A bill of lading is a contract between you, the owner of the goods, and the carrier that specifies what you’re shipping, where it’s coming from, and where it’s going. It also serves as the carrier’s receipt once your shipment is picked up.
A bill of lading (also known as a freight bill of lading or a waybill) can also be used as a title document, allowing the person holding it to claim possession of your goods. There are numerous types of bills of lading, which we will go over in detail below.
Understanding Bill of Lading
The bill of lading is a legally binding document that gives the carrier and the shipper all of the information they need to process a shipment correctly. It serves three primary purposes:
- It is a title document for the items described in the bill of lading.
- It is a receipt for the things that have been shipped.
- It represents the agreed-upon terms and conditions for goods transit.
As an example, a logistics company plans to transfer gasoline from a plant in Texas (shipper) to a gas station in Arizona (receiver) via a heavy vehicle. After loading the gas onto the truck, a plant representative and the driver sign the bill of lading. When the carrier delivers the fuel to the Arizona gas station, the truck driver insists that the station clerk sign the document as well.
To prevent theft, every organization must have internal measures in place. Internal control includes the separation of roles, which prevents one individual from having too much power within a company. There are no two internal control systems that are alike. However, most adhere to a set of underlying beliefs that have evolved into conventional management practices. Internal controls can help to streamline operations while also preventing fraud. A bill of lading is one of several critical papers that must be kept and evaluated properly in order to prevent asset theft.
What Is the Purpose of a Bill of Lading?
#1. A bill of lading can function as a receipt for commodities.
A shipment cannot be carried out without a Bill of Lading. For items to go from Point A to Point B, BoLs must be issued. They are legally binding documents that frequently serve as confirmation of ownership of the goods being transported.
#2. A bill of lading also serves as a title to goods.
The Bill of Lading serves as a title to the goods after they arrive at their destination. The consignee indicated on the Bill of Lading must show it in order for the carrier to release the shipment and claim ownership. In this sense, it constitutes proof of delivery confirmation.
#3. Bills of lading also ensure that the shipper is compensated.
In some situations, the shipper may retain the original bill until payment is received. As a result, the consignee will be unable to access their goods until payment is received and the Bill of Lading is released.
Who Uses A Bill Of Lading?
All companies that offer transportation services typically produce bills of lading. Owner-drivers, freight forwarders, steamship lines, third-party logistics businesses, and others are examples. They include companies that transport commodities by any means, including air, sea, rail, and road.
They are appropriate for both domestic and international deliveries.
What Does a Bill of Lading Include?
- Details about the shipping firm (also known as the carrier), the shipper, and/or the consignee
- The location of the cargo’ loading
- Destination
- Mode of transportation (e.g., road, rail, air, sea)
- The shipment terms (incoterms)
- A description of the products being transported (including weight, dimensions, categorization, and so on).
The Importance Of Precision
The necessity of giving precise information on a Bill of Lading cannot be overstated.
Errors in the preparation of bills of lading have resulted in calamities for shipping businesses. For example, in 2017, a court in New South Wales ordered a freight forwarder to pay more than $800,000 in damages for’misleading and deceptive conduct’ because the bills of lading created the impression that they were ocean carriers’ bills (when they were not).
When creating these bills, extreme caution must be exercised.
Who Is In Charge Of Issuing A Bill Of Lading?
Only the ‘Carrier’ is authorized to issue the Bill of Lading. When shipping goods by sea, the carrier may be a Shipping Line (Vessel Operating Common Carrier) or an NVOCC (Non-Vessel Operating Common Carrier), often known as a Freight Forwarder (though not all Freight Forwarders are NVOCCs).
Who Is Awarded A Bill Of Lading?
Bills of lading are typically issued to:
- The sender
- A customs broker, freight forwarder, or other third party
- The consignee is the person who originally purchased the items.
Types Of Bill Of Lading Based on Transportation Mode
Are you shipping your goods by rail, truck, or sea? The terms and types of bills of lading vary depending on the mode of transport.
Sea Transportation
An ocean bill of lading is issued when items are transported by ship. The Federal Maritime Commission (FMC) regulates ocean freight to and from the United States. The following are examples of ocean bills of lading or releases:
#1. Straight bill of lading
A straight bill of lading is a non-negotiable form of the B/L that is addressed/committed to the buyer directly, with the buyer’s customs broker designated as a “Notify Party.” In this case, the carrier will issue a set of three original Bills of Lading, one of which the consignee must endorse and submit in order for the cargo to arrive at the destination. If the buyer still owes payment for all or part of the goods, a straight bill of lading is usually given.
#2. Order bill of lading
A bill of lading addressed “to order” or “to order of [a party]” rather than being consigned to the buyer is referred to as an “order” bill of lading. As long as the bill of lading is endorsed on the back, the carrier will deliver the shipment to whoever delivers it. The owner of the items being shipped is presumed to be the bearer of the order bill of lading. When the purchase of goods is covered by a letter of credit or the commodities are intended to be traded on a mercantile exchange while the cargo is still in route, the order bill of lading is usually employed.
#3. Electronic “telex” release
An electronic “telex” release eliminates the necessity for an original bill of lading to be presented at the destination for the goods to be released. Instead, the shipper signs and submits an original bill of lading to the carrier’s agent at the origin. The origin agent then advises the destination agency via a simple message that the items may be released in the absence of a physical copy bill of lading. This notification was previously done via telex (thus the name), but electronic releases are now done via email or via integrated system notes in carrier booking systems. This is frequently used when a buyer still owes money for all or part of the items but pays before the cargo arrives.
#4. An express bill of lading
The carrier commits to only release the goods to the stated consignee or notification party under this type of bill of lading. It is a non-negotiable document, and there are no original bills of lading issued. If the importer paid for the items before shipping or has credit with the supplier, the express bill of lading is usually used. It speeds up the release of goods upon arrival and saves time and postal courier expenses by eliminating the requirement to provide a physical bill of lading.
Air Transportation
When commodities are delivered by air, air waybills, or AWBs, are issued. They are non-negotiable; therefore, as soon as the cargo reaches the destination airport, it is handed over to the consignee or their customs broker for customs clearance and final delivery. As a result, air waybills solely act as:
- A carriage contract
- A cargo receipt indicates that the shipment has been received by the carrier.
- Delivery instructions, if any special handling is required
The airwaybill may be committed to a bank if the items are sent under a letter of credit or the shipper is utilizing his bank to collect payment for goods prior to delivery to the consignee. In such circumstances, the consignee must pay the bank, which then gives the airline with a bank release permitting the carrier to release the cargo. This process usually takes several days, during which the goods sit at the airline warehouse and may incur storage fees.
Land Transportation
In North America, a “Waybill” is commonly used for overland shipments. This is a brief contract of carriage that usually refers only hazily to the carrier’s tariff terms and conditions. Make sure to request these; you’ll want to know the liability restrictions that apply to your cargo. A waybill, like an air waybill, is never consigned “to order” and is never negotiable. To protect the interests of both the buyer and the seller, the package can be shipped under “collect on delivery” terms with an additional carrier’s handling fee.
Uniform Bill of Lading
This bill of lading is used for overland shipments and is subject to “uniform” terms and conditions based on generally recognized transportation rates and/or contract carriage agreements. The uniform bill of lading (aka uniform waybill) can be signed “to order,” making it a negotiable bill of lading, similar to an ocean B/L. A uniform bill of lading is a longer version of the “Waybill,” and it includes all of the terms and conditions, whereas the waybill just refers to them ostensibly.
Hand tag
The hand tag is commonly used when a truck driver arrives at a shipping dock or door for cargo collection and fills out a form by hand, hence the name. This is a brief contract with only a few terms and conditions listed. Despite its casual nature, it is nonetheless protected by the carrier’s liability limit and corresponds to the underlying tariff of the carrier. Because of its convenience, courier services and other electronically dispatched vehicles that are engaged to pick up cargo from shippers who did not produce a consistent waybill for the driver to sign as a cargo receipt typically utilize the hand tag in the air freight and local carriage business.
Why Do I Need A Bill Of Lading?
A bill of lading is used for four important reasons:
#1. It serves as a receipt for your items and ensures that you are fully insured.
A bill of lading will give you a record of what is included in the cargo. The bill of lading outlines the products being sent, the destination, who is paying, and how the shipment will arrive.
The person taking up the cargo signs the bill of lading at the bottom. The signature confirms that what you’re claiming is there is. It serves as proof of what’s on board for insurance purposes and informs your insurance coverage if your products are damaged in transit.
#2. It is proof of a transportation contract between the exporter and the carrier.
The bill of lading provides every detail about how the items will be shipped, so there is no confusion about who is in control of each step.
#3. It prevents your shipments from being delayed.
Any shipment questions or issues are eliminated by a properly filled bill of lading. Any errors on your bill may cause your shipment to be delayed or, worse, you may not be paid for your shipment.
#4. It ensures that you are compensated for your goods.
Every year, almost 10,000 shipping containers are lost. It is extremely difficult to obtain compensation for your loss without a properly prepared bill of lading.
What Is The Difference Between A Shipping Bill and a Bill of Lading?
A shipping bill is a document that specifies the value, quantity, and type of items being shipped. A bill of lading is a document that states that goods have been received and will be delivered to the specified recipient.
What Is the Difference Between a Bill of Lading and a Packing Slip?
A bill of lading (BOL) is a document that transfers property ownership from sellers to buyers. A bill of lading (BOL) is a legal document that acts as proof that a freight shipment was delivered. A packing slip depicts the actual items delivered in the shipment.
Why Is It Called a Bill Of Lading?
The term “bill of lading” is derived from the verb “to lade,” which means “to load.” Because the bill of lading was initially employed as a transportation receipt for products placed into ships, the name is appropriate. For example, a freight bill of lading is a transportation document that details the terms of a shipment and what’s within it.
In Conclusion
A bill of lading is a contract that a transportation company issues to a shipper that specifies the quantity, type, and destination of the items being carried. It acts as a shipment receipt and can help prevent the theft of goods being shipped. It is critical to understand the many types of bills of lading in order to select the correct ones. Otherwise, your shipment will most certainly be delayed.
- A Newbie’s Guide to Freight Shipping
- CARGO INSURANCE: What It Is and When Do You Need One
- CARGO MANAGEMENT SYSTEM: Definition, Features, and 2023 Pricing
- How to Prevent Shipping Damage: Best Tips for 2024
References
