What is a bill of lading?
The bill of lading (BOL) is a legally required document that must be completed before a freight shipment is hauled. A bill of lading protects both the carrier and the shipper. The document contains detailed information on the type, quantity and destination of the goods being carried. It is issued by a carrier and given to the shipper of goods.
The BOL serves three essential purposes:
- It is a receipt for the goods shipped
- It evidences 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 and what terms are defined for delivery.
The bill of lading should be provided to the carrier at pick-up or arrival and will be delivered 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 information must be included on the bill of lading?
- 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 item being shipped, include the material of manufacture and common name.
- PO or special account numbers used between businesses for order tracking.
- Special instructions for the carrier.
- A note if the freight is a Department of Transportation hazardous material. (Special rules and requirements apply when shipping hazardous material.)
- The declared value of the freight being shipped.
3 major roles of a bill of lading form:
As a 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.
As evidence of the contract between carrier and shipper
As evidence of contract, a BOL is the contract of carriage entered into between the carrier and shipper in order to transport the freight as agreed upon by the buyer and seller.
As a 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 the goods to be transferred to another.
What is the Difference between a BOL and Freight Bill?
The bill of lading and freight bill are similar documents; however they should not be confused. 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 show room for improvement in costs, solutions and time.
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 known as 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: 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, brokers are required to post a $75,000 surety bond that guarantees payment to motor carriers receiving loads 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
- Product doesn’t make it to destination.
- Loss of the right to limit liability.
- Loss of P&I cover.
- Loss of the right to indemnity from the charterer.
Mistakes Shippers Can Avoid on 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 all required fields have been filled out 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
The information within the BOL must be clearly written or typed in the space provided. 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 are required to fill in all fields which decreases the chance of error. And of course, always double check the information before sending the BOL.
Generating the BOL with Technology
Today, most leading technology platforms or transportation management systems allow you to electronically complete the bill of lading. This not only requires less time, but it also increases accuracy as many of the fields are prepopulated based on historical data within the system. In addition, shippers, carriers and 3PLs are notified automatically if any critical data fields are missing or incomplete. .
Technology makes filling out the BOL easy, convenient and quick. Through TMS technology, there’s less risk that the BOL will be filled out incorrectly, leaving you free of extra charges and headaches.