A bill of lading is a document accompanying freight that states the agreement between the shipper and the carrier and governs their relationship when goods are transported. It details the cargo in the shipment and gives title or ownership of that shipment to the receiving party specified on the document. That party is usually the organization the cargo is being shipped to.
The bill of lading accompanying a shipment is signed by the carrier when it picks up the shipment. The signature acknowledges that the shipment is on board the carrier, whether it’s truck, rail, air, or ship. When it’s signed by the recipient, often referred to as the “consignee,” it confirms that the goods were received as described on the bill of lading. It also serves as proof of delivery.
Types of bills of lading
- Straight bill of lading – used when the shipment has been paid for in advance and the carrier is delivering the freight to the buyer or other appropriate party.
- Order bill of lading – used when the goods are being shipped before they’re paid for. It is expressed as “to order of” on the bill of lading often followed by the recipient’s name. An order bill is considered a “negotiable instrument,” which means that it acts as a substitute for money or as a promise to pay. An order bill of lading might be used if the goods are shipped under an open account or letter of credit.
When the recipient endorses or signs the order bill of lading, the carrier can transfer title to the recipient. Endorsed order bills of lading can serve as collateral against debt.
What is included on a bill of lading?
The bill of lading includes the following:
- Purchase order and/or account number
- Shipment date
- Shipper’s name and address
- Recipient’s name and address
- Number of units being shipped
- Description of what’s being shipped
- Declared value of goods being shipped
- Shipment packaging – cartons, crates, pallets, etc.
- Notation if product in shipment is a Department of Transportation hazardous material, which has special requirements
- The national motor freight classification (known as NMFC) for items being shipped
- Exact shipment weight
- Pickup or delivery specifications
The bill of lading is used with both domestic and international shipments.