When it comes down to it, ordering and shipping freight requires a certain level of trust:
- Trust that asupplierwill send the goods he or she promised, in good condition.
- Trust that thesteamship line, truckor vanline or airlinewill move those goods to the best of their ability,handling the freight with care.
- Trust thatthepurchaserwillreceive andpay for the goods, as agreed.
That being said, allof this trust is backed up by a legal agreement between these three parties, which is documented on abill of lading(BOL).
If you’ve ever looked at your bill of lading, you’ll see three parties named on the document.If you’re new to thelogisticsworld, these terms may beunfamiliar—or confusing:
- The shipper
- Thecarrier
- The consignee
In order to make it simplefor youto1)understand your bill of ladingand2)giveyourfreight forwarder the information they need to effectively move your shipment,we’ll walk youthe three main parties on your bill of lading.We’ll also show you whythis documentisabsolutely crucialtothefreight shipping process.
First, though,let’sget an understanding of the basics.
What Is a Bill of Lading?
Abill of lading(BOL)is a legaldocument, issued by a carrier, that contains all the information it needs to correctly move a shipment, including the type, quantity and destination for the cargo.
The bill of lading names the three parties who are crucial to theshippingprocess:
Investopedia callsthe bill of lading “perhaps the most important document in shipping.”iIn order to understand why, you first need to have a solidgraspof the three parties named on a bill of lading.
Party #1: The Shipper
Theshipperon a bill of lading is the person who is responsible for packing and preparing a shipment to turn over to the carrier for transport.
For example, this might be a supplier who is sending your company parts for use in your manufacturing processes. Or, if you’re buying goods from a vendor in China that you plan to resell in the United States, if that vendor is packing and preparing the shipment for transit via ocean freight, that person will be the shipper on your bill of lading.
Why this term can cause confusion:Many peoplenew to logisticsconfuse thetermsshipperandcarrier.For example, you might hear someone call UPS “the shipper.”Let’s clear this up by talking aboutthe role that an entity like UPSactually plays.
Party #2: The Carrier
Thecarrieris the party thatactually movesyour cargo.
UPS is acarrier, for example.Steamship lines, truck lines and airlines—these are allcarrierswho own and operate transportation equipment.
Soto summarize:
- The vendor who packed the shipment would be theshipper, who then. . .
- Passes thecargo onto thecarrier:the steamship line.
Then, thiscarrierwill ultimately deliver the shipment to the third party in the agreement:
Party #3: The Consignee
Thisfinal termis probably the least intuitive of the three.
Allconsigneemeans, though, is the person who’s designated to receive the shipment.
For example,let’s go back to the example of a supplier (theshipper), sending you parts via a steamship line (thecarrier), which are intended for your company (theconsignee), who will use them in their manufacturing processes.
If you’re curious, the term originates from the concept ofconsigning,which Merriam-Webster simply defines as: “to give, transfer, or deliver into the hands or control of another.”In the arrangement, you have:
- Aconsignor, the party who hands over the goods, and
- Aconsignee, the party who ultimately receives these goods.
How this term can cause confusion:In some scenarios,the consignee is not the person paying for the freight.
Take the example of a company whosuppliesminishampoos and conditioners for hotels.Instead of charging its customers separately for freight,the suppliersimply buildsshipping into their overall cost.Sowhen they need to send a shipment to one of their hotel customers:
- Thesupplierpaysits freight forwarder to deliver the shipment to the hotel.
- However, the hotel would still be theconsignee. Even thoughthe hotel isn’tpaying for the freight, they’re stillreceiving the shipment.
Now that you understand the three main parties named in a bill of lading, let’s talk about why it might beconsideredthe “most important document in shipping.”
Why IsaBill of Lading SoImportant tothe Shipping Process?
As we mentioned earlier, a bill of lading is a legal document. Itoutlines the obligations and responsibilities of each of the three parties involved inatransaction.
In its role as a legal document, the bill of ladingserves threebroadpurposes:
- Acknowledges receipt of cargo by the carrier:In other words, the BOL is proof that the carrier has taken control of the goods from thesupplier.
- Provides evidence of “contract of carriage:” Inplain language, the bill of lading documents the agreement between the shipper and the carrier for the transport of the freight.
- Acts as the “document of title:”In other words, the bill of ladingproves the ultimate ownership of the goods.
Giventhese importantfunctions—and the legal weight of the document—make sure you checkall oftheinformationon your bill of ladingcarefully before signingit.
Decoding the Terminology of Logistics
As with many specialized industries,logisticshas its own set of terminology. Many of these termscan be confusing to newcomers.(Take“drayage,” for example!)By walking you through the main points of a bill of lading, we hope we’ve cleared up any confusion around this critical document. We also hope we’ve made iteasier for you to understand the parties and responsibilities involved in your next shipment.If you’re looking for more informationabout the terms youhear when shipping freight, check outourglossary of commontransportation and logisticsterms.
Additionally, our experts would be happy to helpwith any additional questions you might have.Whether you’re the shipper or the consignee, we can helpyoumake your next shipment simpler.Just reach out to usfor a free consultationto get started.
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