Why a Bill of Lading Is So Important to Your Shipment
Importance of Bill of Lading
Experienced international shippers will be aware of the amount of documentation required for shipments to gain customs clearance. With rules and regulations to follow, no consignment can leave port without the correct paperwork.
Although the amount of paperwork can seem daunting, each document serves a specific purpose and is designed to facilitate the shipping process for sellers, carriers, and buyers.
One key document required if you are shipping goods overland or by ocean is a bill of lading. Below, we outline why this is such an important shipping form, highlighting the different types of bills of lading and the purposes they serve.
If you are seeking information about the documentation required for air freight shipments, please see our airway bill article. For more information about customs clearance, please read our customs guidance article.
What Is a Bill of Lading?
A bill of lading is a written statement outlining the nature and quantity of goods to be shipped and the destination of the shipment. You’re unlikely to encounter the word ‘lading’ outside of the shipping industry. It’s derived from the term ‘lade’. This is an old-fashioned word that means to load cargo onto a vessel or other type of carrier (a truck, for example).
What Purpose Does a Bill of Lading Serve?
A bill of lading is a legally-binding document that helps the seller and carrier ensure the smooth movement of freight across different territories by land and/or sea. All consignments, whether carried by ocean or over land, must be accompanied by an accurately completed, signed, and dated bill of lading.
During your interactions with freight forwarders or shipping agents, you may see a bill of lading referred to as BL, B/L, or BoL. These are just shorter ways of saying the same thing.
Why Is a Bill of Lading Important?
A bill of lading is important because it serves multiple purposes:
A Contract Between the Carrier and Consignee
A bill of lading is a contract of carriage (a goods transportation contract) between the carrier and consignee for ocean or overland imports and exports.
The BL contains the terms and conditions of transportation. It provides evidence that the carrier (the company that is shipping the goods) has agreed to transport the freight to its final destination as per the agreement between the seller and buyer.
A Receipt for Shipped Goods
At the point of origin, a bill of lading confirms that the seller has transferred the freight to the carrier in good condition. The carrier confirms receipt of the goods on board their cargo vessel in optimum condition as per contractual terms.
A Document of Title
When a consignment reaches its destination, the bill of lading acts as a title to the goods. Whoever is receiving the goods must show the bill to secure the release of the freight from the carrier. Think of the BL as the keys to a bank security deposit box. Access to the contents can only be gained by producing the bill of lading.
Other Purposes Served by a BL:
- The unique bill of lading number can be used to track the shipment
- The BL must be submitted when making an insurance claim
- A BL is key to the letter of credit process
Who Issues a Bill of Lading?
A bill of lading can be issued by cargo agents, freight forwarders, and other NVOCC (Non-vessel owning common carrier) intermediaries. Most forwarders create their own bill of lading forms with a unique layout and design. But all BLs contain the same information (more about that later).
Different Kinds of Bill of Lading
There are many different bill-of-lading variants. Knowing which type relates to your shipment will help to prevent problems and misunderstandings during shipping.
All of the following can affect the type of Bill of Lading you need:
- The issuer of the BL
- The purpose of the document
- The relationship between buyer and seller
- The protection it offers to the buyer
If you are using a freight forwarder or other shipping intermediary to manage your shipment, there will be two sets of bills of lading. One set is called the master bill of lading, and the other is the house bill of lading.
- Master Bill of Lading
The master bill of lading is issued by the shipping carrier to the freight forwarder, NVOCC, or shipping agent. It acts as the freight forwarder’s contract of carriage and receipt of delivery to the carrier. Forwarders will share the master BL reference number with the shipper, since it can be used to track the consignment.
- House Bill of Lading
A house BL is issued by the NVOCC or freight forwarder to the exporter of the goods after the exporter receives the freight from the shipper. The forwarder will look to the shipper to confirm vital information contained on this BL, such as the weight and dimensions of the freight.
Other Types of Bills of Lading
Original Bill of Lading
The original bill of lading is typically issued in a set of three. One copy must be presented at the destination by the consignee for the carrier to release the cargo. The seller needs to keep control of the full set of original Bills of Lading until one of the following conditions is met:
- The seller receives payment
- The seller accepts a bill of exchange
- The seller accepts an assurance of payment
Telex Release Bill of Lading
This is a digitized version of the original bill of lading that brings speed and convenience to the shipping and customs-clearance process. A telex release can be presented at the destination by the consignee to secure the release of the freight instead of using a physical BL.
Hard copies will still be issued and kept by the shipper, but allowing the buyer to use a telex release to access the goods speeds up the process. There’s no need for the shipper to pay a courier to transport the original bills of lading to the importer of the goods. Instead, once the seller receives payment from the buyer, the shipper sends the set of original BLs to the carrier and requests a telex release.
Express Bill of Lading
(Also known as an express release, express BL, sea waybill, or straight bill of lading).
An express bill of lading is a digitized BL that eliminates the need for hard copies of the bill to be issued. Its efficiency is unrivaled. It avoids the costs that would otherwise be incurred in issuing or couriering the original bill of lading. It also enables cargo to be released to the consignee as soon as it reaches its destination.
However, given the less stringent security protocols, Express BLs should only be used by shippers and consignees who have a trusting relationship or are part of the same company.
Switch Bill of Lading
As the name suggests, a switch bill of lading replaces the original bills of lading. Issued by the carrier, switch bills follow the same format and serve the same purpose as the originals. They are needed if:
- A change is required to the port of discharge. This could be because the freight has been re-sold during transit (a high-sea sale).
- An intermediary involved in the shipment wants to keep the identity of the supplier hidden from the buyer. It ensures that the buyer cannot approach the supplier directly in the future.
- The goods were initially shipped using separate BLs and the consignee wants to consolidate the entire shipment on one bill of lading.
- The consignment was originally shipped on one bill of lading and the buyer now wishes to ship using separate bills.
How Do Negotiable and Non-Negotiable Bills of Lading Differ?
A Negotiable Bill of Lading
The negotiable bill of lading provides clear instruction to deliver freight to anyone who holds a copy of the original bill of lading. That means the buyer/consignee/recipient or their agent must show an original copy of the bill of lading at the discharge port to receive the freight.
A Non-Negotiable Bill of Lading
A non-negotiable bill of lading contains fixed details of the recipient to whom the freight is to be delivered. It enables the consignee to claim the cargo simply by confirming their identity. If the identity documents match the details on the BL, the consignee can take the goods. Such bills are usually reserved for use with shipments of military cargo.
Use Of Electronic Bills of Lading
Many elements of shipping today benefit from digitization. The bill of lading is one example. Below we outline the advantages and disadvantages of using electronic bills:
Faster: An electronic bill of lading can be sent anywhere in the world instantly (assuming there’s an internet connection), facilitating faster shipping. Changes to the content of a bill can be made efficiently and cost-effectively. In certain circumstances, goods can be released to the consignee at the destination very quickly.
Cost Savings: Printing bills of lading and using couriers to transport copies to carriers and consignees is an expensive process. Digitization removes these costs from the equation.
Environmentally friendlier: As a paper-free process, an electronic bill of lading removes the need to use vital natural resources, as no printing or physical transportation of bills is required.
More Secure: Paper bills can be forged, leading to huge losses for sellers, shippers, and buyers. But a correctly prepared electronic bill of lading—while not foolproof—is far more difficult to counterfeit.
Lack of uptake: For digitization to be truly effective, all areas of the shipping industry must adapt their ways of working to accept electronic bills of lading. Currently, this is not the case and is something that will take time.
Less versatile: With paper bills, it’s fairly easy to negotiate and transfer the possession of the bill of lading. However, this is not automatically the case with electronic bills.
Security Issues: Only the most robust electronic billing systems offer protection from hackers and fraudsters. With counterfeiters using increasingly advanced methods to commit cybercrime, systems must be regularly tested and updated to ensure the highest levels of security.
An Example of a Bill of Lading
While carriers are responsible for filling in original bills of lading, it’s still good to know the information that’s required on the document, as you will have to provide some of the necessary details. The key information required includes:
- The name and address of the shipper
- The name and address of the recipient
- Purchase order and invoice numbers
- The date the freight is to be picked up
- The number of items being shipped
- The weight of the freight
- The dimensions of the freight
- Information about the type of packaging used—pallets, cartons, crates, etc.
To see a Bill of Lading template, along with other paperwork that your consignment is likely to require, please visit our handy documents list page.
Tracking Shipments Using A Bill of Lading Number
The carrier will assign each shipment a bill of lading number, which acts as a unique reference number. It can be used to track the status of the shipment.
What If The Goods Received Don’t Match the Bill-of-Lading Entries?
As a BL is a legal contract that can be used in litigation, it must be completed accurately.
If the details on a BL don’t match the goods received, the consignee can make a claim. That’s also the case if the BL shows the goods were loaded onto the vessel in good condition, but are damaged when they reach the consignee. Similarly, if the BL states the shipment contains 60 crates but only 35 arrive, the consignee has the right to claim for the shortfall.
If the consignee is not happy with the freight they receive, they are under no obligation to sign-off the bill of lading. In any case, the recipient should always inspect the freight carefully, to ensure the goods correspond with the details on the BL. Any damage, or details that contradict the entries on the BL, must be recorded in writing.
The Shipper Still Has An Important Role To Play
Freight forwarders such as Shipa Freight will take responsibility for a bill of lading. Nevertheless, shippers still have an important role to play in the process. Providing accurate information to enable the BL to be completed is critical. So too is the checking of details on the BL before shipping takes place.
Aside from the fact that it is a legal obligation, an accurate bill of lading brings efficiency to the shipping process for everyone involved, helping ensure goods are exchanged smoothly between seller and buyer.
- What Is a Bill of Lading?
- What Purpose Does a Bill of Lading Serve?
- Why Is a Bill of Lading Important?
- Who Issues a Bill of Lading?
- Different Kinds of Bill of Lading
- How Do Negotiable and Non-Negotiable Bills of Lading Differ?
- Use Of Electronic Bills of Lading
- An Example of a Bill of Lading
- Tracking Shipments Using A Bill of Lading Number
- What If The Goods Received Don’t Match the Bill-of-Lading Entries?
- The Shipper Still Has An Important Role To Play
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