The first use of paper was in China in the 2nd Century BC, and it wasn’t widely used by Europeans until centuries later. Paper was certainly a much better medium for recording your shipping consignments than bamboo, silk, or other fibres.
Today, we are probably at a similar crossroads, where digitisation is opening up new opportunities for cost-saving automation, accuracy, speed and vastly-improved efficiency in trade documentation.
We at Bolero have been at the forefront of this journey and were the first to provide the electronic bill of lading (eBL) solution approved by the International Group of P&I Clubs.
Beyond electronic Bills of Lading, Bolero has also been closely aligned with the digitisation of trade finance, expanding to provide more of the supply chain with digital alternatives to paper documents. That through our solutions support the world’s leading carriers, financial institutions and corporates. This allows us to give a unique perspective on the market changes within shipping and finance as it pertains to digitisation.
The bill of lading, for example, has been around for a long time and is likely to remain a key instrument in global trade, issued by a contracting carrier to a shipper. Yet, it too is part of the digital revolution in trade documentation. Just like its paper equivalent, the electronic bill of lading, (eBL) has 3 basic functions:
- A receipt from the carrier for the goods it describes
- The contract for the carriage of the goods
- A document of title, entitling the rightful holder to claim delivery of the goods
Just like a paper bill of lading, the electronic variant must have only one holder at any time. This can be ensured in the subscription of participating parties to a legal rulebook that outlines roles and responsibilities. This enforces the notion of a transferable singularity and secondly, through the use of a messaging platform and title registry database that ensures that essential element of singularity and that there will be no departure from what the rulebook requires.
The eBL fully replicates the functions of a paper bill of lading, containing as it does, the specific data such as a description of the cargo, the ports of loading and discharge, the date of shipment and so forth, along with the terms and conditions of carriage. The new holder takes up the rights in the eBL, subject to the obligations and limitations.
As the advantages of eBLs have become apparent, they have been recognised around the globe. BIMCO, the well-respected carrier association with a reputation for documentation, has issued a standard charter party clause. Additionally, P&I clubs in the International Group provide as standard protection and indemnity coverage for eBLs on the same basis as paper bills.
Whilst there has historically been some reticence to the adoption of these digital variants, a year and a half into the Covid-19 pandemic any lasting objections to taking trade paperless appear to have dissipated entirely.
As a result of lockdowns across the globe; in-person meetings have become scarce, but some would say more importantly have prevented the processing and transportation of important trade documents, chief amongst them the Bill of Lading.
We are now at an inflection point where the digitisation agenda for carriers and forwarders has not only accelerated but there is now political capital that can be gained with the adoption of several legislation in various jurisdictions.
With more than $15 trillion in goods transported annually, the shipping industry is complex and ever-changing. Tightened security measures, business constraints, and competition require companies to look for new ways to run their businesses more efficiently. Electronic Bills of Lading (or eBLs) are changing the industry one freight bill at a time.
How do electronic bills of lading work?
The electronic bill of lading (eBL) is the electronic equivalent of a paper bill of lading. The eBL is a combination of the title registry records and an attached document containing the eBL data.
- An eBL can only have one holder at any one time
- There must be a holder at all times.
- The title registry records who is the holder.
- Holdership is the electronic equivalent of possession of the physical paper bill of lading
There are three key functions of the bill of lading:
The receipt function is easily replicated in the electronic world. The quality of, and therefore the ability to rely on the data confirmed is linked with the quality of the security in the electronic system used. Put simply, are there sufficient measures in place to ensure the identity of the issuer (the carrier) and the authenticity of the data. The right to rely on this receipt.
Contract of Carriage
The contract function is also easily replicated in the electronic world. As we have seen, there are two elements to the bill of lading contract – the data specific to that carriage (port of loading/date of shipment etc) and data setting out the terms and conditions of carriage. As between the carrier and the shipper this is no different to the receipt function. It gets a bit more complicated when the eBL is transferred to a new holder. There is no universal law relating to how the rights and obligations in a traditional bill of lading contract are transferred, this varies from jurisdiction to jurisdiction. The Rulebook establishes the legal method by which this happens for a Bolero eBL. Transferring the eBL means that the new holder becomes a party to the eBL. The new holder takes the rights in the eBL on transfer subject to the obligations/limitations in the contract – the most well-known limitation being the carrier’s ability to limit liability for loss of or damage to the goods.
Document of Title
This function is the most difficult to reproduce in an electronic format. The answer again is found in the Rulebook that characterises precisely the nature of the rights that the new holder gets when it receives the transfer of the eBL. At the moment of transfer, the right of control over the goods passes to the new holder. The new holder becomes the only party entitled to give instructions to the carrier. This is known as constructive possession and this unique right drives the ability to use the eBL for letters of credit and documentary collections. Included in this is the sole right to demand delivery of the cargo from the carrier.
A common misconception is that moving from electronic to paper defeats the purpose of using an eBL in the first place. The speed, accuracy and integrity of an eBL will benefit users up to the point at which a replacement is sought. For example, the eventual holder may require a traditional bill of lading but that doesn’t mean those earlier holders cannot benefit from the benefits of an eBL prior to that final transfer.
Another common misunderstanding is that the replacement will only be from eBL to traditional paper bill of lading. It is relatively easy to see a situation where a party in receipt of a paper bill seeks the replacement of that paper bill with an eBL (if a letter of credit either requires an eBL (under eUCP for example) or an option for either an eBL or a traditional bill of lading). The quicker the documents are presented, the quicker the beneficiary can get paid and/or the goods can be delivered. In this instance the carrier will require the return of the paper bill of lading before issuing a replacement eBL.
So, what does the future look like?
Being involved on both sides of international trade with carriers and financial institutions, we see the partnerships of technology providers, fintechs as the key to digital interoperability between the key counterparties of international trade and elimination of paper processes. The depth of knowledge gained through direct collaboration with the largest shipping lines and financial institutions has allowed companies like Bolero and other providers to develop the connections in networks not seen previously in the paper world.
Adding standards and guidelines on top of that with organisations like DCSA, ICC, UN CEFACT, it becomes easier to align financial documents with shipping documents via digital platforms. Standards facilitate the development of technology providers by lowering the implementation cost and increasing interoperability. But they also help streamline solutions using similar processes and patterns hence leading to adoption by the different trade parties.
At Bolero, we welcome and support any initiative that strives to enable digital trade, regardless of if this can be achieved by cooperation, interoperability, common standards or even through global Legislative developments. Having been a pioneer in this space for over two decades, we understand like no other how challenges need to be overcome and how important it is to be a trusted solution and services provider in this innovative area.
Hence, we look forward to continuing to pragmatically support our current and future customers on their digital trade journey.