Bill of Lading

What Is a Bill of Lading

A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the type, quantity and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination. This document must accompany the shipped products, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper and receiver.

Bill of lading (BOL) is one of the most important documents in the shipping process. To ship any goods, a bill of lading is required and acts as a receipt and a contract. A completed BOL legally shows that the carrier has received the freight as described and is obligated to deliver that freight in good condition to the consignee.

A bill of lading is a document issued by a carrier (or their agent) to acknowledge receipt of cargo for shipment. Although the term historically related only to carriage by sea, a bill of lading may today be used for any type of carriage of goods. Bills of lading are one of three crucial documents used in international trade to ensure that exporters receive payment and importers receive the merchandise. The other two documents are a policy of insurance and an invoice.

Whereas a bill of lading is negotiable, both a policy and an invoice are assignable. In international trade outside the United States, bills of lading are distinct from waybills in that the latter are not transferable and do not confer title. Nevertheless, the UK Carriage of Goods by Sea Act 1992 grants “all rights of suit under the contract of carriage” to the lawful holder of a bill of lading, or to the consignee under a sea waybill or a ship’s delivery order.

A bill of lading must be transferable, and serves three main functions:

  • it is a conclusive receipt, i.e. an acknowledgement that the goods have been loaded;
  • it contains or evidences the terms of the contract of carriage;
  • it serves as a document of title to the goods, subject to the nemo dat rule.

Typical export transaction use Incoterms terms such as CIF, FOB or FAS, requiring the exporter/shipper to deliver the goods to the ship, whether onboard or alongside. Nevertheless, the loading itself will usually be done by the carrier himself or by a third party stevedore.

Bill of Lading Explained

The bill of lading is a legally binding document that provides the carrier and shipper with all of the necessary details to accurately process a shipment. It has three main functions. First, it is a document of title to the goods described in the bill of lading. Secondly, it is a receipt for the shipped products. Finally, the bill of lading represents the agreed terms and conditions for the transportation of the goods.

The Importance of Bills of Lading

The carrier need not require all originals to be submitted before delivery. It is therefore essential that the exporter retains control over the full set of the originals until payment is effected or a bill of exchange is accepted or some other assurance for payment has been made to him.

A bill of lading, therefore, is a very important issue when making shipments to move the cargo or freight from one point to the other. On one hand it is a contract between a carrier and shipper for the transportation of goods and on the other hand, it serves as a receipt issued by a carrier to the shipper.

Hence, the bill of lading is considered a legal document which provides all the vital details to the shipper and the carrier to conveniently process the freight shipment through different maritime countries and invoice it correctly.

The original copy of the bill of lading is provided to the carrier, and a copy of the same should also be ascribed to the packaged freight.

Purpose of Bill of Lading

The bill of lading document is meant to act as a transport document enacting as the evidence of the contract of carriage of the goods. A negotiable bill of lading has the following legal qualities:

  • It acts as a piece of evidence for the carriage contract containing the terms and condition under which the goods transportation will be carried out
  • It represents as a receipt which endorses that the carrier has received the cargo as per the contract and the goods are received in good condition.
  • It is a document of title, permitting the sale of goods in transit and the raising of financial credit. Most of the local and international system does not consider a bill of lading as a document of title. It provides the right for the delivery to be made to the possessor.

Types of Bills of Lading

Bills of lading may take various forms, such as on-board and received-for-shipment.

  • An on-board bill of lading denotes that merchandise has been physically loaded onto a shipping vessel, such as a freighter or cargo plane.
  • A received-for-shipment bill of lading denotes that merchandise has been received, but is not guaranteed to have already been loaded onto a shipping vessel. (Typically, it will be issued by a freight-forwarder at a port or depot). Such bills can be converted upon being loaded.
  • A straight bill of lading is used when payment has been made in advance of shipment and requires a carrier to deliver the merchandise to the appropriate party.
  • An order bill of lading is used when shipping merchandise prior to payment, requiring a carrier to deliver the merchandise to the importer, and at the endorsement of the exporter the carrier may transfer title to the importer. Endorsed order bills of lading can be traded as a security or serve as collateral against debt obligations.

Specific Bill of Lading

Specific bills of lading forms should be used based on which method you’re using to transport goods. Here are a few common examples:

  • Straight bill of lading: This bill of lading is typically used to ship goods to a customer who has already paid for them.
  • “To order” bill of lading: To order bills of lading are typically negotiable documents and allow the transfer of ownership of the goods outlined in the bill of lading to another party upon endorsement by the party listed as the ultimate consignee on the document. Often under the terms of a letter of credit, the bill of lading is consigned “to order” or “to order of [named] bank.”
  • Inland bill of lading: Inland bills of lading are often the first transportation document issued for the international shipment. They are used for cargo shipments by rail or road, but not sea.
  • Ocean bill of lading: This bill of lading is used for shipping goods overseas. It authorizes the holder or another party to take possession of the goods. Ocean bills of lading can be straight bills of lading or consigned “to order” bills of lading.
  • Air waybill: The air waybill (AWB) is the equivalent of an ocean bill of lading used in air transport. However, unlike the ocean bill of lading, it cannot be negotiable; in other words, it may not be consigned “to order.”
  • Multimodal bill of lading: You’ll use this type when you combine shipping methods. For example, goods flown from Omaha, Nebraska, to New York City and then shipped to Europe qualify for a multimodal bill of lading.

Contents of Freight Bill of Lading

The bill of lading comprises of the following details:

  • The complete name and official address of the receiver and the shipper.
  • The Purchase orders or special reference/ invoice numbers which helps the shipper and the consignee to release the goods for pickup or accepted at delivery.
  • The date of the pickup which acts as a reference to track the freight.
  • The details of the item including the number of unit being shipper, weight and dimension of the product, along with the nature of the cargo being carried, i.e. dangerous goods etc.
  • If the goods are hazardous, Department of Transportation hazardous material designation is tagged, and it is cited on the bill to follow special rules and requirements when shipping.
  • The details of the packaging used such as crates, palates, cartons, pills, drums etc.
  • Any special notes or instruction for the carrier.

Bill of Lading Tracking

Different companies use different forms of bill of lading which makes it difficult to track them unless a specific tracking service is provided by the carrier. There are few companies which tie-up with the shipping carriers to track the bill of lading for easy trade.