Q: We’re a shipper, and when we ship to our customers the freight terms are supposed to be FOB origin, freight collect. I’m told by my department that it takes a while to fill out a bill of lading [B/L], therefore my department doesn’t fill one out.
We provide our customers with an invoice that shows the origin, destination, product, invoice date, carrier name, Section 7, freight terms, date of shipment, and date of delivery. Shipper signature, consignee signature, and carrier signature aren’t on the invoice.
Please tell me the following:
-Is a B/L legally required?
-What information is required, as opposed to information that is nice to have on a B/L?
-What is the impact to us if we don’t have a B/L?
-Are we legally bound by a specific B/L format?
I come from the old school of regulation days, and I might be overprotective. Some of my peers tell me that a B/L is no longer needed because of deregulation.
A: Let me start by correcting the one error in your letter: these aren’t your peers. Call them co-workers, as it’s the highest status to which individuals this ignorant of their discipline can aspire.
That said, I can find nothing to fault with your practice. The fault, rather, lies with your carriers, and although the lack of a B/L might cause you some inconvenience in the event something goes wrong, it’s likely to impact them a lot more than it does your company.
Assuming you’re shipping in common carriage (if you have contracts with your carriers, all bets are off), a B/L is required under the law, 49 U.S.C. Section 14706(a)(1) for motor carriers. But it’s the carrier’s, not your, responsibility to issue the B/L. To be sure, they’re commonly prepared by shippers, but the statutory obligation is on the carrier. And your customer invoice, as you describe it, gives your carriers all the information they need for the B/L and even (with incorporation of Section 7 terms) protects you against liability for freight charges in case your consignees fail to pay.
There’s also a pragmatic reason to have a B/L: it’s the contract of carriage for the shipment to which it relates. That’s what gives a carrier entitlement to its freight charges, establishes any liability limitations, and otherwise fixes the parameters of the shipper-carrier relationship. A carrier that doesn’t bother with a B/L is poorly positioned legally to enforce the terms of its tariffs/rate schedules and its rules. It also may compromise its ability to limit liability for loss and damage to less than the full actual value called for by the statute.
But there are drawbacks for you, too, which is why it’s a good idea to insist on a B/L before turning your goods over to a carrier. If you have special shipping or handling instructions, the B/L is the means by which you give and enforce them. And, absent some sort of written receipt for the goods, proving you turned them over to the carrier might be problematic in case of non-delivery.
Your question about whether you’re bound to a specific B/L form raises an interesting issue. No, you aren’t, and these days many shippers have taken to using forms — such as the Transportation and Logistics Council’s so-called shippers’ B/L — that afford them certain rights and protections that go significantly beyond what’s customary.
You won’t get such terms if you don’t prepare a B/L form specifying them; a court almost certainly would apply only the standard protections of the uniform B/L (as found in the National Motor Freight Classification), which are pretty bare-bones implementations of the underlying law.
All of which is to say that, while your colleagues are probably correct that you can get along in most cases without a B/L, you really ought to have one for your own protection. It’s always a good idea to document business relationships properly, and the B/L is the means of doing this in transportation.
As for your departmental protest that “it takes a while to fill out a bill of lading,” that’s lame. It also “takes a while” to manually prepare your detailed customer invoice, but I doubt mightily you’re doing it that way. Unless your company is in the dark ages, a computer is doing that for you with the speed of summer lightning. Because you already have the necessary data captured, reprogramming your system to also spit out a B/L ought to be a piece of cake.
Consultant, author, and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; email: BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.