What Is a Bill of Lading?

A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried. The bill of lading acts as a document of title, a receipt for shipped goods, and a contract between a carrier and shipper. The document must accompany the shipped goods and must be signed by an authorized representative from the carrier, shipper, and receiver. If managed and reviewed properly, a bill of lading can help prevent asset theft.

Key Takeaways:

  • A bill of lading is a legal document issued by a carrier to a shipper that details the type, quantity, and destination of the goods being carried.
  • For air shipments, an airway bill acts as the bill of lading. However, an airway bill is not a document of title.
  • Typically, there are three bills of lading, one for the shipper, one for the consignee, and one for the banker, but there is no limit to the number of bills of lading issued.
  • Addition bills of lading increase the risk of fraud, theft, or the unauthorized release of goods.

Understanding the Bill of Lading

Typically three bills are issued—one for the shipper, one for the consignee, and one for the banker, broker, or third party. There is no restriction on the number of bills of lading that can be issued, but the number issued must be stated on the bill. Because the bill of lading is a document of title, it is valuable. For security purposes, it is advisable to only request as many bills of lading as you actually need. If more bills of lading are issued, there is an increased risk of fraud, theft, an unauthorized release of goods, or release to the wrong person.

Types of Bills of Lading

There are two ways to ship, by air and by ocean. Each mode has its own bills of lading: the ocean bill of lading and the airway bill. Determining which mode of shipping to use depends on time. Air travel is reserved for shipments that are time-sensitive or on a tight deadline, and it is usually more expensive. Travel by ocean is slower but more economical, which is why it is used more frequently.

There are many different types of ocean bills of lading, but the most common types are a "straight," a "shipper's order", a "clean," and an "onboard" bill of lading.

The straight bill of lading is non-negotiable and must be marked as such. It can only be released to the person named on the bill.

A shipper's order bill of lading outlines any conditions that have been imposed by the shipper. A common example is when payment has been secured by a letter of credit, and the terms must be met before the delivery is accepted.

The clean bill of lading is when everything in the shipment is in perfect order. Should any shortages of product or damages occur, a clean bill is not issued.

An onboard bill of lading is issued when the goods are loaded onto the ship and is signed by the ship's master. This type of ocean bill of lading is rendered when payment is contingent on a letter of credit.

The Airway Bill

The airway bill is issued by the air carrier of goods on receipt of goods after completion of export customs formalities. The shipper obtains the airway bill once the cargo is transferred to the air carrier. Since the transit time for air cargo is much less that transit time for sea shipment, a set of airway bills is sent along with the cargo for immediate reference on transit and for import customs clearance at the destination port by the importer. Once customs formalities are completed at the loading port customs location, the cargo transfer manifest (CTM) is issued by an International Air Transportation agent along with an airway bill and other required documents for transportation. Original airway bills are issued in quintuplicate, one for the carrier, importer, shipper, and additional copies. The main difference between a bill of lading and an airway bill is that an airway bill is not a document of title.