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 issued by a carrier (transportation company) to a shipper that 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, and 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 of the necessary details to accurately process a shipment. It has three main functions:

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

As an example, a logistics company intends to transport, via heavy truck, gasoline from a plant in Texas (shipper) to a gas station in Arizona (recipient). A plant representative and the driver sign the bill of lading after loading the gas on the truck. Once the carrier delivers the fuel to the gas station in Arizona, the truck driver requests that the station clerk also sign the document.

Every business needs to 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 controls systems are the same. However, 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

There are several types of bills of lading. Some of the most common 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, for example, that XYZ Fine Dining receives shipments of fresh meat and fish five times a week. The restaurant manager determines the type and amount of meat and fish that the restaurant needs to order. They then fill out a purchase order (PO), and XYZ’s owner reviews and initials each PO before it is 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.

Next, 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. If the information matches, the PO and the bill of lading are sent to the owner, who reviews the documents and writes a check payable to the food vendor.

In this example, the owner does not issue a check to the vendor without reviewing the purchase order and the bill of lading. This step ensures that XYZ pays only for what it ordered and received. If the two documents do not match when the restaurant manager compares them, the manager will ask the vendor about the exception. A third employee reconciles the bank statement and makes company deposits. All of 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 different types of bills of lading to ensure that the right ones are chosen. If not, your shipment will likely be delayed.