Bill of Lading vs. Bill of Exchange: An Overview
A bill of lading lists the details of what items are being received by a shipper and where they are being shipped to; it also serves as a receipt for the second party once the items have been received.
By contrast, a bill of exchange is documentation of payment, much like a promissory note, that legally requires the buyer to pay an agreed-upon amount by a certain date.
Key Takeaways
- A bill of lading is proof of a contract between a shipper and a seller and includes details about what is being shipped, who the buyer is, and where the buyer is located, in addition to a receipt for the buyer.
- A bill of exchange includes what items are being shipped and how many are in the order, an invoice requesting payment and details about when the payment is due and often bank information to fulfill the charge.
- Both a bill of lading and a bill of exchange provide the seller, the carrier, and the buyer with critical information needed to complete the process of selling, shipping, paying for, and receiving goods.
Bill of Lading
A bill of lading is a document from a shipper of goods that describes the goods being shipped, the number of goods and where they are being shipped to. It can resemble a standard store receipt or a train ticket.
The bill of lading also serves as a receipt when the goods being shipped arrive at their destination. The destination of the goods is also noted on the bill of lading. A bill of lading is evidence of shipment and proof of receipt of the goods by the carrier from the company or individual providing the goods for shipment.
Bill of Exchange
A bill of exchange is a document used in international shipping, a negotiable instrument that is created by the seller or exporter and given to the buyer or importer. It legally binds the buyer to pay an agreed-upon sum of money to the seller on a specified date, often upon receipt of goods or on a specific day following the receipt of goods (for example, 10 days after receipt of goods).
Bills of exchange are similar to checks in that they can be drawn on banks and can be transferred through an endorsem*nt of the bill of exchange. When a bill of exchange is issued by a bank, it is referred to as a bank draft; if issued by an individual, it is commonly referred to as a trade draft. A bill of exchange details the goods shipped to the buyer, the invoice amount for payment, the date payment is due, and bank details, since the buyer usually makes a payment from his bank to the seller's bank.
Both a bill of lading and a bill of exchange are important deterrents to asset theft when sellers are shipping items to buyers, often through a third party.
Bill of Lading vs. Bill of Exchange Example
For example, a local bakery is shipping pastries to a coffee shop in another city, using a third-party shipper. The shipper would need to look over the bill of lading to make sure the correct number of pastries are included in the order, that the payment information is specified, and that the location of the buyer is clear. Once the shipper delivers the pastries to the coffee shop, the bill of lading would be handed over to the coffee shop as proof that it had received the goods.
To the same example, the third-party shipper could give the coffee shop a bill of exchange. Like the bill of lading, it would provide detailed shipping information. But it also provides more financial details than a bill of lading, as well as legally binding the coffee shop to pay the bakery the amount previously agreed upon. The bill of exchange would also include an invoice, a payment due date, and even the coffee shop's banking information to complete the transaction.
FAQs
The main purpose of a bill of exchange is to facilitate the financing of a transaction between two parties. The main purpose of a bill of lading is that it acts as an underlying document that allows a cargo owner to enter a contract with a logistics provider for shipping the cargo internationally.
Are bill of entry and bill of exchange the same? ›
A Bill of Exchange is unrelated to any physical goods. It's simply a written order to pay a fixed sum of money to a person on demand, possibly after a certain date. A Bill of Entry is a document created by an importer or exporter of documenting what is being shipped across political boundaries.
What does bill of exchange mean? ›
A bill of exchange, a short-term negotiable instrument, is a signed, unconditional, written order binding one party to pay a fixed sum of money to another party on demand or at a predetermined date. A bill of exchange is sometimes called draft or draught, but draft usually applies to domestic transactions only.
What is BoE and bl? ›
B/L (Bill of Lading) is the transport document for sea shipment and it can be captured in inbound delivery of R/3. BoE (Bill of Entry) is the customs document which is filed by the importer to the Customs on landing of the goods by sea / air.
What is the difference between a bill of export and a bill of lading? ›
A shipping bill is a declaration document detailing the value, quantity, and type of goods being exported. In contrast, a bill of lading acknowledges the receipt of these goods, guaranteeing their delivery to a designated party.
Is bill of exchange the same as bill of lading? ›
The main purpose of a bill of exchange is to facilitate the financing of a transaction between two parties. The main purpose of a bill of lading is that it acts as an underlying document that allows a cargo owner to enter a contract with a logistics provider for shipping the cargo internationally.
What are the disadvantages of bill of exchange? ›
Disadvantages of a Bill of Exchange
- Though discounting allows quick funds, the discount paid for the Bill of exchange is an added expense for the drawer.
- It can be a short-term mode of securing payments from creditors.
- The drawee becomes legally bound to clear the payment on demand or on the specified date.
A bill of exchange is of real use if it is accepted by the person directed to pay the amount. For example, X orders Y to pay ₹ 50,000 for 90 days after date and Y accepts this order by signing his name, then it will be a bill of exchange.
Who accepts a bill of exchange? ›
A bill of exchange is generally drawn by the creditor upon his debtor. It has to be accepted by the drawee (debtor) or someone on his behalf. It is just a draft till its acceptance is made. For example, Amit sold goods to Rohit on credit for ` 10,000 for three months.
What are the three forms of bill of exchange? ›
The three main types of bill exchange are accommodation bills, time bills, and trade bills. The accommodation bill is drawn and accepted for mutual help while the trade bill is drawn and accepted to trade a transaction and the time bill is meant to ensure payment is made on the specified date.
What are the two types of bill of lading?
- Through bill of lading - A document that covers the shipment of goods from the point of origin to the final destination.
- Straight bill of lading - A document that covers the shipment of goods from the point of origin to the final destination without any stops in between.
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.
Who fills out the bill of lading? ›
The bill of lading is a necessary document for freight shipment. The shipper fills it out and gives it to the carrier at pickup. BOL could be considered a receipt, a proof of the contract between the shipper and the carrier.
Who pays the bill of lading? ›
In most cases, the shipper (seller) supplies and pays for the BOL, as it acts as a receipt and title to the goods. But if specific arrangements exist between the parties, such as a free on board (FOB) contract, the buyer may be responsible for obtaining and paying for the BOL.
Why are there 3 original bills 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.
Do all shipments have a bill of lading? ›
When is a paper Bill of Lading or freight label required? A freight shipping label (whether it's a paper Bill of Lading or a label created online) is required for all domestic and international LTL shipments, including those shipped through a freight forwarder.
What is a bill of entry? ›
A bill of entry is a legal document that is filed by importers or customs clearance agents on or before the arrival of imported goods. It's submitted to the Customs department as a part of the customs clearance procedure. Once this is done, the importer will be able to claim ITC on the goods.
What is the entry of the bills of exchange? ›
Bills of Exchange Accounting Entries. Bills of exchange account entries are also known as an instrument that is used in writing any unconditional or conditional statement or a statement that is signed by a maker which directs that a particular person has to pay the specified amount to bear the product.
What is the difference between a bill of exchange and a shipping bill? ›
What is the difference between a Bill of exchange and a bill of lading? A Bill of exchange is for financing a transaction between two parties, whereas a Bill of Lading is a shipping document that a freight forwarder or a shipping carrier issues to a cargo owner.
