Electronic bill of lading #eBL

- Peter Kern is the COO of CargoX Ltd., with almost two decades of experience in leading positions in the shipping industry 

Electronic bills of lading are becoming a standard way of transferring title and as the contract of carriage – and rightfully so. 

They are faster, more cost-efficient, and safer to transfer, compared to traditional paper documents. Not to mention that they can be manipulated contactlessly and remotely in distributed teams, with the help of digital signatures. That is why numerous large shipping companies and leading maritime trade countries are driving the digital transformation of global trade and improving operational efficiency.

Electronic B/L (#eBL), blockchain B/L and smart B/L

Electronic bills of lading enable digital document of title transfer, preserving all the functions of a paper bill of lading while improving speed, cost-efficiency, and reducing the risk of delays. Blockchain brings major improvements to the core electronic B/L functionality. 

A blockchain bill of lading (or a smart bill of lading) is a special type of electronic bill of lading that uses blockchain technology for an immutable audit trail, ultimate transparency of business events, and unbreakable confidentiality among business partners. Blockchain bills of lading make it possible for businesses to build deep levels of trust, automated processing of release, improve workload planning, and even help analyze processes and make reliable projections on a large scale. 

Electronic B/L solutions, designed 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 support an immutable and tamper-proof environment. Electronic BL services were complex to use, and consequently, the companies using them were not yet able to see the added value of a digital bill of lading processing. Blockchain changes that profoundly.

Smart, modern electronic bills of lading, built on blockchain technology, introduce 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.

While using a blockchain-based electronic bill of lading, military-grade encryption is used to secure the confidential content of both the documents and owner’s identity, while the transfer of ownership is validated in a distributed, global, and immutable transactional environment. The neutral, public blockchain provides an impeccable system of validation and auditing transactions of documents of title.

These features provide more trust in digital transfer, and processing, and also bridge the gaps in time, risk, and cost inefficiencies. A smart bill of lading can trigger other processes automatically, as it has very high levels of information reliability!

Main properties of electronic, blockchain-based bills of lading

The electronic bill of lading’s architecture provides the following benefits to the companies that use them: 

• Higher level of security through immutable transaction records

• Owner validation prevents misdeliveries

• Fast distribution around the globe prevents damage and demurrage costs

• Radically lower costs of sending, processing, and archiving 

• Cannot be lost, stolen, or tampered with

• Secure end-to-end documentation process

• Reduced credit time in financial transactions

• Access to trade finance under eUCP600 rules

According to the eUCP rules, an electronic bill of lading is part of the documentary payment process and electronic documents presentation.

This all is of extreme importance, as – according to research by Maersk and IBM – one container shipment can generate 200 communications, and the administrative cost of merely processing the documentation is estimated at 15-20% of the overall cost of transporting the goods. 

Electronic bills of lading prevent the following situations:

• Physical bill of lading is not available

• Multiple persons demanding delivery of the cargo

• Amending the bill of lading after the document has been signed and sent

• Agents providing unauthorized information on the bill of lading

Seven key platforms for eBL

The IGP&I has so far approved seven different platforms for electronic bill of lading transfer. The CargoX Platform for Blockchain Document Transfer (BDT) utilizes the neutral, public blockchain technology to do so. This provides a significant advantage, providing  unsurpassable transparency, as well as immutable audit trail, and unbreakable confidentiality among business partners and in competing with rival solutions essDOCS, Bolero International, E-Title, edoxOnline, WAVE, and TradeLens. 

How do the paper B/L and electronic B/L compare?

Bill of lading regulation

Bills of lading fulfill three main functions: they act as a receipt for the shipment of the goods, they provide evidence of the terms of the contract between the carrier and the cargo owner, and they serve as documents of title. 

These functions of the bills of lading are defined by law and global agreements, such as :

• Carriage of Goods by Sea Act 1992 (COGSA), that replaced the Bills of Lading Act of the UK (1855)

• Hague (-Visby) Rules (1924)

• Hamburg Rules (1978)

• Rotterdam Rules (2009)

• Other laws and regulations … 

Valid through all parties’ freedom of contract

As the regulation varies from country to country, so varies the acceptance of electronic bills of lading as equal to paper bills of lading, as well as the acceptance of various methods of digital signatures. Some countries already adopted new specific legislation to support digitalization, while some are working their way towards that goal by implementing best practices, as well as provisions of the UNCITRAL MLETR Model Law for Electronic Transferable Records, and other legal solutions. 

Jurisdictions that have legislation adopting MLETR, or are in the process of adoption, including Bahrain (passed in 2019, first to adopt MLETR), Singapore (2021), Abu Dhabi Global Market (2021), Belize (2021), Kiribati (2021). Those considering bills to adopt MLETR include Papua New Guinea, Paraguay, Trinidad & Tobago. 

Nevertheless, according to the parties’ freedom of contract, all the participants in a cargo shipping transaction agree that they can accept the electronic B/L, signed electronically, as a valid document, with all its practical and legal implications. (See: Time is Now - Widespread Adoption of the Electronic Bill of Lading by Patrick Vlacic, Ph. D., Maritime Law Expert).

While jurisdictions are creating common laws for electronic transferable records, private laws, rulebooks, and arbitration provide for the immediate adoption and use of electronic bills of lading.

New developments in global trade regulation

There are many ongoing activities to define the standards and frameworks for the global shipping industry and to facilitate frictionless global trade. 

CargoX follows them closely and contributes to the efforts of international bodies to build standardized formats. 

Generally, to be up to speed with the development of the eBL, it is recommended to closely observe the following:

• United Nations Commission on International Trade Law (UNCITRAL) draft Model Law on Electronic Transferable Records (MLETR).

• International Chamber of Commerce (ICC) Uniform Rules for Digital Trade Transactions (URDTT) Version 1.0 and UCP600 rules on documentary credits for the financial sector.

• Digital Container Shipping Association (DCSA), bringing together the biggest shipping companies in the world – MSC, Maersk, CMA CGM, Hapag-Lloyd, ONE, Evergreen, Yang Ming, HMM, and ZIM, eDocumentation initiative Standards for the Bill of Lading

• International Trade & Forfaiting Association (ITFA) Digital Negotiable Instruments Initiative (DNI).

• Group of Seven (G7) Trade Ministers' Digital Trade Principles.

• UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT); Multimodal Transport Reference Data Model.

• Baltic and International Maritime Council (BIMCO) standalone Electronic Bill of Lading Clause (2014).

• International Federation of Freight Forwarders Associations, developing a e-FIATA Bill of Lading, has announced the standard and tools to be published soon. 

When do we digitalize complete global trade?

If anything, the COVID-19 pandemic has brought to light the need for contactless, paperless processing of business documentation. This holds true especially in environments where exposure to the Sars-CoV-2 virus and the resulting illness can cause great inefficiencies in processing such important objects as either trade documents, or the cargo itself. The CargoX Platform provides fully contactless and remote trade documentation manipulation, transactions, and verification of originality. In addition to that, it also supports the collaboration of dispersed teams on a level that was not possible with paper-based trade documentation processing.

The trends leading to digitalization in global trade are stronger than ever. Political and professional interest groups are using their influence and knowledge to develop a new global trade digital ecosystem, based on modern technologies, and with a new level of trust in a trustless digital world. Trust that is built on transparency, accountability, and technical and legal interoperability.

One of the strongest signals in the market was the decision by the G7 Group of Seven major global economies (Canada, France, Germany, Italy, Japan, the UK, and the US), which produce 33% of the world’s economic output) to agree on the G7 Trade Ministers' Digital Trade Principles to govern cross-border data use and digital trade. This breakthrough could liberalize hundreds of billions of dollars of international commerce.

This message came five months after the G7 committed in May 2021 to adopting electronic transferable records in international trade transactions and declared exporters have ‘12-18 months’ to prepare, as the G7 paves way for trade digitalization. The G7 also committed to supporting international efforts to facilitate legal reforms as well as ongoing work by other international bodies on interoperability and cooperation on relevant regulatory issues, as reported by GTReview.

Does anyone still think there is no need for digitalization?