Bills of Lading: How Important Are They Really?

by Vector | Nov 2, 2021 8:08:09 AM

Whether a shipment is international and intermodal or domestic and a simple truck drive across state lines, you and the other parties involved need to set expectations about that shipment. What will it contain? Who will deliver it? And what stops it will make along the way to its destination, among other details?

Shippers and carriers can use a bill of lading (BOL) to define those expectations and share them with all the parties that need to be in the know.

You’ve probably used a BOL at some point in your career, but are they really that important? The answer is more complicated than you might think. On the one hand, a BOL performs some critical functions. But on the other hand, some modes of transport don’t use BOLs.

In this post, I’ll dive into all the nuances of BOLs and whether you need one. Let’s start by defining BOLs.

What Is a BOL?

“A bill of lading is how goods get moved under one reference document,” said Jack Carbone, a consultant for small ocean carriers and equipment trading.

A BOL contains details about a particular shipment that different parties like the carrier and shipper can reference, he said. Details you might find on a BOL include

  • port of loading or port of origin,
  • the discharge port,
  • the final destination,
  • the amount of goods in a shipment,
  • if any goods were damaged, and
  • whether any of the goods are hazardous.

However, BOLs are far from standardized, said Chris Petrocelli, president of xMS Supply Chain Services and an Advisory Board member at the SUNY Maritime College and Oregon State University. In addition to different standards existing for domestic and international BOLs, for example, what’s listed on each BOL will be determined by the parties involved in the transaction.

A simple transaction will have a pickup location, a delivery location, and a carrier.

“Each of those parties has ownership and involvement in creating that document,” Petrocelli said. “Sometimes it's not clear as to who's supposed to do it; sometimes it's not clear as to what the details are supposed to be. And sometimes it's not clear how it's supposed to be executed.”

A BOL’s contents will also depend on the mode of transport. For example, an ocean BOL will include a vessel and voyage number, Carbone said.

What Exactly Does a BOL Do?

Beyond containing details about a shipment, a BOL serves three functions, Petrocelli said.

  • It's the transfer of ownership.
  • It's the insurance requirement for who has the liability if there's any damage or loss.
  • And it becomes the basis for completing the execution of a transport requirement for payment.

How Important Are BOLs?

So, now that we know what BOLs do, we can ask: are they important?

BOLs are most important to truckers because that’s how they get paid! And they’re important to carriers because a BOL acts like a receipt, Carbone said. Also, on the international side of things, BOLs are critical.

A trucker who’s going to pick up an import load from the Port of Los Angeles needs to give the gate clerk a BOL that specifies which shipment the trucker is picking up, Carbone explained. But before the BOL is even generated, the person importing the goods has to make an Importer Security Filing (ISF) with documents that include a commercial invoice, certificate of origin, and packing slip.

“Once the customer provides the ocean carrier with shipping instructions, then they create a bill of lading,” he said. “That bill of lading then becomes what the carrier and shipper constantly refer back to.”

But across the transportation and logistics industry, the answer to the question of whether BOLs are important isn’t a simple yes or no. That may come as a surprise given all the benefits of a BOL we discussed above.

The importance of the functions a BOL performs can’t be understated, especially when considering the legal protection it offers. But BOLs aren’t the only way to track and transfer ownership of a shipment.

“The bill of lading is important, but it's one way that goods get moved under one reference document,” Carbone said.

And depending on the transportation mode, you might have a standard that performs a similar function but doesn’t look like a BOL.

Similar Functions, Different Forms

A trucker would use a BOL to pick up a shipment of imported goods at the Port of Los Angeles. But if that same trucker was trying to pick up containers from a depot yard, they would need a release number.

“If you’re leasing containers, they have things that they’ll call a release number,” Carbone said. “If I have 100 containers in a depot and I want to release 10 of them to a trucker for a particular move, I'll give the depot a release number, and the trucker can go in and get that release number. And that'll be good for a certain number of a certain type and size of containers.”

Or, let’s say you have a shipment that’s being transferred from an ocean carrier to a railroad. The ocean carrier and all the parties involved up to that point used a BOL for that shipment. But for revenue purposes, railways reference rail bills, not BOLs. So, the railway will generate a rail bill.

The BOL and rail bill serve similar purposes. But after the railway generated the rail bill, the next shipper may not even reference the ocean carrier BOL that preceded the rail bill, Carbone said.

Can a Universal, Digitized Standard Help?

“The transactional piece of it is rather simple,” Petrocelli said. But it’s hard to overcome the different standards that exist.

“Something that's done in Germany is different from something that's done in the US. Something that's done on the rail is different from something that's done at sea or in the air,” he said.

But if you look at the electronic bill of lading (eBOL), you can see how some folks have simplified these transactions.

“In some cases, more progressive logistics relationships have eliminated some of these so-called traditional transactions,” Petrocelli said.

“The bill of lading then becomes a living, breathing document that kind of evolves as the transport takes place,” he continued. “So, it's a bill of lading request that becomes an actual bill of lading that becomes a transported bill of lading that becomes a received bill of lading that becomes a paid bill of lading.”

The biggest impediment to implementing that universal standard is “not the handoffs between the carrier and the trucker and the shipper. It has more to do with the banking and the customs regulatory information that has to take place,” Carbone said.

Additionally, by digitizing a BOL the document can transcend its transactional function. For example, although a BOL contains information about a shipment’s components, it typically isn’t detailed enough to include specifics like part numbers or SKUs.

Some have proposed forming a link between a digitized BOL and a cargo supplier or owner’s systems, Carbone said. That would create more opportunities for interoperability and enhance supply chain control towers’ functionality and visibility.

So, Are BOLs Really That Important?

Whether its route is simple or complex, each shipment of goods needs to be tracked in some way. And each party involved in that shipment needs a way to verify that the shipment has arrived intact (or to note that the shipment is not intact). 

A BOL is one way that you can record the details of a particular shipment. But it’s not the only way. Just look at rail bills and container depot release numbers. BOLs, rail bills, and release numbers all help shippers, carriers, and destinations keep track of a shipment’s movements—which document is used depends on which party is involved.

So, the BOL is a means to an end, and it’s only one possible means to the same end. We might look to create an eBOL that’s used industrywide to create a universal, digitized solution. But we might just as well use rail bills or release numbers universally.

This post was written by Kristin Rawlings. Kristin is a writer, editor, and fierce advocate of the Oxford comma. She has experience working in journalism, academic publishing, and content marketing. Her passion is collaborating with others to share information in a clear, readable way.

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