Your bill of lading (BOL) is the most important part of your freight shipping. This applies to Less-Than-Truckload (LTL) or full truckload shipping. It applies to intermodal shipping or volume shipping quotes. It's everything. It's all of it. It's really important to get it right, so let's talk about your bill of lading.
What is a Bill of Lading?
A bill of lading is a document given by the shipper to the carrier at the time of pickup. It includes all the relevant information of the shipment, including but not limited to: pickup and delivery addresses, contact information, total weight, piece count, freight class, NMFC code, additional services, special instructions, commodity description, freight dimensions, billing party information, shipping/purchase order numbers, and much more.
See? It's a lot of stuff. Now, let's break it down a bit.
To “lade” means to load cargo on the ship or vessel.
Hence, a bill of lading is the receipt of the cargo laden on the ship issued by the carrier to the shipper. Since the carrier agreed to move the freight that the shipper needs delivered, it is a legally binding document that serves as evidence of their contract.
In it, you’ll see the following details:
- Names and addresses of both the shipper and receiver (consignee) and both should be easily readable in the document.
- Purchase orders or references numbers that are required for pickup or accepted upon delivery.
- Special instructions for the carrier that may be needed to ensure the integrity of the package.
- Date of pickup that the consignee can expect the goods to arrive.
- Description of items like the quantity of goods, dimensions and weight, information about the material.
- Packaging type i.e. cartons, crates, pallets or drums during shipping.
- NMFC code that corresponds to the freight class of shipment according to its density, ease of handling, liability, and value.
- Dept. Of Transportation hazardous material destination whereby hazardous items must be disclosed and which handling measures are necessary.
What MUST be on the BOL?
There are a few things that must be on the BOL. First, the delivery address. How else is the carrier going to know where to take the freight? Next, the total weight and count of the shipment. You also must include the commodity a.k.a. what exactly are you shipping?
Finally, you'll need the billing party information a.k.a. who's paying for this shipment once it's delivered?
These are hardly the only things that should be on a bill of lading, but at the absolute minimum, these things must be notated on the BOL or else the freight probably won't be picked up, and you could get charged a dry run by the carrier. If your shipment is LTL, then you'll also need the freight class of the shipment.
Here at FreightPros, we provide our LTL customers with their own customized BOLs using our transportation management system. When moving full truckload freight it's more common for the shipper to provide their own bill of lading, but our team can always supply one if necessary. Additionally, a truckload BOL will also require pallet counts and signatures.
Differences between the Freight Bill and the Bill of Lading
A freight bill mainly supports the bill of lading by providing financial information about the shipment as well as clarifying other details in the bill of lading.
It is what accountants tend to look at for accounting, financing, and documentation purposes. Others who are interested in a more detailed account of the shipment process also look at the freight bill.
Both are similar but there are key differences.
A bill of lading is legally binding, while a freight bill isn’t a document of service level agreement. The former can be used to settle disputes between the shipper and the carrier while the latter isn’t usually considered as evidence.
The freight bill also contains information that the bill of lading doesn’t, like information or stipulation that support the details found in the bill of lading. For example, the bill of lading will only specify the date and location a shipment is transferred but information about additional costs incurred during transport is found in the freight bill.
What is Consignee of the Bill of Lading?
The consignee is the person entitled to receive the shipment from the carrier and the type of bill of lading dictates how the goods are transferred.
A straight bill of lading identifies the consignee as the actual person and depending on the laws of the destination country, he/she may not be required to show the original bill when claiming the goods. And more often than not, the consignee has to make an advance payment first before they can receive the goods.
A negotiable bill of lading states the consignee as a named party pre-determined either by the carrier, a bank, the importer of goods, etc. The consignee usually pays through credit or cash against documents.
A bearer bill of lading states that the consignee is the person who possesses the original bill of lading and can be negotiated by physical delivery.
Bill of Lading Types and Examples
There are several kinds of bill of lading used in different situations but is primarily categorized according to its basis of execution and method of operation.
Basis of execution
- Straight bill of lading
The cargo is consigned to one specific person and neither the endorsee nor the endorsee is prioritized when claiming ownership of the delivery. Also known as a non-negotiable bill of lading, this type is often used for military purposes.
- Open bill of lading
The cargo can be transferred from one consignee to another. Also known as a negotiable bill of lading, the goods can be transferred multiple times as long as there is the consignee’s signature.
- Bearer bill of lading
The cargo is delivered to those whoever possesses the bill of lading. The consignee may be unspecified originally or endorsed as blank. This type is used for bulk shipments that are released in smaller quantities.
- Order bill of lading
The cargo is only delivered to the bonafide holder of the bill, as determined by the shipper or consignee's order. To ensure the safety of delivery, an agent who makes delivery orders must verify the bill. Also considered as a negotiable bill of lading, it is the most used type in the world.
Method of operation
- Received for shipment bill of lading
The bill is sent to the carrier by an agent or middleman. This confirms that the goods have been received but not yet laden on to the ship.
- Shipped bill of lading
It is issued when the cargo is onboard the vessel and binds the shipowner to the carrier directly.
- Clean bill of lading
The bill states that the cargo is in good condition aboard the vessel and cannot explicitly declare a defective condition of the packaging and/or the goods inside.
- Through bill of lading
A legal document that allows the cargo to be directly delivered from one location to another. It allows the shipment to pass domestic and international borders because it serves as a contract of carriage and receipt of the cargo.
- Combined transport bill of lading
The bill states that the cargo is transported by multiple modes i.e. by land, sea, or air.
- Dirty bill of lading
The bill has a clause where the shipowner can declare the condition of the cargo to be “dirty” when he finds out that there is broken cargo, incorrect quantity of goods specified, significant damage in the packaging, etc.
Why the Bill of Lading is important in Freight Shipping?
Business owners — of both offline and online enterprises — benefit from having a copy of the bill of lading because they know when to release the product to the market and anticipate their profits. Depending on the seasonality and quantity of their order, they can secure higher profits from increased demand in their respective markets.
And should their shipment arrive in conditions they didn’t expect, they can present the bill of lading as evidence of the contract of carriage. Since the bill of lading also includes the terms and conditions on how their cargo is to be transported, they exercise the right to demand what is rightfully theirs.
Check out our Freight Paper, The Importance of Using the Correct BOL, for more information on the bill of lading, and read our Beginner's Guide to Freight Shipping while you're at it. It will get you set up with your shipping.