Bill of Lading: Meaning, Types, Example, and Purpose

What Is a Bill of Lading?

A bill of lading (BL or BoL) is a legal document that's issued by a transportation company to a shipper. It details the type, quantity, and destination of the goods being carried. A bill of lading also serves as a shipment receipt when the carrier delivers the goods at a predetermined destination.

This document must accompany the shipped products no matter the form of transportation. It must be signed by an authorized representative from the carrier, shipper, and receiver.

Understanding Bills of Lading

The bill of lading is a legally binding document that provides the carrier and the shipper with all the necessary details to accurately process a shipment. It has three main functions:

• It's a document of title to the goods described in the bill of lading.
• It's a receipt for the shipped products.
• It represents the agreed-upon terms and conditions for the transportation of the goods.

Say a logistics company intends to transport gasoline from a plant in Texas (the shipper) to a gas station in Arizona (the recipient) by way of a heavy truck. A plant representative and the driver sign the bill of lading after loading the gas on the truck. The truck driver requests that the station clerk also sign the document when the carrier delivers the fuel to the gas station in Arizona.

Every business should have internal controls in place to prevent theft. One key component of internal control is the segregation of duties which prevents one employee from having too much control within a business.

No two internal control systems are the same but most follow a standard set of core philosophies that have become standard management practices. Implementing internal controls can help streamline operations and prevent fraud. A bill of lading is one of several key documents that must be properly managed and reviewed to prevent asset theft.

Types of Bills of Lading

Some of the most common types of bills of lading include:

• Inland bill of lading
• Ocean bill of lading
• Through bill of lading
• Negotiable bill of lading
• Nonnegotiable bill of lading
• Claused bill of lading
• Clean bill of lading
• Uniform bill of lading

Bill of Lading Example

Assume that XYZ Fine Dining receives shipments of fresh meat and fish five times a week. The restaurant manager determines the type and the amount of meat and fish the restaurant needs to order. They then fill out a purchase order (PO). XYZ’s owner reviews and initials each PO before it's emailed to the food vendor. The vendor gathers the meat and fish and signs a bill of lading along with a representative from the overnight carrier.

The carrier delivers the food to the restaurant and the manager compares the information on the bill of lading to what was requested on the PO. The PO and the bill of lading are sent to the owner if the information matches. The owner reviews the documents and makes payment to the food vendor.

The owner doesn't pay the vendor without first reviewing the purchase order and the bill of lading. This step ensures that XYZ pays only for what it ordered and received. The manager will ask the vendor about the exception if the two documents don't match when they compare them. A third employee reconciles the bank statement and makes company deposits. All these steps must be in place to prevent theft.

The Bottom Line

A bill of lading is a contract issued by a transport company to a shipper that spells out the quantity, type, and destination of the goods being shipped. It serves as a receipt of the shipment and can help prevent the theft of goods being transported. It’s crucial to understand the types of bills of lading to ensure that the right ones are chosen. Your shipment will likely be delayed otherwise.