Many companies commonly use an invoice or freight bill instead of a bill of lading for shipping purposes. Invoices are typically used for accounting purposes only, so they don’t have legal standing in court if someone tries to steal your cargo! Risky, right?
When you ship products, you want to be sure that the process is efficient and secure. A BOL makes sure that happens and even takes it up a notch.
If you’re shipping goods & products daily, it’s essential to understand what is bill of lading and its types So, let’s learn more about this topic.
Table of Content
What Is Bill Of Lading?
Whether you want to ship products across the country or just around the corner, a bill of lading can help prevent asset theft. These bills are either an electronic bill (modern BOL or telex release) or a paper bill (original bill).
Shippers receive a bill of lading from a transportation company that lists the types, quantities, and destinations of their cargo. These bills are also attached to the packaged freight. The bill even helps to reconcile shipping invoices.
If you want a simple and short bill of lading definition, then bills of lading are official documents you can use to prove ownership of goods or services. They represent an official agreement between a shipper and carrier, laying out where the shipper will transport the goods and their time of arrival. It also serves as a description of loan collateral, and the court admits it.
There must be an authorized representative from the carrier, shipper, and receiver to sign this legal document, regardless of the method of transportation.
A shipment bill of lading is valuable in preventing asset theft when managed and reviewed correctly. Also, there are different types of bills of lading, so it’s essential to choose the right one for your business needs.
Functions Of The Bill Of Lading
The Bill of Lading serves three critical functions. Let’s look at those roles.
1. Cargo receipt
The carrier issues BOL to the shipper as evidence that the carrier has received the shipment safely as per the pre-determined conditions of quality and quantity. Thus a BOL acts as a receipt of the cargo. It testifies that the transported products are in good condition as described in the bill and also serves as proof of delivery.
2. Document of title
The bill of lading is vital for determining ownership of shipped goods. Officials can use a Bill of lading to determine ownership of the freight after delivery. The shipping company issues this document.
BOL also describes the condition of goods when the shipping company received them. In addition, it determines who has authority. Only the legal owner can claim the goods from the shipping line.
3. Legal contract between carrier and shipper
A bill of lading is a legal document that provides evidence of the agreement between a shipper and a carrier for cargo movement.
The contract between these two parties involved is created before the issuance of a bill, but the bill itself is what safeguards both parties’ interests. This should not be confused with the sales contract between parties (buyer and seller)—BOL does not replace it.
The most important international rules governing carriage contracts are the Hamburg rules, Hague Rules, US COGSA (Carrier of Goods by Sea Act), and Rotterdam rules.
Types Of Bill Of Lading
There are various types of lading bills. You can choose the bill based on what you’re shipping, where you’re shipping, and your needs.
1. Master bill of lading:
A carrier issues the Master bill of lading (BOL) or carrier bill. Master bill of lading represents the contract of carriage for the freight shipment between the shipper and the carrier. When the carrier confirms receiving the goods, it issues the master bill to the one who booked the freight—the shipper of the freight forwarder.
2. To order bill of lading:
Order bills are the documents that give the owner of cargo rights over it and allow the shipper to transfer ownership at the discharge port under certain conditions. It is a negotiable instrument, and the opposite of a straight bill of lading.
3. Bearer Bill of lading:
This is a second type of negotiable bill. Under this BOL, a shipment is delivered to whoever has the bill of lading and does not specify a consignee—it can be blank with no name or have the word ‘bearer’. This bill is functional for bulk shipments sent out in small quantities.
4. Straight bill of lading:
This bill of lading is one of the most common lading bills. A straight bill of lading is a non-negotiable bill that comes in handy when the actual goods being delivered are already paid for or are donations/gifts and require no payment.
5. Inland bill of lading:
You will need an additional document issued for international shipment—if your materials travel via land before reaching internationally. You need an inland bill to reach the shore of a country before being shipped to another country.
6. Ocean bill of lading:
This is for international shipments too. To ensure your cargo arrives safely, you’ll need to provide an ocean bill of lading when the freight shipment crosses international waters. An international bill of sale is proof of delivery from the carrier to the shipper.
7. Direct bill of lading:
Direct bill of lading is used to specify that the vessel that picked up the cargo will be the same vessel that will drop it to the final destination. So basically, it is used for the freight shipment picked up and delivered by the same carrier.
8. Open bill of lading:
An open bill of lading is a negotiable BOL. This BOL allows the transfer of the shipment to another consignee by changing the name of the consignee after the consignee sign it. The person with the Ocean bill of lading can rightfully pick up the goods from the carrier.
9. Clean bill of lading:
This bill is signed by the carrier and shipper when assured of the good’s quality. A clean bill of lading is a document that asserts that there was no damage/loss to the goods during shipping. The carrier issues it after inspecting all packages for quality and quantity.
10. Claused bill of lading:
A claused bill of lading, also known as the “dirty bill of lading,” is the exact opposite of a clean bill of lading. It is issued when the goods shipped are damaged, there has been a loss of goods during shipping, or the number of goods received varies from the predetermined quantity.
Bill of Lading Template & Their Necessary Parameters
Here is an example of a bill of lading for your reference.
A typical bill of lading template consists of the following parameters:
1. Receiver’s information
The detailed information includes the receiver’s name, address, and phone number.
2. Shipper’s information
The information includes Shipper’s name, address, and phone number.
3. Tracking number
There are various numbers for tracking the consignment. Trailer number, Standard Carrier Alpha Code (SCAC), and seal numbers are some of the numbers used.
4. Freight charge terms
This section includes how the freight charges are paid. By default, the freight charges are prepaid. In some cases, it can be marked as collect or 3rd party.
5. Item description or cargo description
It describes the condition of the consignment. The section provides the declared value of the item, weight, quantity, and package type.
6. Special instructions
It mentions any specific instructions regarding the handling of the consignment. If the shipment contains hazardous material, it needs to be said. As per the department of transportation hazardous material designation, special rules apply while shipping such products.
7. Amount payable
This section mentions the transportation charges. It includes the details regarding the purchase order, the amount to be paid, and the terms of payment. The terms of payment will specifically mention whether the fees is to be paid via cash on delivery or is it prepaid.
The bill of lading document requires both the shipper and carrier’s signature, as it is a binding legal contract.
How Is The Bill Of Lading Different From POD (Proof Of Delivery)?
There are many challenges associated with running a transportation company. Hundreds if not thousands of packages come through in a day.
The worst nightmare of a delivery service is missing a package.
Two documents reduce liability and help in accurate package tracking to solve the problem.
- Proof of Delivery – It is evident that the intended receiver has received the package. The consignee provides their signature on the delivery receipt.
- Bill of Lading – In contrast, the bill of lading is the receipt issued for the freight services.
Although PoD and BoL ensure the package’s safety and protect the company from liabilities, there are differences between the two.
|Proof of Delivery||Bill of Lading|
|Context||It is used in last-mile delivery. Proof of Delivery comes into the picture when the delivery company hands over the package to the customer.||It is used in the early stages of the shipping process. BOL is the documentation used between carriers and shippers|
|Legality||A PoD is not a legally binding document.||BOL is a legally binding document in nature. There are legal implications of not following the shipping agreement.|
|Handler||A recognized and authorized official of the receiving party (company) must sign the proof of delivery. The warehouse manager handles it.||As it is a legal agreement between carrier and receiver, the carrier or the agent issues it.|
|Roles||The PoD serves the following main functions:
||The BOL performs three functions:
|Issuance place||Proof of delivery is issued once the consignee receives their package.||The bill of lading is given once a container is loaded onto a vessel for domestic borders or international trade.|
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- Claim compensation for a loss or damage to your cargo during transportation.
- Prove ownership of your cargo if you need to take legal action against someone who has damaged or stolen your goods.
- The shipper – The party that gives the order to the carrier to ship their goods
- The carrier – The company that loads your goods onto their truck or plane
- 3PL working on behalf of the shipper – A company that provides logistics services to other businesses.
For less-than-truckload (LTL) shipments, a Bill of Lading is an important document. It ensures that a load is designated and accounted for before and after the completion of shipping.
It serves as essential contracts, receipts, transfers of responsibility, and insurance claim documentation to protect shippers and carriers from liability.
To avoid unnecessary challenges, you must have a correct lading bill before sending out your items for delivery. BOL proves that you have complied with all applicable laws and regulations regarding shipping procedures. This way, if anything goes wrong during the delivery process, you can make the most of the bill of lading.