What Is a Bill of Lading and What's Its Purpose?

February 21, 2020

Why is the bill of lading so important in shipping and logistics? The information in it is the backbone of keeping track of any freight you choose to ship or haul. Today we're going to talk about what exactly a bill of lading is, why you need them, what people use them for, and how you can track and process them efficiently. Also, I'm going to cover some of the most efficient ways to keep track of freight, to help your business run more smoothly.

What Is a Bill of Lading?

The bill of lading, or BOL, at its most basic is a legal document. This legal document protects the shipper, the carrier, and the customer all in one place. Acting as a contract between all parties, the bill of lading contains all pertinent information about a given shipment. For instance, it lists the names as well as typically the addresses and phone numbers of shippers and consignees. Also, it includes an itemized list of the goods being transported. This list should include the quantity as well as weight of the cargo.

The bill of lading will also spell out any special instructions for the shipment. For example, if the consignee wants the shipper to contact the delivery location 24 hours before delivery, then that can be on the bill of lading for the carrier to view.

Last, the bill of lading will reflect payment terms and amount of payment. This payment is the agreed-on contract between the shipper and the carrier of the freight.

What Purpose Does the Bill of Lading Serve?

The bill of lading has several functions. It provides evidence that a shipper has entrusted the release of a consignee's goods to a carrier to be transported. As such, the carrier must have a copy of the bill of lading—either at the point of arrival for loading of the cargo or before then.

The document also acts as a receipt of receiving the product at the consignee. For instance, if the customer believes they ordered a quantity other than what they've received, then the bill of lading will act as the evidence of what the parties actually agreed on. Let's say the customer received four pallets but was expecting five. In this case, the carrier would reference the bill of lading. If the document shows four pallets, the carrier has protection from any repercussions. Conversely, if the bill of lading shows five pallets, the customer can file a claim, and a court may hold the carrier liable.

Furthermore, the bill of lading acts as a title of ownership of goods. At first, the shipper owns the product. Next, the shipper releases the product to a carrier. Finally, the consignee receives and owns the product. This chain of command protects all three parties. Throughout the process of shipping, transportation, and receiving, the bill of lading is the sole proof of transaction.

The Needs of the Shipper

In the logistics business, the company that's shipping the product from one location to another is the shipper. Often the shipper has made an agreement with a consignee to deliver goods from one predetermined location to another. To meet this agreement, a shipper will hire a carrier for transport. The bill of lading is the contract between the shipper and the carrier.

The shipper, like the other parties, gets protection from this contract. Primarily, it protects the shipper from theft and fraud. The document explains exactly what the cargo is and how much is required to be transported. Therefore, if on arrival of delivery, the type or amount of goods received by the consignee don't match the bill of lading, then the shipper has recourse against the carrier.

This recourse typically happens through filing a claim. Note that a claim is not only for a loss of goods but for damage as well. Should a carrier damage the cargo in transit, the shipper may also file a claim. The result of any such claim would be a demand of reparations from the carrier.

The Needs of the Carrier

The carrier is the transportation company that agrees to transport the goods from and to the designated locations the shipper provides on the bill of lading. The bill of lading is usually most important to the carrier. Beyond being a contract with the shipper, the document provides all the necessary information for transportation. The carrier will see addresses, phone numbers, type and quantity of goods, and agreement of payment amount.

In turn, the bill of lading also protects the carrier. It ensures that the carrier receives the amount of money that the shipper agreed to pay for the transport. Furthermore, because both the shipping and receiving parties sign the bill of lading, it acts as a receipt for the carrier's work. It's proven documentation that the carrier picked up and delivered the freight as expected. Also, it certifies that the carrier delivered the freight in its expected condition. This prevents the shipper and receiver from making fraudulent claims about the transportation of the goods after the fact.

The Needs of the Consignee

Finally, the consignee will use the bill of lading to sign and confirm receipt of its goods as expected. The bill of lading is the receipt the consignee can provide for the carrier. The consignee's workers can also use the bill of lading to confirm that the shipment delivered to them is what the company expected. Should the quantity or condition of the goods not meet expectations, the consignee could then seek repercussion with the shipper, noting any concerns on the bill of lading.

Processing Bills of Lading Efficiently

Most commonly the bill of lading will be a physical paper document the carrier receives either prior to or at the time of loading. Today the exchange of paper can sometimes become cumbersome. The carrier can't get paid until it submits the bill of lading. In turn, the shipper can't confirm delivery without this receipt from the carrier. Using paper alone, often all parties would have to wait for a driver to return from their trip. At times, this could be a week or more.

Fortunately there are modern alternatives. While people used to send faxes, cell phones have simplified things. Many brokers may offer an app that lets the carrier access the bill of lading electronically. This includes all the information as well as an option for a digital signature for origin and destination.

However, not all brokers have apps. Some consignees also may still require the driver to sign a paper copy BOL at the time of delivery. Companies now offer digital imaging solutions in these circumstances. Drivers can simply complete the paper copy, snap a photo on their cell phone, and upload it through an application. The shipper receives its signed delivery receipt, and the consignee still signs paper at the point of delivery. The carrier is able to submit its paperwork and get paid more quickly. In short, everybody wins!

If you're in the market for a digital imaging solution, look for one that can scan and upload all kinds of documents, even ones that have been damaged.

Putting It All Together

In this post, we've discussed what a bill of lading is. We've also discussed its purpose. Next, we applied the purpose to the shipper, the carrier, and the consignee. Last, we've discussed how to process the bill of lading efficiently.

You should now have a better understanding of this document. This knowledge is essential to any transportation transaction. Now you're armed to begin the first step in shipping, hauling, or receiving goods.


This post was written by Matthew Zandstra. Matt has been working in transportation and logistics dispatch for the past six years, both as a broker and direct to drivers. He’s familiar with various facets of relationships, technical systems, pricing mechanics, and commodities.

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