What is a Bill of Lading?
The bill of lading (BOL) is a legal document that shipper must complete before a freight shipping process begins. A bill of lading protects both the carrier and the shipper. The document contains complete information on the type, quantity, and destination of the goods.
The BOL serves three essential purposes:
- A receipt for the goods shipped
- The contract between the carrier and shipper
- It serves as a document of title.
There are 2 basic types of bills of lading, a straight BOL, and an order BOL. Understanding the difference between these BOLs is important because it determines whether the document is negotiable the terms for delivery.
Who Prepares the Bill of Lading?
The carrier issues the BOL to the shipper of goods. You should provide the document to the carrier at pick-up or arrival. Later, the carrier passes the BOL to the receiver or consignee at delivery. It provides the driver and carrier with all necessary information to process the freight shipment and invoice it accurately. The BOL must specify any and all details of the shipment.
What Does a Bill of Lading Include?
- Shipper and receiver (or consignee) names and complete address.
- The date of the shipment.
- The number of shipping units.
- The freight classification.
- The exact weight of the shipment. If there are multiple freight units, then each item’s weight must be listed.
- Type of packaging, including cartons, pallets, skids, and drums.
- A description of the items, including the material of manufacture and common name.
- PO or special account numbers used between businesses for order tracking.
- Special instructions for the carrier.
- Note if the freight is a Department of Transportation hazardous material.
- The declared value of the freight.
3 Main Roles of a Bill of Lading Form:
- Receipt of the goods. The BOL is issued by the carrier to the shipper in exchange for the receipt of the cargo. This is proof that the carrier has received the goods from the shipper in apparently good condition.
- Evidence of the contract between carrier and shipper. As evidence of a contract, a BOL is the contract of carriage between the carrier and shipper in order to transport the freight.
- Document of title to the goods. A document of title means the freight can be transferred to the holder of the BOL. Now, the holder of the BOL has the right to claim to transfer the goods to another.
What is the Difference between a BOL and Freight Bill?
The bill of lading and freight bill are similar documents. However, they are not the same. Unlike a BOL, a freight bill cannot serve as evidence in a claims dispute or shipping mistake. The information on a freight bill should be similar (if not the same) to the BOL, but it also includes extra information on accessorial charges, fees, and notes to clarify any data on the BOL. Freight bills are an invoice that can be assessed by 3PLs or an internal logistics team; they showroom for improvement in costs, solutions and time.
What Are the Types of Bills of Lading?
- Straight Bill of Lading: a non-negotiable bill of lading used where the goods have been paid for or do not require payment. The shipping company will deliver the shipment to its consignee upon confirmation of identification. This is also a consignment bill of lading.
- Order Bill of Lading: a document that is issued to the order of a shipper or consignee for the delivery of goods. This bill of lading can be transferred by endorsement to third parties.
- Negotiable Bill of Lading: a negotiable BOL can be transferred by its consignee to a third party through signing (endorsement) and delivering it to another consignee. The new consignee can transfer the document again, and so on. In order to issue a negotiable BOL, it must be written “to order” of the consignee and must be clean.
- Claused Bill of Lading: a BOL that shows there has been damage to the delivered goods. If something is missing or goods are damaged, the carrier may have difficulty receiving payment.
- Electronic Bill of Lading: a paperless version of the bill of lading.
Regulations on BOL
In the fall of 2013, the Federal Motor Carrier Safety Administration (FMCSA) issued rules over freight brokers operations and how they fill out the bill of lading. Under these guidelines, FMCSA requires brokers to post a $75,000 surety bond that guarantees payment to motor carriers if the broker fails to make payment.
The rule also eliminates “double-brokering.” Double-brokering is when a driver takes ownership of freight from another driver or broker. Truckers cannot broker freight without a brokerage license, and the freight brokerage must be a completely separate entity from the carrier.
When a driver gets to the destination to pick-up freight, the freight broker must ensure that the driver is with the same trucking company as arranged on the BOL. A broker can never appear on the BOL as the carrier. If there is a discrepancy, the shipper or broker must create a new BOL and identify the driver and carrier.
The FMCSA’s rules detail what is acceptable and unacceptable in the relationship of carriers and brokers. The rules provide shippers peace-of-mind that the carrier on the bill of lading will be the same one that hauls their freight.
Consequences of An Inaccurate Bill of Lading
- The product doesn’t make it to the destination.
- Shipper loses the right to limit liability.
- Losing P&I cover.
- Loss of the right to indemnity from the charterer.
Common Mistakes Shippers Make While Completing BOL
- Not describing the freight correctly.
Be thorough in your description of the freight.
- Not being specific enough on freight and product count.
You must specify the number of containers, and sometimes you have to specify the number of goods in each container. Be sure to clarify items versus pallets, and so on.
- Not identifying hazardous materials.
If you deal with hazardous materials, be sure to take responsibility for shipping the product safely. Do research to learn if you have hazardous materials, and properly label the BOL.
- Not communicating the carrier requirements for the shipment.
Make sure you are providing the information required. Ask, if you have to, and plan ahead so that you can avoid expensive errors.
- Not referencing the correct contact numbers or service numbers.
Include the service contract number in the paperwork. BOLs are evidence of carriage, so if terms differ, it can cost you money. Make sure your contact information is correct in case questions arise during the transport.
- Not completing the BOL.
Double check that you fill out all required fields properly.
- Not understanding the terms on the BOL.
Read through the document and make sure you understand what you are responsible for.
How To Keep a Consistent and Accurate Bill of Lading?
Given the importance of this shipping document, the information must be filled out accurately every time. Use the same bill of lading form consistently, then you will become familiar with the information you need. It’s helpful to refer to a transportation management system (TMS). Eliminate risks by quickly and easily filling out your BOL online. Using a TMS, you need to fill in all fields which decreases the chance of error. And of course, always double check the information before sending the BOL.