WHAT IS A
BILL OF LADING?
A Bill of Lading (BOL) is a legal document issued by a carrier to a shipper. It confirms the receipt of goods in good condition, ready for shipment, and outlines the terms of delivery between the shipper, carrier, and consignee. The BOL includes details such as the type, quantity, and destination of the goods.
What Are Bills of Lading Used For?
Bills of Lading (BOLs) serve as:
Proof of shipment, confirming carrier responsibility.
A legal requirement for shipment and proof of ownership.
Title to goods, needed by the consignee to claim the shipment.
Payment security, allowing the shipper to retain the BOL until payment is made.
Who Uses a Bill of Lading?
Businesses that provide transportation services, like owner-operators, freight forwarders, shipping lines, and third-party logistics companies use bills of lading. They can be used for both domestic and international shipments across all transport modes: air, sea, rail, and road.
What Information Is on a Bill of Lading?
A BOL typically includes:
Information about the carrier, shipper, and consignee
The place where the goods were loaded and their destination
The mode of transportation (e.g., road, rail, air, or sea)
Shipment terms (Incoterms)
Details of the goods being carried (weight, dimensions, classification, etc.)
Why Accuracy Matters
Mistakes on a bill of lading can lead to severe consequences. Australian Capital Financial Management paid over AUD 800,000 due to misleading documents. A freight forwarder incorrectly listed themselves as the ocean carrier, causing confusion and legal issues. This highlights the importance of accurately stating roles, especially when goods serve as collateral or title. (source)
Who Issues a Bill of Lading?
Only the carrier can issue a BOL. For sea freight, this might be the shipping line (the company operating the vessel) or an NVOCC (Non-Vessel Operating Common Carrier), often called a freight forwarder. However, not all freight forwarders are NVOCCs.
Who Receives a Bill of Lading?
The shipper
A Customs broker, freight forwarder, or third-party Customs manager
The consignee (the person who bought the goods)
For example, if goods are imported through a freight forwarder under EXW (Ex Works) terms, the BOL follows a specific journey to ensure all parties have the necessary documentation.
When goods are being imported, here is the typical journey a bill of lading takes:
When goods are being exported, here is the typical journey a bill of lading takes:
Can a Bill of Lading
Be Issued Without a Consignee?
Usually, a bill of lading needs a named consignee. There is an exception when a shipment uses a Letter of Credit (L/C). In these cases, the bill of lading might list “To Order” instead of a specific receiver or address.
The Letter of Credit might specify instructions like:
“To Order of the Shipper”
“To Order of the Bank”
In these cases, the buyer or consignee is typically listed as the Notify Party and will still receive shipment updates.
How Long Should You Keep a Bill of Lading?
Recordkeeping depends on legal rules, company policies, and the type of goods. Here’s a concise guide:
Legal Requirements: Many countries require businesses to keep shipping documents for tax and audit purposes, typically for 5 to 7 years. In the US, 5 years is recommended.
Company Policy: Some companies maintain records for potential claims or disputes.
Type of Goods: For high-value, sensitive, or hazardous goods, it’s smart to retain the bill of lading longer. Hazardous materials often have stricter requirements.
Claims and Disputes: If there might be a dispute over the shipment or payment, keep the bill of lading until resolution.
A good rule of thumb is to keep it for 5 to 7 years. Always check local rules and your company’s policy to be safe.
Bills of lading are usually grouped into two categories: negotiable and non-negotiable. We will explain each type in more detail.
Negotiable vs. Non-Negotiable Bills of Lading
Negotiable (Original) Bill of Lading: Serves as the title to the goods, allowing ownership transfer via endorsement. The consignee or their agent must present the original BOL to claim the goods. Failure to do so can make the carrier liable for the cargo's value.
Non-Negotiable Bill of Lading: A copy of the original that doesn’t transfer ownership, only documenting shipment details.
Note: These terms apply to sea freight. For air freight, similar documents are Master Air Waybills and House Air Waybills, usually non-negotiable unless consigned through a bank.
Types of Bills of Lading
Bills of Lading come in several types, each with its own role in shipping. They vary based on who issues them, why they’re used, how they’re sent, and the level of buyer protection.
The main types in international shipping are:
Original Bill of Lading–OBL
Seaway Bill of Lading–SWB, BOL, or B/L
House Bill of Lading–HBL
Master Air Waybill of Lading–MAWB
House Air Waybill of Lading–HAWB
Switch Bill of Lading–SBL
Below are brief explanations for each type of Bill of Lading.
Original Bill of Lading
An ocean bill of lading is issued by a shipping line for sea transport and ensures the consignee pays before goods are released. After payment, it can be handled in two ways:
The original bill of lading can be surrendered for a Telex Release (a digital version).
The original can be sent to the consignee, who presents it to the receiving carrier to release the goods.
House Bill
A house bill of lading is used when goods are shipped by sea through a freight forwarder or NVOCC. It can be either negotiable or non-negotiable. If it’s non-negotiable, it’s sometimes called an Express Bill of Lading.
Multimodal Bill of Lading
Used for shipments involving different transport modes, such as rail and then road for the remainder on the transit.
Through Bill of Lading
Used for goods primarily transported by sea and then by road or rail, but not to be confused with multimodal bills.
House Air Waybill
House air waybills are like MAWBs but indicate that the issuer assumes liability as the carrier or acts as an agent for a carrier.
Dirty/Claused Bill of Lading
Issued when goods are damaged upon shipper’s receipt. In such cases, the carrier’s insurance might not cover the damage. This is different from a 'clean' bill of lading, which means the goods were delivered in good condition.
Switch Bill of Lading
Created when a second BOL replaces the original to update details, often in triangle shipments where the buyer resells to a third party.
Sea Waybill
A sea waybill is a non-negotiable document used in place of an ocean bill of lading when the shipper does not need to control the release of the cargo.
Master Air Waybill
A master air waybill is a non-negotiable airline shipping document, unless marked "To Order," which involves a bank. In such cases, the bank must release the shipment before delivery. MAWBs are exchanged between forwarders, while house air waybills are used for shipment from the shipper to the consignee.
Electronic Bills of Lading (Telex Release and Express Release)
Telex Release: An electronic message from the carrier at the loading port to the agent at the discharge port, authorizing cargo release without the original bill of lading.
Express Release: Fully electronic, with no physical bill of lading, offering greater efficiency in certain situations.
Why Are Incoterms® Important for a Bill of Lading?
Choosing the right Incoterm is crucial for managing the shipping process. If you are new to Incoterms®, refer to our guide to learn how they interact with a bill of lading.
Selecting the correct Incoterms can be complex, as it depends on your business and the type of goods you are shipping. It's important to finalize the terms before shipping to ensure all parties are clear on their responsibilities.
When you're getting started with shipping, it's a good idea to work with an experienced forwarder to make sure all your documentation and Bill of Lading processes are handled smoothly.
At Juno Logistics, our skilled team is here to help you navigate Customs and ensure everything goes without a hitch!