What is a Bill of Lading and Why is it Important?

Bill of LadingWhether you’re shipping via LTL or parcel package, using a bill of lading is vital. This legal document not only provides details about the shipment to carriers, but it also provides a paper trail of information that protects the rights of the shipper. While several freight companies have streamlined their operations to include a computer or electronic bills of lading or shipping invoices, they still provide several important functions.

Noted below we’ll outline what a bill of lading is, and why it’s so important to use – regardless of your type of shipping method.

What is a Bill of Lading?

A bill of lading is a document or electronic invoice that is completed by a carrier and provided to the shipper when freight is picked up for delivery. There are several, individual components that are required for a bill of lading that needs to be filled out correctly.

• The names and complete address of the shipper and receiver. This is often regarded as the consignee information.
• A purchase order or invoice control number. This is used as a permanent record for control purposes.
• The date of the shipment. While it might seem rudimentary, noting the exact date and time of the shipment can be used as evidence in a legal case. It also serves as a notification of liability for a carrier or third-party logistics providers.
• Special instructions. While the process of moving freight from a point of origin to a destination seems basic, sometimes special handling instructions are needed. The bill of lading serves as a platform for the shipper and carrier to openly document any special requirements for shipping a commodity. Some examples of this would include cold storage, special tracking, or multiple stop shipments.
• Shipping specifics. In this section, the shipper will verify with the carrier the type of packaging (such as cartons, skids, pallets, drums or containers), the quantity of packaging or shipment units, the amount of space it takes in the shipping container or platform, and the dimensions.
• Description of the commodities. It’s important for the shipment to be described in the bill of lading for identification purposes.
• Notification of special handling. Any bill of lading must also disclose any special handling requirements such as hazardous materials.
• Declared Value. DV is used for liability insurance. It notes the ‘declared value’ of a shipment. In most cases, the declared value is the cost of manufacturing – as opposed to retail value.

The bill of lading is typically filled out online or by the carrier, then supplied for verification to the shipper during the physical pick-up of freight. With advanced technology, more carriers are moving towards cloud-based bill of lading and invoicing, which permits both the shipper and carrier to ad critical updates to shipment details in real-time.

There are multiple types of bills of lading that are used for specific types of shipments including an OBL (Ocean bill of lading), AWB (Airway bill of lading), ProBill: (usually for ground transportation services or truck shipments).

Why is a Bill of Lading Form Important?

The first and most obvious reason why a bill of lading is important is for legal purposes. A bill of lading protects both the carrier and shipper, by documenting facts about the shipment. However, beyond the simple ‘paper trail’, a bill of lading also serves three important duties:

• Evident of Shipment or Carriage: While it’s often assumed that a BOL is simply a contract between the seller and buyer, this isn’t completely accurate. The contract exists when the order is placed – not shipped. The bill of lading provides evidence that the previously agreed-upon purchase is being transmitted as agreed upon.
• Receipt of Goods: A BOL is a document that verifies that goods have been received by an agent, carrier, 3PL or others from one party. When this occurs, in most cases, the organization who takes possession of the commodity is responsible for its condition. The BOL provides a paper trail of evidence to support freight damage claims.
• Title Documentation: This essentially means that whoever holds the bill of lading has the title for possession or ownership of the goods. This is why the shipper and recipient are both noted on the bill of lading.

Using a bill of lading is critical not only to protect the assets of a shipper but also provides specifics for a carrier to ensure safe and efficient delivery of goods. If you’re curious about the best practices of using a bill of lading, a professional 3PL or third-party logistics provider is an excellent source.