A bill of lading is an agreement that acts as proof that a freight shipment has been picked up by a carrier and successfully delivered to the recipient. Bills of lading play an important role in logistics. Below, we’ll explore the importance of a BoL, the different kinds of BoLs, and how these documents facilitate processing steps in shipping freight.
Bills of lading are legal documents that govern the agreement between a shipper and a carrier in freight shipping. They function as a receipt and include information about the shipment type, quantity of goods, and destination.
The freight carrier signs the bill of lading when it takes possession of the cargo from the shipper. Once the cargo is delivered, the recipient also signs the bill of lading to confirm that the goods were received as detailed on the document.
The bill of lading protects all parties involved in freight shipping by acting as a contract that stipulates what cargo is being moved and whose possession it’s in. BoLs reduce the risk for shippers and carriers by clearly acknowledging who is liable for the cargo, and they protect the recipient by ensuring they only pay for what they receive. Bills of lading can also stipulate special shipping conditions, like temperature-controlled storage.
Today, most bills of lading are signed and shared using electronic data interchange (EDI).
A bill of lading is required for all freight shipments. It’s one of the most important elements of freight shipping because it acts as proof of the shipper’s agreement with the carrier, freight forwarder, or freight broker.
Bills of lading are used only in freight shipping and are not necessary for parcel shipping.
A bill of lading typically includes the names and addresses of both the shipper and the recipient, the date the cargo is shipped, and specific details of the cargo, like what is being shipped, how it is packaged, the exact quantity of goods, their exact weight, and their value. They may also include special instructions that stipulate if the cargo contains hazardous materials or requires specific transportation conditions, special instructions for the carrier, or specific tracking numbers.
If a shipment is being sent overseas, the BOL may also include other important information, like the voyage number and vessel name of a cargo ship. Shipments may also include information about the carrier's liability and type of service.
The bill of lading is issued by the carrier. Authorized representatives from the shipper, carrier, and recipient must still sign the document.
Let’s say that a local bakery places regular weekly orders with a food vendor for butter, milk, and eggs. The bakery determines how much of each ingredient they need that week, and places a purchase order with their vendor. The vendor prepares the goods and schedules a shipment with a carrier that can handle temperature-controlled deliveries.
The carrier prepares a bill of lading that details the exact amount of each ingredient, how they are packaged, the exact weight of the cargo, the cargo’s value, and contact information for both the shipper and the recipient. The vendor and carrier sign the bill of lading, acknowledging exactly how much inventory is being moved.
Once the butter, milk, and eggs arrive at the bakery, the bakery manager compares the information on the bill of lading to the information on the purchase order to verify they have received what they ordered. Assuming the information matches, the PO and BoL are sent to the bakery’s owner, who then pays the vendor.
There are two primary types of bills of lading: straight and order. Under each of these umbrellas, there are more specific types of BoL that pertain to how the cargo is shipped and identified.
A straight BoL is a nonnegotiable document that is used when the goods have already been paid for or don’t require payment immediately upon delivery. The recipient, or consignee, only needs to acknowledge that the goods were delivered to them. On a straight BoL, the recipient is specifically identified.
An order BoL is the opposite of a straight BoL. These BoLs are negotiable and are used for shipping cargo that has not yet been paid for. An order BoL acts as a substitute for money or a promise to pay. These may be used to ship goods under open accounts. Rather than identifying a specific recipient, these BoLs are expressed “to the order of” the recipient, and ownership of the cargo may be transferred to another party upon receipt.
Other bills of lading can typically be described as either a straight or order BoL, but get more specific as to how the goods are transported, delivered, and accounted for. These are a few of the other types of bills of lading:
As a legal document of title, a bill of lading:
Keeping track of bills of lading can be challenging, especially for companies that use a multi-warehousing strategy, have launched international fulfillment, or do a lot of wholesale shipping. Working with a logistics provider that can manage freight shipments and provide EDI functionality can simplify the freight process and keep operations running smoothly.
Airhouse offers freight coordination services to and from our network of warehouses. Schedule a call with one of our fulfillment experts to learn how Airhouse can help grow your business.
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