by Sam Franklin | May 30, 2022 | 16 min read
What is a bill of lading?Get funded
Last updated: June 03, 2022
Those in the eCommerce or logistics business will regularly come across the term Bill of Lading. For starters, a bill of lading (BoL or BL) is a legal document that must accompany shipped products. This printed or electronic document includes details about the type, quantity, and destination of the goods being carried as well as information about the shipper, carrier, and receiver.
Table of contents
The purpose of a bill of lading
For a transaction to happen, there must first be trust between the sellers and buyers (or among the shipper, carrier, and receiver in eCommerce and logistics). There should be a clear agreement about the type, quantity, and destination of goods before a transaction takes place.
A bill of lading helps make sure that everyone is on the same page. This way, what the receiver ordered will match the products’ details stated by the shipper and carrier. The shipment will be accurately processed, and the receiver (e.g. the eCommerce business) can mark the transaction as complete because it happened according to the agreement.
Why is a bill of lading important?
Aside from proof of transaction, a bill of lading also acts as a contract between the shipper, carrier, and receiver. Before the goods are delivered, all the necessary and relevant details should be clearly defined first.
Furthermore, a bill of lading also prevents asset theft because a BL’s details should be consistent among all parties. For instance, theft or mishandling could have occurred if the quantity of the goods received didn’t match what the carrier delivered or what the shipper dispatched. And because a bill of lading is a legal document, this protects the receiver. The receiver can reject the shipment or file a legal dispute. This is one main reason why the shipper and carrier do their best to ensure the accuracy of the shipment’s details.
Who issues a bill of lading?
The carrier issues a bill of lading to the shipper. As a contract between the shipper and carrier and as a document of title, it helps protect both parties from potential financial losses and asset theft. As mentioned, a bill of lading acts as a contract which means there’s a legal obligation to be fulfilled. This statement of obligation is one of the primary functions of a bill of lading.
How many bills of lading do you need for one shipment?
Three or more bills of lading might be issued (shipper, consignee, and a third party each receive one). The number of bills of lading depends on how the cargo is transported and the agreement among the sender, carrier, and receiver. However, you should only request what's necessary because as the number of bills of lading increases, the chance for fraud and theft also increases. A wrong person might receive the goods, or the goods might be released without your knowledge.
What information is in a bill of lading?
Because a bill of lading is a contract and a legally binding document, all the relevant and necessary information should be included, such as the items’ type, quantity, exact weight, freight classification, and shipment date. A BL should also include the complete names and addresses of the shipper and receiver as well as a bill of lading number, which you can use for shipment tracking.
In addition, you should also see the items’ complete description, specific instructions for the carrier, especially when it comes to handling, and the type of packaging used. Depending on the nature of the goods, a bill of lading would also tell you whether the items are hazardous or require special handling and certification.
When is the bill of lading required?
A bill of lading must accompany the shipped products because the document acts as a contract and a transaction receipt. Whether shipped through land, sea, or air, a bill of lading is required to protect all parties involved and help ensure the accuracy of the shipment’s details.
Understanding bills of lading
Logistics, import, and export businesses often come across several different types of bill of lading (based on carrier, payment and consignee, transportation mode, and others). Knowing these helps them process shipments and prevent fraud, inconsistencies, financial losses, and legal consequences.
Types of bills of lading
1. Based on the carrier
Here there are two types: House Bill of Lading and Master Bill of Lading.
House bill of lading
Contains the BL’s usual details, such as the item’s type, quantity, weight, and destination, as well as the names and addresses of the receiver and the shipper
Issued by a freight forwarder or a non-vessel operating common carrier (NVOCC, often known as a forwarding agent)
Consignor is the actual exporter/sender/seller
Consignee is the actual importer/receiver/buyer
Master bill of lading
With BL’s usual details
Issued by the carrier or shipping line
Consignor is the actual seller’s freight forwarder or NVOCC
Consignee is the actual buyer’s freight forwarder or NVOCC
Notice that in a Master Bill of Lading, the focus is on the details of the “middle man” or intermediary (freight forwarder or NVOCC). On the other hand, a House Bill of Lading’s details focuses on the actual shippers and receivers. You might come across both of these in international shipments.
2. Based on payment and consignee
Straight bill of lading. This is a non-negotiable instrument where the consignee must receive the delivery. In a straight bill of lading, complete payment has been made in advance. It’s called a straight bill of lading because the cargo is consigned directly to the receiver or buyer. The transaction is straight or direct because the interaction is between the carrier and the original consignee.
Order bill of lading. In this type, the consignee may renounce their right to receive the delivery to another person or a third party (which is why it’s a negotiable instrument). Here, the original consignee endorses another to receive and process the cargo.
Unlike the straight bill of lading that is permanent (with permanent consignee and non-negotiable), there will be further instructions from the original consignee in an order bill of lading. In other words, there is further “order” about who will finally receive the cargo. The original consignee’s further order is usually about transferring the title or ownership of the goods to another party.
In a shipping line, an order of lading brings convenience to all the parties involved. It’s especially the case when a cargo goes through multiple ports with different time zones and practices. If the original consignee fails to receive the cargo, there could be a breach of contract. Remember that a bill of lading is a legally binding document with obligations that must be fulfilled. Just as the shipping line has an obligation to deliver the cargo according to the agreement, the consignee also has an obligation to receive the goods as stated in the contract or bill of lading.
Bearer bill of lading. This is also a negotiable instrument where the consignee can assign a third party to receive the goods. It’s called a bearer bill of lading because the “bearer” holds the document and is allowed to accept the shipment.
It’s rare to see this type of negotiable bill of lading. That’s because, in the BL, there’s no consignee assigned. This means anyone can claim the cargo as long as they bear the BL. There’s a risk of fraud and potential misuse because details on the consignee are blank.
Clean bill of lading. The carrier issues this after inspecting the goods. The shipment is considered “clean” if there was no damage during transport and the right quantity of items are received in good condition with the packaging still intact.
In a clean bill of lading issued by the shipping lines or a transportation company, you won’t see any clauses about the defects of the cargo and the packaging. This makes it easier to accept the cargo and complete the transaction.
Foul/dirty or claused bill of lading. If the received shipment is not clean, the BL will contain clauses and statements about the shipment’s defects and quantity discrepancies. With these clear clauses about the shipment’s damages, the consignee may now refuse to accept the delivery.
A soiled or dirty bill of lading might contain phrases like torn packaging, damaged cargo, and missing goods. The receiver issues this dirty bill of lading, and as a consequence, the carrier or exporter might find it hard to receive payment. After all, the agreement was to deliver the cargo in good condition. Violating that agreement can result in financial losses and a damaged reputation.
Due to mishandling and unforeseen circumstances, damage could still be common and inevitable. It’s especially the case when the shipment contains thousands of goods where there might be a few damaged or below the expected quality. It’s also possible that the exporter or manufacturer fell short of the agreed quantity (e.g. only 900 instead of 1,000).
To prevent a breach of contract and other legal and financial problems, the manufacturer or exporter should immediately notify the buyer about the goods’ quality and quantity issues before shipping.
It’s still best, though, to prevent those discrepancies in the first place. One way is to hire reputable shipping lines so you can lower the risk of damaged, lost, or stolen goods. They have clear processes and internal controls that help prevent cargo losses and damages.
3. Based on transportation mode
Inland (domestic or in-country shipments)
Through (the goods go across several destinations through one or more modes of transport)
Multimodal (used at least two modes of transport for moving goods)
4. Other types of bill of lading
There are other types of bills of lading, and the classification depends on the carrier’s practices and the relationship between the shipper, carrier, and buyer.
Seaway bill or express release bill. The sea carrier issues this to the shipper and acts as a receipt and evidence of the contract. However, technically this is not a bill of lading. It’s still used, though, especially if there’s already a high level of trust between the ocean carrier and its customer. Most likely, they regularly deal with each other directly. Because of the long history of transactions and high level of trust between the parties, the express release bill allows for the immediate release of the cargo even without the original bills.
Fraud is possible here because a seaway bill is not as secured as a real bill of lading. There will be no legal consequences because a seaway bill is not a legally binding document. It’s only proof of a contract of carriage where there’s a recorded receipt of goods. However, the carrier might still lose a long-term customer in the case of fraud or a large discrepancy between the goods delivered and carried.
Received for shipment bill of lading. This is issued for loading purposes. This document confirms and acts as evidence that the container has arrived and was received at the port (issued before the sailing).
Shipped on board bill of lading. This document is released after the sailing of the vessel because it confirms that the goods are received and loaded (the goods are now actually on board).
Switch bill of lading. This is issued in transactions that involve a middleman or three different parties. In a usual BL, you can see detailed information about the manufacturer or the original shipper.
You won’t see the original shipper’s details in a switch bill of lading because the middleman has already edited the first document. As a result, you’ll only see the middleman’s details (usually a trading company) and not the manufacturer’s or original shipper’s. This can help prevent direct contact or transaction with the manufacturer (and the middleman stays in business).
A switch bill of lading is commonly used because international shipments often require a trader or a middleman. It’s also the case when the cargo contains parcels from several shippers or manufacturers. Instead of seeing several bills of lading, you will now only see the one issued by the trader or middleman.
Bill of lading tracking
Aside from being a proof and contract of shipment, you can also use the bill of lading , specifically the BL number, for tracking your goods and cargo. The carrier or a partner company might include this additional service. You can visit their website, enter your BL number, and then it will show your shipment’s status. Aside from the BL number, you can also use the container number to track your cargo.
Bill of lading example
A bill of lading always has information about the sending and receiving party as well as details about the cargo and shipped goods. Because a bill of lading acts as a contract and receipt, the complete name and identity of the shipper as well as of the receiver should be included. This way, you can further confirm the shipper’s identity and hold them responsible if the goods transported and received violate the BL’s terms and conditions.
For your quick reference and checklist, you should find the following in a bill of lading:
Bill of lading number (important in cargo tracking)
Details of the shipper and receiver (you can immediately find their complete names and addresses)
Details of the carrier, the vessel’s name, the pickup date, and information about the place of loading and receipt and final destination
Description of the goods and packages (including the number and kind, gross weight, and dimensions)
Additional clauses (for example, details about specific instructions for the carrier, special handling, certification, and whether the goods are hazardous)
How to file a bill of lading
Filing and signing a bill of lading requires attention to detail so that you can protect yourself from fraud, theft, legal issues, and financial losses. To prevent problems, it helps to double-check the following:
Loading port and the date of loading
Description of the cargo and their condition
Additional clauses (especially if you’re dealing with hazardous goods or those that require special handling and certification)
Bill of lading FAQ
What is a telex release?
Another term for telex release is telegraphic transfer. Through email, you’re sending an instruction to release your cargo even without the original bill of lading. This is a quick and convenient option for carriers, especially when they have already surrendered the original documents to a different port. It’s an additional expense, but telex release helps prevent delays and issues with paperwork.
Although this is fast and convenient, especially if it’s an international shipment that goes through multiple ports, there’s still a risk of fraud. This happens when the telex release email is fake, or there are some language barriers and misunderstandings. This results in the release of cargo and goods to unauthorised recipients.
One way to prevent unauthorised claims and receiving is by introducing additional controls, requiring a written and signed confirmation before releasing the cargo without the original document. Another way is through regular cargo tracking, where you always know your cargo’s status and confirm that it’s still on the way or that no one has accepted the goods yet.
What are negotiable and non-negotiable bills of lading?
Negotiable bills of lading allow the carrier to deliver the cargo to a person other than the original receiver or consignee. This is in contrast to non-negotiable bills of lading, where only the original receiver is allowed to accept the cargo. This limits the carrier’s liability in case of fraud or error.
What happens when a bill of lading is filed incorrectly?
You might suffer from financial and legal consequences if a bill of lading is filed incorrectly. Whether the information in a bill of lading is incomplete or inaccurate, this error might expose you to expensive and serious problems such as:
Criminal prosecution (related to fraud, taxes, and deceit)
Loss of insurance cover (especially protection and indemnity)
False claims from the other party and financial losses (e.g. the other party might take advantage of an inaccurate shipment bill of lading and tell you there’s nothing wrong with the goods when in fact, there are many)
Keeping in mind those potentially serious and expensive problems, it’s best practice to double-check both the bill of lading and the cargo before signing anything and authorising the payment.
Electronic bill of lading – what are the pros and cons?
An electronic bill of lading can be faster, more convenient, and less expensive because of lower administrative costs and the straightforward way of filing an e-bill. Because it’s electronic, it can be filed neatly and perhaps undergo data analysis later (this can be useful in AI and machine learning, especially when hundreds or thousands of bills of lading are already available).
However, there’s a risk of data manipulation if the file or system is hacked. Someone might have changed the receiver’s details in the transport document, and an unauthorised person received the cargo, resulting in financial losses and damage to the carrier’s reputation.
Large-scale hacking and data manipulation could hurt the shipping industry because of the loss of trust in the system. Perhaps this is one reason the shipping industry is cautious about implementing a fully electronic system.
What is the difference between a bill of lading and an invoice?
A bill of lading is a legally binding document, while an invoice is a financial one. In a bill of lading, the right or title to goods passes from the shipper or carrier to the customer. The transaction is between the sender and recipient, where there’s a transfer of title or ownership. In contrast, the transaction in an invoice happens in the accounting system.
Although an invoice also includes details about the cargo’s type, quantity, price, and other information, it’s still different from a bill of lading which is a legally binding document issued by the shipper or carrier.
In international trade, both the invoice and bill of lading as well as the policy of insurance are crucial. This protects all parties from financial losses and helps ensure the smooth shipping and receiving of the merchandise.
Sam founded his first startup back in 2010 and has since been building startups in the Content Marketing, SEO, eCommerce and SaaS verticals. Sam is a generalist with deep knowledge of lead generation and scaling acquisition and sales.