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When to use a bill of lading, sea waybill, express release, telex, or a smart B/L?

July 21, 2020, 5:01 p.m.

Simon Ručigaj,
digitalization advisor and communication manager

 

 

This is a common question, but the answer is not a simple one. It depends on the processes your company uses, and how your business model is set up. But the arguments for using any of these document options are easy to make. Follow me!

In short - both the bill of lading (paper or digital) and sea waybill act as a contract of carriage, with all the terms and conditions of the transport. They both act as receipts for the goods being transported. 

But only the bill of lading serves as a document of title, transferring the ownership, sometimes enabling trading with the document, or as collateral security. What is most important - a bill of lading must be used always when there are banks involved in the shipping transactions. When this is not the case, a telex release can help optimize time and courier costs. But the new smart bill of lading concept (on a blockchain) is here to rule over all of these, with undisputable auditability, transparency, and immutability. 

So, why the bills of lading in the first place?

Under the Hamburg Rules of 1978, established by UNCITRAL (U.N. Commission on International Trade Law), which regulate the international transport of goods by sea, it is provided that information about the carriage of goods must be documented with a bill of lading (B/L). At this point, we will avoid to digress into the debate about the Hague, Hague-Visby Rules, Hamburg Rules, US COGSA, and the recently designed Rotterdam Rules, together with the history of the bill of lading, and leave that for another article in the future - but these are all the frameworks propping up the extreme diversity of the shipping industry’s rules, documents and information processes. 

What bills of lading do you really own?

So, let’s return to the question! The bill of lading is a document of title to the goods, and it carries the ownership over to the next holder. With this document, the owner can claim the goods from the carrier at the port of destination. 

A B/L sometimes is a negotiable document that promises the ownership of goods to a specific person or assignee. That is why it is also accepted by banks as collateral security. Of course, this depends on the type of the bill of lading in question. 

The bill of lading declares ownership, and it might likely remain in the hands of the exporter until payment for the goods is received - all while the goods are already sailing to the port of destination. Only after receiving payment can the exporter send the B/L to the importer, to hand over the title to the goods. Sometimes, the bank is the interim holder of the bill of lading, until financial transactions are cleared. 

Sea Waybill a.k.a. express release B/L

The sea waybill is, in its primary function, a document that only serves as evidence of the cargo transfer. It does not facilitate any transfer of ownership between the parties in the process. It is not negotiable and does not allow trading of the goods while they are being shipped. 

This document is used when the payment has been made in advance of the shipment and the ownership of the goods has already been transferred, or if the importer has good credit with the exporter or supplier. It implies a high level of trust between the shipper/exporter and the consignee/importer - such as when both entities are part of the same business group and no negotiations are needed ahead of the cargo’s release. 

To make things a little more complicated in terms of terminology: the sea waybill is sometimes loosely referred to as an express release bill of lading or straight bill of lading. But this is not completely accurate, as a straight bill of lading is just a non-negotiable, non-transferrable document, entitling the release of cargo only to the named consignee and only upon surrender of at least one of the original bills issued. And with a sea waybill, there are actually no bills of lading issued.

But what about the telex release … 

The world of ocean shipping would not be so interesting if there weren’t so many variations and confusing terms, which nobody is really sure what they mean but the whole industry nonetheless runs reliably by using them in different situations. 

One of these is the telex release. It is sometimes considered the equivalent of an express release, as they are used almost interchangeably, usually for fast cargo release procedures. But their definitions are different, and so are their uses. The telex release, you see, is only the service of releasing the cargo at the port of destination by means of informing them through a telex message that the relevant bill of lading has already been surrendered by the shipper or exporter at the port of origin. 

The above described express release document and process are also used in situations when there is no time to lose; often an actual bill of lading follows close behind, or guarantees are issued through different channels. 

The digital, electronic, and smart bill of lading

Modern processes are increasingly using digital bills of lading, especially smart bills of lading (based on blockchain technology). 

Even though some might argue that digital or electronic bills of lading (eBL) have been around for a while and nobody really liked them - the times are changing. Digital B/L solutions, conceived around a decade ago, were built with traditional IT architecture, where ownership was not really auditable all the time, as the technology did not necessarily enable an immutable and tamper-proof environment, and services were complex to use. Besides, shipping line operators and shippers did not see enough value of committing to the path of digital transformation and changing the way “things have always been done”. 

But the shipping industry might just be lucky that modern blockchain technology emerged just at the right time when the current situation is pushing shippers and political entities to optimize legal frameworks and actively pursue the digitization of the ancient behemoth paper concept. Awareness at all levels - personal, business, and policy - is boosting the trend.
So, smart, modern bills of lading, built with blockchain technology and distributed digital ledgers, bring to the table unsurpassed auditability and digital security features, while preserving all the features of the paper B/L. The digital bills of lading (or electronic bills of lading or Smart B/L) of yesterday did not have these properties.

These features enable more trust in digital transfer, and processing, and also bridge the gaps in time, risk, and cost inefficiencies. A smart bill of lading can simply trigger other processes automatically, as it is extremely trusted in terms of information reliability!

Even the International Group of Protection and Indemnity Clubs (IGP&I) are supporting this trend, as they have recently confirmed three new blockchain-based solutions - namely CargoX, WaveBL, and edoxOnline, whereas only three eBL solution providers had been approved in the 10 years before that. 

Blockchain bills of lading transfer make even more sense and seem the ideal choice for the future, as blockchain technologies are being used to record shipments from order release to delivery. The public, neutral Ethereum blockchain network (used in CargoX Platform) is especially suited for the task - as it is independent, transparent, and bolstered by the strongest development community supporting it around the globe. 

To release, or not to release?

All this is important because there exist key differences in processing shipping documentation for the purposes of release procedures at ports of destination. 

In the case of a sea waybill, a procedure called express release is used, as there is no need to go through a complicated and time-consuming controlled cargo release. This is where trust among the parties involved is strong.

If a bill of lading is used, the release procedure leads to additional time and financial costs, as well as the possibility that the paper bill of lading gets lost, stolen, or tampered with. This is avoidable by using a smart bill of lading, such as through the CargoX Platform for Blockchain Document Transfer (BDT). 

But even more important than just improved auditability - smart bills of lading enable companies to build deep levels of trust, automated processing of release, improved workload planning, and even help analyze processes and make reliable projections on a large scale. 

So, now you know. It is all a matter of trust, leading to optimizations everywhere!

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If you want to know how the CargoX Platform for Blockchain Document Transfer (BDT) handles all these types of documents, sign up for a free account (with a quota of free documents to send), or apply for a free demo with our expert advisors at www.cargox.io

 

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