What is a Bill of Lading?

Are you looking to ship something via parcel package or LTL? If so, you need one essential document- a bill of lading.

A bill of lading is a crucial document in the shipping world, as it provides a paper trail of information that helps protect the shipper. But what is a bill of lading? Why is a bill of lading necessary?

Check out this guide to discover everything you need to know about a bill of lading.

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What is a Bill of Lading?

A bill of lading is a document issued by a carrier to a shipper. Often abbreviated as BL or B/L, this document serves as a receipt of freight services.

Regardless of whether you’re exporting, important dealing with ocean freight, or dealing with air freight, a bill of lading confirms that goods were received in an acceptable condition and are ready to be shipped. The carrier then delivers the goods to a consignee (the person who purchased the goods in the first place).

Essentially, a BL is a contract between all three of these parties (the carrier, the shipper, and the supplier) that states the terms and conditions of carriage.

Let’s say, for example, a farming company is looking to transfer some apples from their farm in Washington to a grocery store in Oregon via truck. A representative from the farm and the truck driver will sign a BL after loading the apples on the truck.

Once the driver delivers the apples to the store in Oregon, the driver will ask the store owner to sign the same document.

Bill of Lading Components

A bill of lading contains several crucial components that you need to fill out correctly. Here’s the information that you need to include in a bill of lading:

• The full names and addresses of the shipper and the receiver
• The type of cargo you’re shipping
• The vessel the cargo is sent on
• The invoice control or purchase order number
• The date of shipment
• The shipping line and freight forwarder
• The buyer/importer
• Description of the commodities
• The declared value of the shipment, which is necessary for liability insurance
• Notification of special handling requirements

The bill of lading should also include any special instructions related to the shipping. For example, multiple stop shipments, cold storage, and unique tracking all qualify as special instructions that you need to outline.

Related: International Shipping Glossary of Terms 

Why is a Bill of Lading Important?

Why is it so important to include a bill of lading when shipping something? A bill of lading is vital because it’s a legal document that provides all of the vital information a shipper and carrier need to process the shipment through different maritime countries.

Beyond leaving a paper trail, here are some other reasons why a bill of lading is so essential:

• Evidence of Shipment: A bill of lading does more than prove that someone placed a shipment. It also proves that the item is being shipped in an agreed-upon manner.

• Title Documentation: Whoever has the bill of lading also has the title for the ownership of goods. For this reason, both the recipient and the shipper are noted on the bill of lading.
• Receipt of Goods: The bill of lading also verifies that goods have been received by one party from another party. This signifies that whoever has the item is responsible for its condition.

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Non-Negotiable vs. Negotiable Bill of Lading

A bill of lading falls into two general categories: negotiable bills of lading and non-negotiable bills of lading.

The main difference is that a negotiable BL is an original legal document representing the title of goods. On the other hand, a non-negotiable BL is a copy of the original that doesn’t have any power over the good’s title.

A negotiable bill of lading needs to be endorsed by the consignee (the person who bought the product) when it’s transferred to a shipping carrier or another third party.

Types of Bills of Lading

In addition to a negotiable vs. non-negotiable bill of lading, you can also classify BLs  according to their operation method and how the documents are executed.

You can split a bill of lading classified by execution into four types:

1. An Open Bill of Lading: This is a negotiable bill of lading in which you can change the consignee’s name upon the signature of the original consignee. This will then transfer the bill. It’s possible to transfer the bill multiple times.
2. A Straight Bill of Lading: This type of bill dictates that the goods are for a specific person. It’s non-negotiable and is primarily used for military cargo.
3. Order BL: This type of bill uses certain words to make the bill negotiable. This is the most modern type of BL, and it’s used all over the world. It helps to ensure the safe delivery of cargo to the bonafide holder of the BL.
4. Bearer Bill of Lading: This bill of lading states that the delivery should be made to whoever holds the bill.

You can split a bill of lading classified based on operation into the following types:

1. A Clean Bill of Lading: This states that someone boarded the cargo onto the ship in good condition.
2. Received for Shipment B/L: This bill goes from the agent to the shipper. Endorsing it guarantees that the carrier received the goods. However, it doesn’t yet confirm that the goods are on board the assigned vessel.
3. Dirty Bill of Lading: If the shipowner chooses to object to the cargo’s condition, they can include a clause that states the bill of lading to be “dirty.”
4. Through Bill of Lading: This allows cargo to be delivered directly from point A to point B.
5. Shipped Bill of Lading: This is issued once someone loads the cargo on board.
6. Combined Bill of Lading: This bill of lading gives information about the cargo someone transports in a large shipping container by land or sea.

Related: Supply Chain Management

Bill of Lading: Wrap Up

Now that you know what a bill of lading is, you should be better prepared to ship items overseas. A bill of lading will help ensure the items you’re shipping arrive safely.

You can speak to a third-party logistics provider to learn more about the best practices when using a bill of lading.

Are you looking for help with freight forwarding and other shipping logistics? Contact us today!