What is a Bill of Lading?
Here are excerpts from an informative blog
post by Adam Robinson from Cerasis. Adam has a series of related articles you can browse at http://cerasis.com/blog
What is a
Bill of Lading Form and Why is it Important?
A bill of lading is one of the most
important documents in the shipping industry. The bill of lading is a
legally binding document providing the driver and the carrier all the details
needed to process the freight shipment and invoice it correctly.
A bill of lading must be completed and
provided to the shipper when your freight is to be picked up. The following is
the information that must be included in the bill of lading:
- Shipper’s and receiver’s
(a.k.a) consignee’s names and complete addresses.
- PO or special account numbers
used between businesses for order tracking.
- Special instructions for the
carrier to ensure prompt delivery.
- The date of the shipment.
- The number of shipping units.
- Type of packaging, including
cartons, pallets, skids and drums.
- A note if commodity is a
Department of Transportation hazardous material. Special rules and
requirements apply when you are shipping hazardous materials.
- A description of the items
being shipped, include the material of manufacture and common name.
- The NMFC freight
classification for
the items being shipped.
- The exact weight of the
shipment. If multiple commodities are being shipped, then the weight of
each commodity is listed separately.
- The declared value of the goods
being shipped.
Added Notes for those on the
International Side of things with a Bill of Lading
Most of our content focuses on North
American understandings of terms and documents related to freight,
transportation, and logistics. However, we do have some readers who are shipping
modes such as ocean, rail, and air. Thank you to Peter Dawson, a highly respected Supply Chain consultant,
we want to also include some other notes as it relates to the bill of lading.
The following acronyms can also include
details around the bill of lading:
- OBL: Ocean bill of lading
(Type of bills can be cut too)
- AWB: Airway bill of Lading
- ProBill: In use for
GTS ( Ground Transport service) mainly for Truck
Generically a BOL is a contact of
carriage, but even with various geographic locations, the terms that we
use in North America are different to other places. For example, an OBL
(to some) is an ocean bill of lading; where as to steam ship lines this is
the ORIGINAL BILL OF LADING, wich is needed to be presented for the goods
to be moved off the Wharf to the warehouse.
Importance of the Bill of Lading Form
As noted previously, the bill of lading
is a legal contract and can be used in litigation. That in of itself then says,
and must be understood by those using a bill of lading form in the process of
shipping freight, that the bill of lading accuracy and use is one of the most
important things you can do to run your logistics department effectively.
A Bill of Lading has 3 basic purposes
or roles:
- Evidence of Contract of Carriage
- Receipt of Goods and
- Document of Title
Evidence of
Contract of Carriage
Many people think that a bill of lading
is a contract between the Seller and the Buyer and many also think that a bill
of lading is a contract of carriage between the Carrier and Shipper. However,
this is not entirely correct.
The contract between a buyer and seller
was already established when the buyer placed the order with the seller and
they both discussed and agreed (verbally or in writing) the what, where, when,
how and how much of the transaction in detail.
The contract between a shipper and the
carrier was already established when the shipper or their third
party logistics provider made a booking with the carrier
to carry the freight from A to B.
The bill of lading is the EVIDENCE of
the contract of carriage entered into between the “Carrier” and the “Shipper or
Freight Owner” in order to carry out the transportation of the freight as per
the contract between the buyer and the seller.
Receipt of
Goods
A bill of lading is issued by the
carrier or their third party logistics provider to the shipper or 3PL in
exchange for the receipt of the freight. The issuance of the bill of lading is
proof that the carrier has received the goods from the shipper or their 3PL in
apparent good order and condition, as handed over by the shipper.
Document of
Title
Technically it means that whoever is
the holder of the bill of lading has the title to the goods (rights to claim
the goods). However, this title varies according to the way in which the bill
of lading has been consigned, which we will discuss in detail below.
Types of Bills of Lading
There are two basic types of bills of
lading. A straight bill of lading is one in which the goods are consigned to a
designated party. An order bill is one in which the goods are consigned to the
order of a named party. This distinction is important in determining whether a
bill of lading is negotiable (capable of transferring title to the goods
covered under it by its delivery or endorsement). If its terms provide that the
freight is to be delivered to the bearer (or possessor) of the bill, to the
order of a named party, or, as recognized in overseas trade, to a named person
or assigns, a bill, as a document of title, is negotiable. In contrast, a
straight bill is not negotiable.
State laws, which often include
provisions from the Uniform
Commercial Code, regulate the duties and liabilities
imposed by bills of lading covering goods shipped within state boundaries.
Federal law, embodied in the Interstate
Commerce Act (49 U.S.C. [1976 Ed.] § 1 et
seq.) apply to bills of lading covering goods traveling in interstate commerce.
It is important to ensure that,
when signing the bill of lading, the description of the goods in the bill
of lading is accurate as well as all of the information in the bullet
points above. If the bill of lading is inaccurate, with errors, or if not
use at all, there are consequences that could occur.
Consequence of Not Used or Inaccurate Bill of Lading
One of the most costly and obvious
consequences of not using or filling out a bill of lading inaccurately is that
you most likely won’t get your product to your desired recipient, but the main
consequences are:
- Exposure to Claims: For example, if the bill of lading indicates
that the goods were loaded in good order and condition, but
the consignee receives them at the destination in a
damaged condition, the consignee will be entitled to make a
claim for the damage against the bill of lading carrier. Thus,
if the information is not accurate, it will be difficult to get your full freight claim
paid as you
won’t have the right information to recover the cost of damage. Another
example might be that the bill of lading said there were 100 boxes but
only 90 arrived. The consignee will be entitled to make a claim
against the bill of lading carrier for the shortage.
- Loss of the
right to limit liability
- Loss of P&I cover
- Loss of the
right of indemnity from the charterer
- Criminal
prosecution
Clearly, as you can see from the points
above, that incorrectly using a bill of lading can mean severe consequences. So
how can you ensure you are compliant?
Solutions to Ensure Your Bill of Lading is Correct
- Employ a transportation management system and the
services of a third party logistics provider: Sometimes, I wonder, how do
manufacturers and distributors stay competitive in their core business
with all of these details and potential risks that are out there in the
logistics and freight world? Using a Transportation Management System,
such as the Cerasis Rater, takes all the data entry
points you must have in a bill of lading and has them as easily filled out
guided fills to decrease the chance of error. The TMS also stores the
documents, allows you to email them, and print them for ease of use!
Additionally, if you have a provider, like Cerasis, that includes freight
claims services for you, that bill of lading is then easily used to make
claims easier.
- Use a Consistent and Standard Bill of Lading: There are many online bills
of lading forms you can download from the internet, but once you choose
one, make sure you use the same one so you are familiar and so are your
consignees.
- Triple Check Before Signing: BEFORE you sign, the easiest
thing you can do is triple check all of the information that needs to be
in the bill of lading (as outlined above) is accurate. It’s YOUR signature
on a LEGAL document, so it’s VITAL to check!
Moving forward,
Jeff Roach
