability. It is also known as a uniform bill of lading.

Clean Bill of Lading

When the goods arrive and are received with no damage, it’s considered a clean bill of lading.

Claused Bill of Lading

When the goods arrive but are defective or damaged, they’re considered claused, fouled or dirty. 

Negotiable Bill of Lading

The negotiable bill of lading allows the title of the goods to transfer to the entity named on the bill, a third party. It transfers the title through a consignment process. The consignee, or expected receiver, can endorse the document so the goods are transferred to the new third party, or the new consignee. To do this, the bill of lading should be clean.

Non-negotiable Bill of Lading

The person or company claiming the goods must be the person on the bill of lading, with proof of identity. They cannot transfer the goods to a third party at the receiving port or destination.

Inland Bill of Lading

This is used when goods are sent via land first (rail or road), and then transferred to an ocean vessel. They would need an ocean bill of lading to be shipped as freight over the water.

Through Bill of Lading

This document is used when goods are transported both domestically and internationally. 

Air Waybill

So far we’ve talked about land and sea transport bills of lading. The air waybill is the air transport version, though it is non-negotiable

Multimodal Transport Bill of Lading

When goods are shipped using multiple transportation modes, you may need a multimodal transport bill of lading. Goods traveling this way may be transported domestically by air, and then internationally via ship, hence multimodal transport. 

On-board Bill of Lading

This description indicates that the merchandise was physically loaded onto the transportation vehicle, whether a ship, plane or truck.

Received for Shipping Bill of Lading

This indicates that the freight was received, but was not necessarily loaded yet onto the transportation vehicle. Often this is issued by a freight forwarder at the port of loading or at a depot.

Order Bill of Lading

If shipping freight without prepayment, a carrier is allowed to deliver the goods to the receiver.

Keeping an Eye Out for Costly Mistakes

Bills of lading are used along with the policy of insurance and a commercial invoice, to ensure the proper exchange of payments and goods. One thing to be aware of is that it can be hard to track bills of lading, along with other commercial invoices. Making mistakes is costly. Fortunately, Shipware offers LTL commercial and parcel audit services as well as parcel contract negotiation to help you avoid those costly mistakes that may be driving up your shipping costs. By auditing invoices, Shipware can easily save you money, while reducing variances in your on-time delivery performance, and retaining functionality to keep you ahead of changes. Shipware can help you negotiate better contracts with the assistance of our shipping insiders, allowing you to reduce your shipping costs going forward with no ongoing effort. 

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