The beginning of the end for the Paper Bill of Lading

Many things have changed in the last 30 years in shipping and freight..

Many positive new developments have taken place with things from the vintage days of shipping either obsolete to almost obsolete now..

If you look at many of the news items about the industry recently, there has been a certain buzz and intensity around the electronic bill of lading..

I am fairly confident that people entering the shipping and freight industry in the next decade will be told that 2020 was the year that saw the beginning of the end for the paper “Bill of Lading” and the year in which the switch to “Electronic Bill of Lading” (eBL) began in earnest..

While this buzz and hype may seem novel to those who are new to the industry, the electronic bill of lading as a concept has been around since the 1990’s and there have been several discussions surrounding this..

The beginning

CMI – The Comité Maritime International, is a non-governmental organization established in Antwerp in 1897 with the objective of unification of maritime law in all its aspects..

In 1990, the CMI adopted the Rules for Electronic Bills of Lading in order to establish a mechanism for replacing the traditional negotiable paper bill of lading with an electronic equivalent..

These rules are voluntary, not legally binding, and work on the basis of a “communication agreement” between trading partners for their application..

These rules also do not interfere with the laws applicable to the contract of carriage, such as the Hague, Hague-Visby or Hamburg Rules and the rules clearly states that “the contract of carriage shall be subject to any international convention or national law which would have been compulsorily applicable if a paper bill of lading had been issued“..

This opened the doors for anyone with an eBL technology platform to create an electronic equivalent for the paper bill of lading..

 

BOLERO (Bill Of Lading Electronic Registry Organization) was launched in September 1999 as an electronic trade community to provide a common and open system for businesses to exchange trade data and documentation electronically without the involvement of paper..

Bolero was jointly owned by the TT (Through Transport) Club, which represented container carriers, ports/terminals and logistics companies and S.W.I.F.T (the Society for Worldwide Interbank Financial Telecommunications) the international banking cooperative.. The TT Club subsequently wrote off its investments in Bolero in 2004..

The Bolero Project, which was the first commercial attempt at creating an Electronic Bill of Lading was set up as an electronic central registry system to enable the transfer of title between users..

The Bolero system (Rulebook/Operating Procedures) was one of the first two electronic trading systems approved by the International Group of P&I Clubs in 2010 alongwith the trading system administered by Electronic Shipping Solutions (essDocs)..

This approval meant that the P&I Clubs under the IGP&I umbrella will cover liabilities arising in respect of the carriage of cargo under such approved electronic trading systems in the same way as it would for a paper bill of lading..

Today there are 6 electronic systems approved by IG P&I :

1. Electronic Shipping Solutions (essDocs) ;
2. Bolero International Ltd (more specifically the Rulebook/Operating procedures September 1999.) ;
3. e-Title solution ;
4. Global Share S.A. edoxOnline ;
5. WAVE ; and
6. CargoX Smart B/L (“CargoX”)

 

So why the renewed buzz and hype around the electronic bill of lading..??

Well, the current buzz surrounding the electronic bill of lading (eBL) can be attributed to a virus – the COVID-19..

Due to the restrictions in human and transport mobility that COVID-19 has brought on, many containers are stuck at various ports, terminals, depots and warehouses around the world due to the receiver not receiving the original paper bill of lading required for the release of goods at destination..

The trade is already losing millions of dollars due to lockdowns, slow productivity at ports, port congestion, overpriced trucking costs, reduction in carrier’s TEU capacities etc.. Delays in receiving this paper documentation and the resultant delays in cargo delivery is creating further losses and stretching the budgets of the traders..

Although shipping lines have assisted with releasing the goods against LOI without insisting on the original bill of lading, this is one lesson that no one is going to forget and there is no going back..

Whatever doubts or hesitation that the trade had, whatever concerns they had on the issue of safety, security and acceptability relating to the transmission and receipt of electronic bill of lading, whatever concerns in terms of readiness of the carrier and country to handle an electronic bill of lading – it is all on its way out..

The electronic bill of lading is quickly becoming a thing of NOW..

If the 90s was the decade for the seeding and development of the eBL and the 2000s was the decade for its incubation (or hibernationa), this decade of the 2020s could see the growth and establishment of the eBL with possible full maturity in this decade itself..

 

Standardisation of the Electronic Bill of Lading

Although there has been a lot of interest and research into the eBL, there is still a question of its acceptability and global usage because not everyone is using the same data and communication standards..

Only the setting of digital standards will enable seamless communication and data transfer between all the role players in the chain..

Recently, DCSA which is a nonprofit, independent organisation established in 2019 by some of the largest container shipping companies has accelerated its efforts for the standardisation of the Electronic Bill of Lading..

As per a DCSA research, the container shipping industry stands to save an estimated annual savings of about US$ 4 billion based on a 50% adoption of electronic bill of lading.. The research using a financial modelling exercise showed that the processing costs for a paper bill of lading were 3 three times much as an eBL processing and that the actual process cost for a single BL can vary widely..

DCSA believes that if the eBL standardisation process is started now, the industry can achieve an adoption rate of 50% by 2030.. They are basing this on IATA’s e-Air Waybills (e-AWB) for airfreight which was adopted in 2010 and is sitting at a 68% adoption rate in 2020..

The organisation’s objective of achieving these standards is also buoyed by the fact that its members (MSC, Maersk, CMA CGM, Hapag-Lloyd, ONE, Evergreen, Yang Ming, HMM and ZIM) are all high profile container lines – all of them within the top 15 container lines in the world already with state of the art electronic systems themselves..

“DCSA’s mission is to drive alignment and digital standardisation to enable transparent, reliable, easy to use, secure and environmentally friendly container transportation services. Digitising documentation, starting with the bill of lading, is key to the simplification and digitisation of global trade” says Thomas Bagge, CEO of DCSA.

“The transformation that has taken place in the airline industry is an example of what’s possible if we work together. The e-AWB is now the norm rather than the exception among air carriers. We invite industry stakeholders to work with us to create standards that will make the eBL maximally useful and relevant for ensuring their goods are delivered safely and seamlessly to their final destination.”..

 

The reason for the adoption of Electronic Bill of Lading

COVID-19 notwithstanding, advances in new technologies such as Blockchain, IoT etc has enabled the world of trade to communicate, collaborate and continue business at a much quicker, safer and easier pace than ever before..

As mentioned above, although the eBL concept has been around since the 1990s, regulatory issues surrounding the acceptability of this bill of lading was a major dampener restricting its commercial usage.. Not just governments, but banks and insurers were also loathe to accept this form of trade documentation..

COVID-19 changed all that and many of these establishments are now looking at ways of changing the way they do business and the eBL has seen a sudden resurgence in interest..

André Simha, Global Chief Digital & Innovation Officer for MSC and DCSA Chairman recently noted, “The COVID-19 situation is bringing the core strengths of a standardised eBL to the fore. Cargo in ports cannot be gated out because of paper that is stuck elsewhere due to airfreight delays caused by the pandemic.”..

In fact, in a recent survey done on the impact of COVID-19 on supply chain, one of the most important trends unearthed was that a whopping 42% said they would change their shipping and supply chain strategy based on their experience with the Coronavirus pandemic..

67% saying they would invest in technology as part of their recovery efforts post the pandemic..

 

 

If you want to check your readiness to invest in freight technologies, you can take click here to take a short 5-minute survey..

 

Conclusion

The change in mindset in the market with regards to the eBL (albeit driven by a dark force like COVID-19) could just be the accelerator or push that the market needed in adopting the eBL..

Apart from the above, the recent improvements in technology and the collaboration within the industry is knocking down barriers for the adoption of the eBL..

The eBL is about to make a strong entry into the container shipping industry and the sooner everyone welcomes, adopts and accepts it, the better for all.. There are still a lot of doubts about the efficacy of the eBL, especially among small to medium business.. In fact, last week one of my neighbours who is a small scale exporter asked me how this eBL works and if it is worth looking into for businesses of his size..

The setting of standards for the handling and transmission of the eBL will greatly enable interoperability and acceptability among everyone involved in the documentary chain including BCOs, Banks and regulatory authorities and make the eBL a viable replacement for the paper bill of lading..

Will the year 2020 be the beginning of the end for the paper bill of lading..??

 

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