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Electronic Bills of Lading

Jagan - September 10, 2014 - 0 comments

This article discusses on Electronic Bills of Lading with reference to Paper Bills of Lading. Although there are many many providers of Electronic Bills of Lading such as Bolero, essDOCS, KTNET and ETitle, we contacted Bolero and essDOCS so that we could ascertain the differences between both a paper B/L and an electronic B/L.

  1. One of our readers had commented after reading our earlier article Switch Bills of Lading – revisited that we should have also considered Electronics Bills of Lading (“eB/L”). We subsequently contacted both Bolero and essDOCS (in no particular order of preference) so that we could ascertain the differences between a paper B/L and an eB/L so as to write an article. This article is made possible by the assistance provided by both Bolero and essDOCS.
  2. By way of introduction, although eB/Ls were touted more than a decade ago, in the recent past we have been seeing traction due to the efforts of both Bolero,essDOCS and other parties in promoting this to the trade. It appears to us that the push for eB/Ls would come from the cargo interests as they simplify and shorten processes with respect to trade transaction by doing it electronically (letter of credit, bank payments, etc). Although some Liner companies such as PIL & NYK appear to be issuing eB/Ls, the majority of the Container Liner Operators (“CLO”) are still dealing with a paper B/L. Having said that, we believe that eB/Ls would be the standard in the future and therefore it may make sense for CLOs to consider and participate in the development.
  3. Under English Law, derivative rights and liabilities under contracts of carriage are governed by the Carriage of Goods by Sea Act 1992 (which came into force on 16th Sep 1992 – hereinafter “COGSA 1992”). This act applies in conjunction with the Carriage of Goods by Sea Act 1971 (which incorporates the Hague/Visby Rules as laid in Schedule 1 and which applies automatically to certain carriage contracts by force of law – hereinafter known as “COGSA 1971”). COGSA 1992 applies to various transport documents such as bills of lading, sea way bills and ship’s delivery orders. The title to sue under COGSA 1992 is not linked to property but is vested in the lawful holder of or the consignee mentioned in the transport document without the need of establishing that such holder or consignee is the owner of the cargo represented by the document. Further, the transfer of rights under a contract of carriage occurs independently of any transfer of liabilities. However, the act does not apply to electronic substitutes such as the eB/L’s but allows the Secretary of State by regulations to make provision for the application of this act for eB/L (S1(5) of COGSA 1992). Therefore, the implication is that for COGSA 1992 to apply to eB/Ls, regulations must be issued by the Secretary of State. In the circumstances, as no such regulations appear to have been issued, under English Law, a paper bill is necessary if a buyer of goods in transit is to acquire rights against the carrier (without a new contract of carriage having to be entered into at the time each re-sale is concluded).
  4. Bills of Lading are essentially transport documents issued by the carrier and serve three functions which are as follows:
    1. Receipt
    2. Evidence of Contract of Carriage
    3. Document of Title 

      While the first two functions can be easily replicated in an eB/L, it is the third function i.e. Document of Title which may cause issues to replicate.

  5. Both the Bolero and essDOCS systems provide integrated solutions to parties involved in international trade by way of electronic trade documentation. Solutions include Trade Finance and invariably there is a requirement for the presentation of a transport document such as the Bills of Lading. We will focus on eB/Ls and discuss the various stages and our below comments are on the basis of the information provided in both Bolero and essDOCS website and our telecom with them (we have not had an opportunity to physically go through the different processes and therefore it is quite possible that we have missed out some of the processes).
    1. Agreement :
      1. Bolero: All users must sign an agreement with Bolero to be a party to their Rulebook. Each user of Bolero contracts for the provision of the service and separately enters the Rulebook agreement which contains the contractual rules governing amongst other things, eB/L’s.
      2. essDOCS: All uses must sign the DSUA Agreement to use the services of essDOCS. The agreements in essDOCS are multi-partite agreement which bind all essDOCS users to each other and to essDOCS. 

        These agreements allow a legal framework to replicate the legal results achieved in a paper environment. As mentioned in 3 above, under English Law, COGSA 1992 does not apply to eB/Ls.

    2. Issue of eB/L:
      1. Bolero: At present, the CLO’s upload their B/L details into the Bolero system in human readable format (both pages containing the face of the B/L showing the parties to the contract of carriage together with the cargo details which would act as receipt and the reverse side showing the terms and conditions of carriage) together with a Title Registry Instruction. We understand that Bolero is presently working on an “edi” format and which will allow CLOs to send data from their systems to create an eB/L.
      2. essDOCS: Members of the essDOCS platform need to fill up the data fields of the B/L as the system would incorporate the wordings of the standard B/L issued by the CLO. The data can be either keyed in or uploaded by the CLO via edi, after which an eB/L can be generated and which will basically mirror what would have been in document form. Data fields can be completed either through edi or by using the web-based system.
    3. Transfer of Title:
      1. Bolero: The eB/L is a combination of the Title Registry Record and an attached document that contains the eB/L date. If a party as Holder of the eB/L wishes to transfer the eB/L, he communicates with the registry record by means of a Title Registry Instruction which automatically transfer the eB/L to the other party (who would be a member of Bolero) and in this way transfer title. The Bolero Rulebook provides that except for the original shipper, the transfer of title would extinguish all liabilities of the intermediate parties in the chain. This transfer of title continues till the last party comes forth who surrenders the eB/L to the carrier via Title Registry instruction sent through the exchange to the carrier so that the control of the title registry record passes on to the carrier. Parties are able to view all prior endorsements made on the eB/L just as they would be able to do in a paper B/L. 
      2. essDOCS: The transfer of title is done by way of control of the eB/L. Once a party receives the document, he is asked if he wishes to endorse/transfer to another party and in this way the document passes on to the next party. Here, the system replicates a paper document as far as possible. Parties are able to view all prior endorsements made on the eB/L just as they would be able to do in a paper B/L.
    4. Amendment/Switch of eB/L:
      1. Bolero: If a party wishes to make an amendment or a switch, he can approach the CLO via the System with the relevant details and who may agree to amend/switch as the case may be. Once the eB/L is amended / switched, the CLO would reissue or issue a new eB/L as mentioned in ii.a. above. In the case of a switch, except for the CLO, subsequent parties are unable to see details of the previous holder i.e. prior to the switch.
      2. eSSDocs: Parties may request for an amendment or a switch by doing the amends themselves with the CLO deciding as to whether to agree and approve the amends/switch. If a switch has been approved by the CLO, then except for the CLO, other parties would be unable to access details of the previous holders i.e. prior to the switch.
    5. Charges:
      1. Bolero: As of now, Bolero does not charge CLOs.
      2. essDOCS: essDOCS does not charge CLOs to use their web-based system, and also provides part of its EDI solution free of charge. Charges only apply when a solution entails complete end-to-end integration between essDOCS and CLO’s systems.
    6. Transfer to Paper B/L:In both Bolero and essDOCS, a request could be made to the CLO by the holder of the eB/L to issue a paper B/L. Following this request, the CLO would issue a paper B/L (the eB/L will be no longer valid).
  6. Costs for issuing eB/Ls: CLOs and their agents charge their customers for issuing Bills of Lading. Given the state of the prevailing freight market, we understand that in some trades, this is an important revenue component. As of now, both the Bolero and essDOCS do not charge CLO. However, should this change, the question would be is whether the CLOs would be willing to pay a fee to either Bolero/essDOCS to issue eB/L? As mentioned in 2 above, given the demand push by the customers, CLOs may wish to absorb these additional costs or in turn charge these additional costs to their customers (which certainly would be insignificant considering the benefit which their customer would derive by way of quicker service).
  7. Transport Liability Insurance: We understand that both the Bolero/essDOCS are endorsed by the IG P&I Clubs, ITIC and TT Club. This being the case, if the CLO is covered for their liability risks from an insurer who has not approved eB/Ls, it would be best for CLO’s to advise their Insurers and seek endorsement that eB/Ls would fall under the cover provided to them.
  8. Standard Operating Procedures: In the case of a paper B/L, the person signing the B/L would generally be a senior individual who would check and verify that all standard operating procedures have been followed and proceed to sign the B/L. In the case of an eB/L, it would be appropriate to have a similar check and balance in that once the eB/L is ready for issue, it must be reviewed by a sufficiently senior person for approval to issue/release. Other than the operational issues for the issue of eB/L, we do not see any significant risks to CLO’s and therefore prior to making the change, it would be worthwhile for an operator to do a flow chart together with a fault tree analysis to map the risks.
  9. In conclusion, eB/Ls appear to mirror a paper B/L (CLO’s can continue to use the same processes which they use for their paper documents) and appear to have come of age and the day is not far when transfer of information would flow without the need of any paper documents. CLOs must therefore review their systems and procedures and consider implementing eB/L’s to satisfy their customers’ requirements (it may be that they would have to consider both platforms i.e. Bolero and essDOCS, as some of their customers may be using one platform and the others using the other platform). It also appears to us that service providers such as Bolero, essDOCS, KTNET, ETitle, etc would also need to consider as to whether their systems could operate seamlessly between other systems (so as to avoid CLO’s signing up for multiple providers to issue eB/L’s).

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