Electronic Bills of Lading – 4

1. We recently had the privilege to attend two insightful webinars, “The Future of Electronic Bills of Lading” and “Reimagining Bills of Lading for the 21st Century”. These sessions delved into the growing relevance of Electronic Bills of Lading (E B/Ls). Additionally, we were able to read Akash Dubey’s compelling dissertation, “Clearing the Path for Digital Shipping: Electronic Trade Documents Act, 2023”, which explores the impact of the new English Act and its application to E B/Ls.
2. Current Landscape: While it is widely acknowledged that adopting E B/Ls can significantly expedite shipping processes, reducing both time and cost, the reality remains that most Bills of Lading (B/Ls) are still issued in paper form. Despite the increased attention during the COVID-19 pandemic, E B/Ls have not yet catalyzed the transformation many had hoped for.
3. Functional Equivalence vs. Transfer of Title : Emerging platforms for E B/Ls focus on replicating traditional paper-based systems to achieve functional equivalence. While this approach ensures approval from trade bodies and insurers, we believe the primary focus, especially in the container shipping industry, should be on the Transfer of Title
   1. A B/L traditionally serves three main purposes:
      1. Receipt
      2. Evidence of a Contract of Carriage
      3. Document of Title (Transfer function)
   2. Our observations on the first two functions are as follows:
      1. Receipt Function:In the container industry, B/Ls are commonly issued with terms like “Said to Contain” or “Shippers Load, Stow & Count,” indicating that the carrier has limited knowledge of the container’s contents or condition. In such cases, the receipt function is largely redundant, aside from confirming the date of shipment. This could easily be handled by the issue date of the E B/L or Transfer of Title document.
      2. Contract of Carriage:B/Ls also serve as evidence of the terms of carriage, which becomes the contract when transferred. While most container carriers operate under broadly similar terms, there are variations concerning jurisdiction, multimodal transport, and General Average. Standardizing these terms across the industry would encourage wider acceptance of E B/Ls. Associations like the Digital Container Shipping Association and BIMCO could play a pivotal role by defining and publishing standardized wording and essential data requirements (e.g., carrier name, container numbers, sailing date).
4. Negotiability of B/Ls: We are yet to encounter data on the percentage of negotiable B/Ls issued vis-à-vis the non-negotiable B/L’s / documents. We however suspect that most of the B/Ls issued are either non-negotiable or allow only a brief period for negotiability due to regulatory requirementsⁱ (declaration of consignee details) before cargo discharge. If our assumption is correct, existing processes may be sufficient for the issue of non-negotiable B/L’s/documents but could be optimised for greater efficiency. What then left is to consider an appropriate system for Transfer of Title for a smaller percentage of cargo which require a negotiable B/L.
5. Conclusion:
   1. The shift to E B/L’sⁱⁱ represents a significant opportunity for the shipping industry to modernize and increase efficiency.
   2. The present focus is on Functional Equivalence and which may no longer be relevant at least for the container industry. Instead, the new system should be modelled on something based on “Zero Based Budgeting” i.e. look at what is necessary only.
   3. By addressing these challenges, the industry can unlock the full potential of electronic documentation and pave the way for a more agile, cost-effective future in shipping.

ⁱ. See Advance Manifest Requirements in China, India and USA.
ⁱⁱ. See also our earlier articles Electronic Bills of Lading, Electronic Bills of Lading (eB/L) – Part 2, Electronic Bills of Lading – 3 , Bills of Lading – Electronic / Blockchain or Traditional methods? and Electronic Trade Documents which can be viewed by clicking the hyperlink.