What Is a Bill of Lading?
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A bill of lading is a legal document that functions as a document of title, a contract of carriage between a freight forwarder and a shipping agent, and a receipt for shipped goods. A carrier typically issues a bill of lading to a shipper that details the type, quantity, and destination of certain goods. Our guide below reviews the finer points of a bill of lading, discrepancies you should consider before seeking one, and different document types.
Why Is a Bill of Lading Important?
Bills of lading, also called BoL, are legally binding contracts signed by the carrier and shipper that show proof of shipment of certain goods. They protect everyone involved in a transaction and help prevent asset theft.
A bill of lading also details a shipment’s cargo and accompanies the shipment or purchase order until it reaches its final destination. At that point, the recipient receives the bill of lading and signs the shipping document as proof of delivery.
Fragile, valuable, or sensitive shipments can benefit from the protection a bill of lading provides. If you’re moving and an expensive or rare piece of artwork goes missing during the shipping process, for example, the bill of lading can serve as a reference point for the value and estimated cost of the missing artwork. This information can help to resolve potential disputes surrounding the missing freight shipment.
Key Information Included in a Bill of Lading
Bills of lading typically contain important details about pricing, freight classification, and the shipment’s final destination. Below are a few of the details every bill of lading requires:
- Description of the goods
- Estimated delivery date
- Freight classification and estimated freight charges
- Quantity of goods
- Shipper and consignee names and addresses
- Special instructions (e.g., fragile, hazardous materials)
- Total and individual weights of goods
Most bills of lading contain the information listed above, but more detailed information can vary slightly depending on the shipping method and carrier. The bill of lading could also include languages other than English, depending on the shipping destination.
Types of Bills of Lading
The two primary categories of bills of lading are negotiable and nonnegotiable bills of lading. Both have specific purposes, and both can handle local or international shipments. Read more about each below.
Negotiable or “Order” Bills of Lading
Negotiable or “order” bills of lading allow for the transfer of ownership of goods while in transit. If the shipper wants to transfer ownership of a set of rare books, for example, the shipper could pass ownership to the intended party during the shipping process.
Negotiable bills of lading are common in international trade and with letters of credit. Most carriers and shipping services recognize negotiable bills of lading, but most carriers will only release goods to the party that presents the original negotiable bill of lading. This is a method of self-protection.
Nonnegotiable or Straight Bills of Lading
Nonnegotiable or “straight” bills of lading are common in domestic shipping and are designed to assist consignors and consignees in making a straight transaction. Shippers cannot use these to transfer ownership.
A nonnegotiable bill of lading limits the carrier’s liability, and it cannot change at a later date. There are a few specific phrases associated with nonnegotiable bills of lading. These legal documents will never include the phrase “to order” on the bill, for example.
Special Types of Bills of Lading
Negotiable and nonnegotiable are the two most common bills of lading types. However, there are special bills of lading for more specific situations that you might need to consider. Read more about them below.
- Clean bill of lading: A clean bill of lading is a document that indicates goods are in good order, with no obvious signs of damage or distress. The clean bill of lading also indicates that there has been no loss of goods during the shipment process.
- Claused or dirty bill of lading: A claused bill of lading indicates either a shortfall or damage to goods in transit.
- Onboard bill of lading: An onboard bill of lading is for use after the goods in question are secure in a cargo ship.
- Received for shipment bill of lading: A received for shipment bill of lading is for use before loading and well before the arrival of the vessel.
- Through bill of lading: A through bill of lading facilitates international shipments and authorizes the transport of goods through both domestic and international borders.
Bills of Lading as Contracts of Carriage
Bills of lading are binding contracts between shippers and carriers. They help establish the carrier’s liability in the shipping process, the responsibilities of the shipper, and any limitations associated with either party.
If certain important information does not appear on the bill of lading, the cost surrounding the shipping process can change. Additionally, the shipper or responsible financial party might not be eligible to receive compensation if any information is left off of the bill of lading.
Electronic Bills of Lading
An electronic bill of lading serves the same function and purpose as a paper BoL but comes with certain advantages. The electronic BoL increases efficiency, reduces costs, enhances security, and allows recipients to sign electronically upon receipt of shipments.
The shipping industry at large has not adopted electronic bills of lading but eBL are becoming more popular. Some take issue with the challenges of ensuring legal validity, security concerns, and the involvement of multiple parties and platforms. Electronic bills of lading might not be accessible for everyone, either, if related documents are reachable through exclusive apps or platforms. Therefore, paper bills of lading are still widely used along with documents such as moving insurance paperwork.
Our Conclusion
Bills of lading are important legal documents that protect everyone involved in a shipping transaction, whether you’re transporting rare and valuable artwork or hazardous materials. Always pay close attention to the details in any bill of lading to make sure you properly protect your assets and receive a proper receipt of goods. Seek professional advice if you’re unsure about any part of the process.
FAQ About Bills of Lading
What is the difference between a bill of lading and a packing list?
The difference between a bill of lading and a packing list is that a packing list serves to detail the individual items in a shipment, while a bill of lading is a legal document that focuses on the terms of a shipment and the receipt. Packing lists are better for inventory management than legal protection.
Who prepares the bill of lading?
The party shipping goods typically prepares a bill of lading. The carrier agency issues the actual document.
Can a bill of lading be changed after issuance?
A bill of lading can sometimes be changed after issuance, but it depends on certain factors. Minor changes, such as an update to an item’s weight, might not require a new bill of lading, but significant changes require a replacement document known as a “switch” bill of lading.
What happens if a bill of lading is lost?
If a bill of lading is lost during transport, the shipper might have to pay a penalty fee to the carrier.
How long should you keep bills of lading on file?
You should keep bills of lading on file for at least nine months to protect yourself and others involved in the transaction.
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