Bill of Lading
DEFINITION
What Is a Bill of Lading?
In the shipping and logistics industry, a bill of lading is a contract between a shipper, a carrier, and a receiver or consignee. It includes several key pieces of information, including what goods are being shipped, where the shipment is sent from, and where the shipment is sent to.
In this context, the shipper is defined as the party that packs and prepares a shipment for transportation, often a warehouse or supply business. The carrier is the party that physically transports the cargo, often a shipping or freight company. The receiver or consignee is the party that receives the shipment, usually a manufacturer or retailer.
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What Do You Need to Know about a Bill of Lading?
Perhaps the most important detail about a bill of lading is that it is a legally binding document. It contains all of the essential details for a shipper and carrier to process a shipment accurately and make sure that it ends up where it is supposed to, when it is supposed to.
Since it is a legally binding contract, a bill of lading also serves as both a document of title and a receipt for any and all goods described. It also lays out the terms and conditions agreed upon between the carrier and shipper for transporting all of those goods. A bill of lading signed by authorized representatives of the shipper, carrier, and receiver must always accompany the goods being shipped.
Bills of lading are essential in the shipping and logistics industry because they allow for accurate recordkeeping and play a key role in reducing theft and fraud. It is important to know what type of bill of lading is called for in each individual shipment, as there are several variations that each serve different functions.
What Types of Bills of Lading Are There?
There are many different kinds of bills of lading, most of them reflecting a specific kind of shipment or special handling requirements. The appropriate type of bill for each shipment may depend on what is being shipped, from where, and to where. Some common types include:
- Master Bill of Lading: A master BoL includes all shipment details for a transfer of goods. This is issued by the carrier to a shipper, who gives a matching BL to the carrier. It is important to make sure that all relevant details match up between the two bills.
- Negotiable Bill of Lading: If a BoL is negotiable, that means that its legal title can be transferred to a third party via consignment. That is usually a third party who has agreed to sell the goods for a commission.
- Non-Negotiable Bill of Lading: A non-negotiable BoL is not transferable, meaning that the goods can only be legally received by the consignee named in the BoL.
- Clean Bill of Lading: After the carrier has inspected the goods being shipped, they issue a clean bill of lading confirming that the listed quantity, condition, and packaging data is correct.
- Claused Bill of Lading: If the carrier’s inspection reveals quality issues or discrepancies in the listed quantity, a claused bill of lading that outlines the problems is issued, ensuring that the carrier is not held responsible.
- Inland Bill of Lading: Inland bills of lading are issued specifically for shipments that are transported via a country’s roads, railways, or inland waterways.
- Overseas Bill of Lading: Overseas bills of lading are issued specifically for shipments that are transported internationally.
- Container Bill of Lading: Container bills of lading specify that the goods will be transported in a specialized or protected container.
Bill of Lading Sample, Example and Meaning
To understand how a bill of lading works, let’s look at a theoretical example. Let’s say that a clothing retailer receives a shipment of new socks once every two weeks. The store manager checks the inventory and decides how many units of apparel are needed for the following two weeks. The manager completes a purchase order that is then reviewed, approved, and signed by the business owner and sent to the supplier. The supplier gathers the required clothing and creates a bill of lading that is then sent to the shipper.
After the shipper has delivered the socks to the retailer, the store manager compares the bill of lading against the information on the purchase order. If all information matches, the purchase order and bill of lading are both sent to the business owner for review, and a payment is issued to the supplier. If the information does not match, all involved parties will review their documentation to determine where the discrepancies lie.
What Information Is in a Bill of Lading?
- Shipper
- Date of shipment
- Shipper’s name and address
- Consignee
- Recipient’s name and address
- Notify Party
- Recipient’s name and address
- Bill of Lading Tracking Number
- Account number or purchase order (PO) number
- The Shipment Information
- Cargo Details
- Number of units being shipped
- Brief description of all goods included in the shipment
- Declared value of all goods included in the shipment
- Description of all packaging included in the shipment
- Confirmation of whether the shipment contains hazardous materials as defined by the Department of Transportation
- National motor freight classification (NMFC) for all goods included in the shipment
- Exact weight of the shipment
- Specifications for pickup or delivery
- Contract Details
What is the Purpose of a Bill of Lading?
The bill of lading serves three major functions, all of which are equally important to ensuring that goods are delivered accurately and on time.
- Documents the title of the goods being shipped
- Serves as a receipt for the goods being shipped
- Spells out the terms and conditions that have been agreed upon for shipping the goods
Who uses a Bill of Lading?
A bill of lading is usually created by the business that is providing the transportation. Bills of lading are used for all types of domestic and international transport, including roads, railways, air, and sea.
What Is an Electronic Bill of Lading?
An electronic bill of lading (EBoL) is a digital document that is considered to be the “legal and functional equivalent of a paper bill of lading.” Electronic bills of lading are becoming increasingly popular with shippers, receivers, and transport companies looking to increase processing speed while reducing paperwork.
How to Create a Bill of Lading Using an Automated Document System
A transportation management software solution can automate many of the steps involved in creating and delivering a bill of lading. Automation can drastically simplify processes such as data entry, routing for approval, tracking with real-time visibility, generating reports, and running three-way matching for invoices, purchase orders, and receipts. Relying on an automated software solution to assist in the BoL process helps to reduce errors, speed up processing, and create more visibility and accountability in the shipping process.
Differences Between a Bill of Lading vs. Other Documents
Documentation of shipping and transportation can be complicated. There are many forms of documentation that are similar to but distinct from bills of lading. There are also many types of bills of lading that are specific to a certain mode of transportation. It is important not to confuse your bill of lading with any of these documents, some of which include:
- Bill of lading vs. invoice: An invoice records a sale of goods between a buyer and a seller, while a BoL is a detailed legal document recording the transportation of goods between a shipper and a receiver.
- Bill of lading vs. air waybill: An air waybill is a non-negotiable type of BoL specifically applied to goods transported by international air couriers.
- Bill of lading vs. sea waybill: A sea waybill is a non-negotiable type of BoL specifically applied to goods transported by overseas couriers.
- Bill of lading vs. CMR: A CMR, also known as a consignment note, is a non-negotiable type of BoL specifically applied to goods transported over the roadways.
- Bill of lading vs. commercial invoice: A commercial invoice records an international sale of goods between a buyer and a seller.
- Bill of lading vs. delivery note: A delivery note, also known as a delivery receipt or proof of delivery (POD), is a confirmation from a consignee that a shipment has arrived in the condition and quantity described in the original BoL.
- Bill of lading vs. delivery order: A delivery order is a formal agreement that the order has been completed as described in the BoL, and specifically authorizes the release of the cargo.
- Bill of lading vs. letter of credit: A letter of credit is a document issued by a bank or financial institution promising that payment for a shipment will be made at a later date if all conditions of the BoL are met.
- Bill of lading vs. packing list: A packing list is a document prepared by the shipper including an itemized list of everything included in a shipment. It is often used while preparing a BoL, or to resolve disputes about incorrect or incomplete shipments.
- Bill of lading vs. telex release: A telex release is a statement issued by an authorized agent verifying that the original BoL has been surrendered by the shipper and the cargo can be released.
- Bill of lading vs. tracking number: A tracking number is assigned to a shipment specifically for the purpose of tracking it through each stage of the delivery process. A BoL can be useful in tracking a shipment but is not intended solely for that purpose.
Want to see how automating your bill of lading process can revolutionize the way your business approaches transporting goods? Contact MHC today to schedule a demonstration of our industry-leading solutions for workplace automation!
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