What is a Bill of Lading?

Whether you’re a newcomer to the shipping business or a seasoned professional, you’ll need to understand the intricacies of bills of lading and why this document is so critical to international trade. A bill of lading is a legal document used in the shipping of goods that outlines the contents of the shipment, and the parties involved in the transaction, and ensures that the carrier delivers the shipment to the specified party in the agreed-upon condition. 

If you need assistance with a bill of lading, it’s best to get in touch with a professional. EES Shipping in Perth, Western Australia, offers total logistics solutions, including sea freight, air freight, warehousing, customs brokerage, and import and export services. In this article, we’ll cover everything you need to know about a bill of lading, including its definition, types, and why the accuracy of the information included is so crucial. 

Bill of Lading Definition

A bill of lading (BoL) is a legally binding document issued by the carrier of goods to the shipper, or the consignee, as proof of receipt of cargo for shipment. In international trade, a BoL functions as a receipt for the shipped goods, a contract of carriage, and a document of title (or proof of ownership). A BoL also provides evidence of the contractual agreement between the shipper and the carrier, while establishing and recording the terms and conditions for the transportation of goods. Simply put, a BoL is an agreement that details the goods being transported, the terms and conditions of the carriage, as well as the rights and responsibilities of the shipper, carrier, and consignee.

Interestingly, many people are confused by this important document purely because of its name. “Lading” is an obsolete term defined by the Oxford English Dictionary as the action of loading a ship with cargo. If you remember what it means, it’s a lot less confusing. It’s also important to note that you’ll need a bill of lading whether you’re shipping goods by sea, land, or air. 

Important Bill of Lading Terms

Why Do You Need a Bill of Lading?

A BoL is essential for various reasons. Some of the primary purposes of a bill of lading include:

1. Proof of contract: The BoL establishes a legal agreement between the shipper and the carrier, ensuring that all involved parties are aware of their respective responsibilities which helps prevent misunderstandings.
2. Receipt for shipped goods: The BoL serves as a receipt for the goods shipped, which acknowledges that the carrier has received the cargo in good condition. In case of any discrepancies or damages, the BoL can be used to settle disputes between the shipper and the carrier.
3. Transfer of ownership: One of the most significant functions of a BoL is its ability to act as a document of title to the goods, allowing the transfer of ownership from the shipper to the consignee or the buyer. This transfer takes place when the consignee or buyer endorses the BoL and presents it to the carrier to claim the shipment.
4. Evidence for insurance claims: In the event of damage or loss in transit, the BoL serves as evidence for insurance claims. The BoL contains detailed information about the shipment and the condition of the goods when handed over to the carrier, as well as the agreed-upon compensation for any losses or damage that might occur.

Bills of Lading vs. Invoices

While both bills of lading and invoices play a vital role in international trade, it’s important to distinguish between the two documents. The primary differences lie in their purpose and the parties involved.

An invoice is a commercial document issued by the seller to the buyer, detailing the goods or services being sold and their prices. It serves as a request for payment and indicates the terms of the sale (such as delivery date, shipping method, payment terms, etc.). Invoices are used to record transactions for accounting and tax purposes and to assist the buyer with customs clearance.

On the other hand, a BoL is a document issued by the carrier to the shipper, indicating the terms and conditions of the shipment of goods. The primary function of the BoL is to act as a contract, a receipt, and a document of title for the goods being transported. While a BoL may contain information about the goods’ price, it does not serve as a request for payment or an accounting record.

Who Needs a Bill of Lading?

Any person or entity involved in the transportation of goods, whether by sea, air, or land, needs a Bill of Lading. This includes:

1. Shippers: The individual or company that owns or supplies the goods being shipped, which could be the seller, the buyer, or any third party authorised to handle the shipment.
2. Carriers: The organisation responsible for transporting the goods, such as shipping lines (or shipping companies), freight forwarders, and other transport service providers.
3. Consignees: The entity authorised to receive the goods at the destination, usually the buyer, or the buyer’s designated representative.
4. Customs authorities: Both the origin and destination countries’ customs authorities need the BoL to facilitate the clearance process and ensure that the shipment complies with international trade regulations.
5. Insurance companies: Insurance providers rely on the BoL to process insurance claims in the event of damage, loss, or theft of the goods in transit.

Types of Bills of Lading

The requirements and usage of a BoL vary depending on the shipment as well as the parties involved. As a result, there are many different types of bills of lading, each with its own specific purpose. 

One of the primary distinctions between bills of lading is whether they are negotiable, a factor that stipulates whether or not the ownership of goods is transferable. Negotiable and non-negotiable BoLs serve different purposes, so choosing the appropriate one for a shipment will help to ensure smooth and efficient handling of the cargo.  

Negotiable Bill of Lading

A negotiable bill of lading, also referred to as an order bill of lading, is a BoL that permits the transfer of ownership of goods during transit. The holder of the original bill of lading can endorse it to another party, which grants the new holder ownership of the shipment. Negotiable bills are preferred when the buyer may change in transit, such as in international trade transactions, where buyers and sellers might change several times before the goods are received.

It’s important to note that the carrier is obligated to deliver the goods to the holder of the original negotiable BoL, giving that party control and ownership of the shipment.

Non-Negotiable Bill of Lading

A non-negotiable bill of lading, such as a straight bill of lading, is a non-transferable BoL which does not allow the consignee to transfer ownership of the goods to another party. This means that the named consignee is the only entity authorised to receive the shipment upon arrival at the destination port. Non-negotiable BoLs are usually used when there’s no need to transfer ownership of the shipment during transit, such as when the consignee is the end user or when the shipper and consignee are the same individual or company.

Commonly Used Bills of Lading

Note: Some ports, distribution centres, and countries may not accept a telex release or express BoL. 

How to Get a Bill of Lading

Freight Forwarder or Third-Party Logistics Provider

One of the easiest ways to get a BoL is through your freight forwarder or third-party logistics provider (3PL). These providers have established working relationships with carriers and can help you get a BoL with everything you need. They may also offer online tools and templates to make the process more efficient.

Directly from the Carrier 

This is a very common practice. Carriers often have standard forms available to download from their websites. You can complete these forms with the necessary information and submit them electronically. It’s important to note that even though this option offers more control over the process, you may also be responsible for negotiating shipping rates and terms with the carrier.

International Chamber of Commerce Templates

The International Chamber of Commerce (ICC) offers standard templates for BoLs. These basic templates are available for purchase from the ICC’s retail website. Notably, the ICC’s website only offers templates for straight BoLs. 

Information to Include in a Bill of Lading

To avoid delays and disputes, your BoL must be completed as accurately as possible. Be sure to include the following information:

1. Shipper and consignee details: Provide the full names, addresses, and contact details of both the shipper and the consignee. The carrier will use this information to ensure proper handling and delivery of the goods.
2. Carrier details: Include the carrier’s name and address, as well as any relevant contact information (i.e. phone number and email address). 
3. Shipping terms (Incoterms): Clearly outline the terms of the contract using International Commercial Terms (Incoterms) to avoid misunderstandings. Incoterms specify who is responsible for the cost and risk at each stage of the shipping process, from loading the goods on the vessel to final delivery.
4. Description of goods: This needs to be as specific as possible. Include details such as quantity, weight, handling unit (e.g. cartons, rolls, etc.), dimensions, and package type. You will also need to provide any necessary details related to the contents, including a Harmonised System (HS) code, which classifies products for international trade, and whether or not your shipment contains hazardous materials. 
5. Special instructions: Include any special handling or transportation requirements in your BoL, such as temperature-controlled transport, hazardous materials, or fragile items.
6. BoL number: This is a unique identification number that can be used to track your shipment. 
7. Freight charges: Include details about whether the freight is prepaid, payment is to be collected upon delivery, or paid by a third party. You may also need to include freight charges and surcharges, as well as any additional, agreed-upon fees.
8. Date of issue: This is the date when the carrier receives the goods and issues the BoL. It is essential for calculating free time (the time allowed for cargo unloading at the destination) and other time-sensitive shipping factors.

You should always consult with your freight forwarder, 3PL, or carrier to help you navigate the various BoL requirements. Remember to always double-check all BoL details. And don’t be afraid to ask a professional if you’re not sure about something. 

Why Your BoL Needs to be Accurate

Let’s explore some of the key reasons your BoL must be accurate:

• Avoid legal disputes: As the BoL serves as a legally binding agreement between the shipper and the carrier, an inaccurate BoL can lead to misunderstandings, conflicts, and unnecessary litigation. 
• Smooth shipping process: As a contract and receipt for the goods being shipped, the BoL ensures that the carrier handles your shipment in an agreed-upon manner. Accurate details will assist the carrier in transporting your goods without unnecessary delays or frustrating complications.
• Streamline customs clearance: Customs authorities rely on the information provided in the BoL to determine the duties and taxes for the shipment. An accurate BoL can prevent delays, added costs, and confiscation of goods as discrepancies and incorrect information may lead to suspicions of fraud or smuggling.

At EES Shipping in Perth, WA, we are dedicated to providing our clients with the best possible solutions to all of their logistics needs. We also understand that every shipment is different, which is why we offer tailor-made solutions catered to each individual client. Contact us today for more information. 

Bill of Lading FAQs

What are the different types of BoL?

Other than the BoLs mentioned in this article, some BoLs that you may come across include:

• Straight or consigned BoL: Issued to a specific consignee and is non-negotiable.
• Order BoL: Easily transferable, this document can be consigned or assigned to another party through endorsement.
• Master BoL: Issued by a carrier to a freight forwarder, who combines multiple shipments under one contract.
• House BoL: Issued by a freight forwarder to each individual shipper whose goods are combined in the consolidated shipment.
• Clean BoL: Indicates that the goods have been received in good condition, without any visible damage.
• Claused or Dirty BoL: Notes any damage or discrepancies with the shipment upon acceptance by the carrier.

How can I avoid common BoL mistakes?

Common BoL mistakes include incomplete or inaccurate descriptions, leaving out important documentation or references, and not specifying shipment terms. To avoid these mistakes, cross-check all information, provide clear descriptions, and use standardised shipping terminology, such as the Incoterms rules. It’s also a good idea to communicate with your carriers and freight forwarders openly to ensure smooth operations and avoid misunderstandings.

Can I make changes to a BoL after it has been issued?

It’s generally quite difficult to make changes to a BoL after it has been issued, particularly if the carrier has already accepted the goods for transport. In some instances, it may be possible to submit a BoL amendment request to the carrier, but additional fees and delays will usually apply. 

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