What is Bill of Lading?

A bill of lading (BL or BoL) is a legal document issued by a carrier (transportation business) to a shipper describing the kind, amount, and destination of the goods being transported. A bill of lading also functions as a shipping receipt when the products are delivered to a predefined location. This document must accompany all mailed products, whatever the mode of delivery, and must be approved by a designated representative of the carrier, shipper, and receiver. The Bill of Lading also specifies the carrier used to convey the goods to their destination, as well as the conditions under which the consignment must be transported. Bills of lading can be transported by land, ocean, or air.

Geeky Takeaways:

• A bill of lading is a legal document issued by a carrier to a shipper that specifies the kind, amount, and final destination of the goods being transported.
• A bill of lading is a document of title, a receipt for shipping goods, and an agreement between a carrier and a shipper.
• This paperwork must be included with the mailed materials and signed by an authorized representative of the carrier, shipper, and receiver.
• A bill of lading, when properly kept and evaluated, can help to avoid asset misappropriation.

Bill of Lading Example

Suppose Aman operate a firm that manufactures machinery components. The company’s purchasing manager creates an order for iron sheets. The vendor receives the order in accordance with the purchase order (PO), gathers the needed amount, and prepares it for shipment. When the conveyance comes, the steel sheets are placed onto the carrier, and the vendor signs the bill of lading.

The vendor’s signature indicates that the products have been put on the carrier, and they can tell the client accordingly.

Next, the items are delivered to your production plant. Aman’s procurement manager receives the bill of lading and compares it with the PO. Check to see if the quantity and quality listed on the bill of lading match the details mentioned on the PO. When verified, the products are unloaded, and the buying manager signs the bill of lading as proof of delivery.

Types of Bills of Lading

1. Straight Bill of Lading (Non-Negotiable): It is sometimes referred to as a non-negotiable BOL. This form of bill of lading indicates that the items are only to be delivered to the stated consignee and cannot be negotiated or transferred to another party. This procedure is utilized when the shipper does not want the products to be easily shifted or when confidential commodities are transported. For example, it is an excellent alternative for transporting military and defense equipment.

2. Order Bill of Lading (Negotiable BOL): This type of bill of lading allows for the transfer of goods to another party through a signed document. It is commonly used when the shipper wishes to allow the consignee to transfer title to the goods to another party, such as when the products are sold in transit. It’s widely utilized in international trade and banking.

3. Through Bill of Lading: Useful for commodities carried by several modes (e.g., truck, rail, ship, and aircraft) to their final destination. The paper describes the entire voyage, including several types of transportation. It is often given by a logistics company that handles the full multimodal cargo.

4. Ocean Bill of Lading (OBL): This document is used for sea-borne cargo. The paperwork provide details regarding the products, the ship, and the terms and conditions of maritime shipment. Depending on the situation, it can be negotiated or not.

5. Inland Bill of Lading (Inland BOL): This document is used for internal shipments inside a country. In the case of international shipping, it is utilized to transport goods from the point of origin to the port or airport. In other words, it merely covers part of the voyage before being handed over to an ocean or air carrier.

6. Air Waybill (AWB): This document is used only for air transportation. The document includes cargo specifics, flight information, and air transportation terms and conditions. By default, it is not negotiable.

Importance of Bill of Lading

1. Contract: The BOL is an agreement between the shipper, the seller or exporter of the goods, and the shipping carrier. It specifies the terms and conditions of the shipping. It specifies the nature and amount of the commodities being carried. It also covers the agreed-upon location, the agreed-upon freight rate or costs, and the obligations and duties of both parties.

2. Receipt: The bill of lading functions as both a contract and a receipt. It verifies that the carrier got the items from the sender in the condition specified in the paperwork. When the carrier takes ownership of the cargo, the BOL validates the number and apparent condition of the items, shielding both parties from any claims of mis-shipments or damage.

3. Title Document: In some cases, the BOL can serve as a title document, especially when commodities are sold and transferred while in transit. By approving the BOL to the new owner, the shipper can transfer ownership of the goods, making the BOL an important negotiable instrument in international trade.

4. Legal Document: The bill of lading is an important legal document. Customs authorities, port officials, and other regulatory organizations in many nations rely on the information included in the BOL to correctly handle freight shipments. It provides important cargo-related information such as description, weight, and value, which is needed to calculate import duties, taxes, and other costs.

5. Segregation of Duties: Essentially, a bill of lading serves as uncontested documentation of transportation. Furthermore, a bill of lading provides for the separation of tasks, which is an essential component of a company’s internal control framework for preventing theft.

Purpose of Bill of Lading

1. Transportation Paperwork: A bill of lading is essentially transportation paperwork that cannot be disputed. A bill of lading also allows for the division of responsibilities, which is a critical component of a company’s internal control system for avoiding theft.

2. Basic Objectives: A bill of lading serves basic objectives, like: first, it serves as a title document for the items mentioned in the bill of lading. Second, it serves as a receipt for sent merchandise. Finally, it outlines the agreed-upon terms and conditions for the transit and ultimate release of the transported products.

3. Description: It is a document indicating that the carrier has received the items for transportation. It includes shipping facts such as a description of the items, amount, weight, destination, shipper/consignee information, and so on.

4. Proves Ownership: It is a document of title that proves ownership of the commodities. By approving the bill of lading, the shipper transfers ownership of the items in transit to the buyer. Whoever has the original bill of lading can take control of the items when they arrive.

5. Terms of Transportation: It stipulates the terms of transportation or establishes the contractual relationship between the shipper and the carrier. This comprises transportation routes, responsibility conditions, freight prices, and so forth. The bill of lading serves as a contract of transportation for the shipment.

Contents of Bill of Lading

1. Names and Addresses: In this part, include the full names and addresses of both the shipper and the receiver so that the document may be easily located.

2. Purchase Orders or Special Reference Numbers: These numbers are deemed critical to the business in terms of freight that must be released for pickup or accepted upon delivery.

3. Special Instruction: This section removes any carrier instructions that are not for extra service requirements, such as a lift gate or delivery notice.

4. Date: The pickup date will be indicated here so that the freight may be tracked when shipping invoices are created.

5. Description: All shippers must provide the number of shipping units, the dimensions and weight, and a description of the material.

6. Packaging Type: Items such as cartons, crates, pallets, and drums used for shipment must be specified.

7. NMFC Freight Class: Freight classes affect the cost of the shipment. In general, freight shipments are classified into 18 types depending on weight, size, density, storage capacity, ease of handling, value, and liability.

8. Department of Transportation Hazardous Material Designation: Hazardous cargoes must be identified, and specific regulations and procedures apply during shipment.

Who Issues Bill of Lading?

• A bill of lading is a receipt provided by the shipping company or its representatives for commodities placed on board the vessel, signed by the carrier, and granted for transporting the cargo from the port of receipt to the port of discharge.
• The bill might be issued on a freight-to-collect or prepaid basis. Aside from that, the Bill of Lading can be supplied by freight forwarders and banks that consider it a transport or negotiation document under Article 30 of the UCPDC.
• When the Letter of Credit specifies so, the original Ocean Bill of Lading must be 3/3. All three bills of lading must be marked original, with the second and third not designated as duplicate or triplicate.

Who Receives Bill of Lading?

Bills of lading are often issued to:

• the shipper;
• a broker,
• freight forwarder,
• or a third party managing customs; and
• the consignee who originally purchased the items.

Bill of Lading vs. Invoice