What is a Bill of Lading?
A bill of lading is a binding legal document between a transportation company and a client. It shows what goods are being shipped, what they’re worth, where they’re being shipped to, and who the recipient of that shipment is. Any other special conditions or instructions about the goods being shipped are also included in the bill.
Bills of lading were originally used in reference to goods transported by ship. Lading is the act of loading cargo onto a ship. But under US law, bills of lading are required for all goods being transported by a third-party carrier. That means you don’t need a bill of lading to transport your own goods but once you hand them over to a carrier like UPS or FedEx, the Department of Transportation requires them to issue you with one.
What is the Purpose of a Bill of Lading?
A bill of lading acts as a receipt for the sender, a contract of carriage for the transportation company, and an ownership title for the recipient.
Once goods are loaded onto a truck, train, ship, or plane, the sender and an agent of the transportation company sign the document. The recipient can only claim ownership of the goods upon delivery by either presenting the document or verifying his identity.
The BOL provides documentary proof of goods being transported to all the parties involved, thus minimizing fraud. This legally binding document is the one that gets consulted in the case of disputes or insurance claims. The transportation company also uses it to calculate shipping charges while governments rely on it to determine customs fees.
Different Types of Bills of Lading
1. Inland Bill of Lading
Used for the transportation of goods overland by truck, train, or boat within a country
2. Ocean Bill of Lading
Used for the transportation of goods by ship across international waters. It’s issued by the shipping line. An ocean bill of lading differs from the sea waybill in that the recipient needs to present the original bill of lading to collect his goods when an ocean bill of lading is issued while a sea waybill is purely electronic. There’s no paper document required.
3. Air Waybill
Used for goods transported by air, both domestically and internationally.
4. Through Bill of Lading
Used for hybrid domestic-international transportation of goods. If, for example, you were transporting corn from Iowa to New York by train, then put it on a ship to England, you would use a thorough bill.
5. Negotiable Bill of Lading
A negotiable BOL allows the recipient to transfer his right to collect the goods being transported to somebody else. A recipient does this by stamping or signing the bill. It works much the same way as endorsing a check.
6. Straight/Non-negotiable Bill of Lading
A straight bill of lading compels the transporter to deliver the goods to a specific person. This version is not transferable and can sometimes compel a transporter to use a specific mode of transport, for example, planes in the case of priority mail.
7. Clean Bill of Lading
A clean bill is issued after delivery. It confirms that the goods have been inspected and there are no defects or evidence of other discrepancies.
8. Claused/Fouled Bill of Lading
A claused bill of lading is issued when goods are damaged in transit.
9. Uniform Bill of Lading
Uniform bills of lading compel the transporter to assume full liability for any loss, accidents, or damage to goods being transported.
Uniform bills of lading are typically used during the transportation of hazardous materials like explosives or valuables like jewelry or art. Many carriers either refuse to transport sensitive materials and valuables or charge through the nose for this very reason.
Master Bill of Lading Vs House Bill of Lading
A master bill is issued by the company operating a ship while a house bill is issued by a freight forwarder.
Clauses in a Bill of Lading
Typically, the following clauses are included:
- An account number, order number, reference number, or purchase order
- The shipment date
- The sender (consignor) and the recipient (consignee) of the goods
- The origin (loading port) and the destination (discharge port) of the goods
- The quantity of the goods
- The dimensions, density, and description of the goods
- The packaging of the goods (are they in crates, cartons, pallets, drums, etc)
- The monetary value of the goods being transported.
- Any special instructions that need to be followed, for example, protective equipment and slow driving may be necessary when transporting hazardous materials. A Department of Transportation Hazardous Material Designation is also mandatory in such cases.
- Signatures of both the sender and the transporter. The recipient also has to sign the document before taking possession of the goods.
What is the Difference Between a Bill of Lading, a Bill of Exchange, and an Invoice?
A bill of lading, as discussed extensively in this article, is a document between a sender and a transporter that details the goods being shipped, the conditions under which they’re to be shipped, and the person to whom they are being shipped.
A bill of exchange is a creditor-issued promissory note (i.e. it is issued by the creditor instead of the debtor). If you want your supplier to ship you rusted car doors from Ohio without paying for them upfront, then he will issue you with a bill of exchange. The document binds you to pay an agreed-upon amount of money on an agreed-upon date. Nonpayment may result in that debt accruing interest. Bills of exchange and bills of lading are both used extensively in international trade.
An invoice is a document issued by a seller to a buyer for the purpose of collecting payment. If you supplied combat boots to the army, for example, your invoice would show the dates on which those boots were delivered, how many pairs were delivered, and how much money the army owes you for both the boots and delivery.
Conclusion
A bill of lading is a very important document, especially if you routinely use third-party carriers to transport your products. Ensuring the accuracy of bills of lading before signing them is of utmost importance as those are the documents that will be consulted in the case of any disputes between you and your shipper
Sources
- UPS. Definition of the term.
- US House of Representatives. 49 US Code Chapter 801
- Legal Information Institute, Cornell Law School. Bill of Exchange.
