Understanding the Bill of Lading

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A bill of lading (BOL) is arguably one of the most important documents involved in the shipment of goods. During medieval times, when merchants needed a way to track the condition of goods and where and when they were loaded, the idea of the BOL was born. As trade and mercantilism grew, this document also began to serve as the title of goods and then further evolved into the BOL that is used today for shipping.

A BOL is legally binding, and it includes all of the information that is needed to process a shipment of goods and invoice it. A BOL must be filled out and given to the shipper when the goods are picked up, and then it must be given to the consignee upon delivery. If a carrier is picking up goods at more than one location, a BOL needs to be issued and signed by the carrier for each pickup. These things should be included on the BOL:

• Shipper’s name and address
• Receiver’s (consignee’s) name and address
• Special instructions for delivery
• Date of shipment
• Number of shipping units
• Type of packaging (includes cartons, pallets, skids and drums)
• A note signifying that the goods are hazardous (special shipment rules may apply in your province for certain hazardous materials)
• A description of the goods
• Freight classification of the goods being shipped
• Weight of the shipment
• Declared value of the shipment

Purpose of the BOL

The BOL has three purposes: It serves as “evidence of contract of carriage,” as the “receipt of goods” and as the “document of title to the goods.”

1. Evidence of Contract of Carriage: When a buyer places an order with a seller, they either discussed the transaction verbally or in writing. A contract between the shipper and carrier is made when the shipper books the carrier to bring the shipment of goods from point A to point B. The BOL serves as the evidence of this contract between the shipper and the carrier.
2. Receipt of Goods: When the shipment of goods is delivered to the carrier from the shipper, a BOL is given to the carrier. It serves as proof that the shipment of goods arrived safe and intact.
3. Document of Title to the Goods: When the BOL is in the hands of the carrier, it gives the carrier responsibility of the goods or the right to transfer the goods on to someone else. Essentially, the carrier is in possession of the “title” to the goods because of the BOL.

Types of BOL

There are multiple types of a BOL.

1. A straight BOL is given to a named consignee and becomes non-transferable. A shipment of goods can only be given to that named consignee and only when all original bills that were issued are surrendered to the shipper.
2. A seaway BOL is generally issued during inter-company shipments; when two different companies are not required to negotiate for the release of the cargo; or when the shipper is not required to submit the original BOL to anyone in order to receive payment.
3. A negotiable BOL may be consigned and labelled as “TO ORDER,” “TO ORDER OF SHIPPER,” or “TO ORDER OF XYZ BANK.” This kind of BOL is very important because it is used as a negotiating tool for payments between a buyer and seller. It also contains a “Terms and Conditions” section on the back of the BOL.

Risks of an Inaccurate or Missing Bill of Lading

Not filling out a BOL or having an incorrectly filled out BOL can cause a breakdown in the transportation of the goods, and they may never be received by the intended recipient. Additionally, you can open yourself up to claims of damage.

Because the BOL is an indication that the shipment of goods is safe and intact, if the consignee receives the goods in a damaged state, the consignee can make a claim of damage against the carrier. If the information on the BOL is not accurate, and no one documented when the goods became “damaged,” you may not get your full freight claim paid because the necessary information that would allow you to recover the entire cost of damage is missing. You may also:

• Lose the right to limit liability
• Lose your protection and indemnity coverage
• Lose your right of indemnity from the charterer
• Be criminally prosecuted

How to Ensure a Correct BOL

Here are some steps you can take to always ensure your BOL is correct:

1. Use a transportation management system (TMS) and hire a third-party logistics provider. Using a TMS helps you easily fill out data entry points that are needed on a BOL. It also allows you to keep documents on file, email them or print them.
2. Be consistent with your BOL. There are many different formats of BOLs to use—choose one and stick with it so that you, your consignees and your drivers become familiar with your BOL.
3. Double- and triple-check all of the information on the BOL every time new information is added.

For more best practices, or to find out how to reduce your trucking insurance costs call CMB at 780.424.2727 or click here to get a quote.