Digital invoice of lading (ebol, eb/l): a key to making improvements to the potency of world industry
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Throughout the last decade, adopting new approaches and integrating new digital technologies into all levels of a business, commonly known as digital transformation, has become the only way to cut down costs and improve business operational efficiencies for many. Today, global trade faces a serious need for a new phase of unprecedented digital transformation where the conversion to electronic documentation and using an electronic bill of lading (eBoL) should play a key role.
Many believe that the eBoL and the shift from paper-based to digitally-enabled operations will not only improve the security of operations, speed up processing transactions, and enable cost savings for certain groups of stakeholders but also ultimately result in greater efficiency for the global trade in general.
However, due to a heavy reliance on physical paper and in-person signatures to communicate within the global trade domain, eliminating the need for paper-based documents is a daunting task.
We will try to analyze where the industry is now on its way to a digital transformation in part of the adoption of eBoL, what holds businesses back from widespread adoption, and use of the electronic bill of lading, and what eBoL solutions exist today,.
WHY CONVERSION TO THE ELECTRONIC BILL OF LADING IS SO CRITICAL FOR GLOBAL TRADE?
WHAT IS A BILL OF LADING, AND WHAT IS ITS PURPOSE?
Bill of lading (BoL or B/L) is one of the key documents in global trade. This document has been around for several centuries, and through this time, it has always been created, sent, and stored as a physical document in paper form.
In essence, it fulfills three functions and serves as:
- Contract of carriage (Evidence of contract of carriage – the contract between carrier and exporter).
- Receipt of cargo (A receipt for shipment acknowledging that the cargo was loaded on a ship).
- Exclusive rights of cargo / Title transfer (Document of title to the goods, which means whoever possesses the original paper copy is the one legally entitled to deliver it to the destination).
THE DRAWBACKS OF BILL OF LADING
Like any other physical document, handling a bill of lading implies physical delivery (often via courier) between carriers and exporters.
Also, it requires manual checking, making handling BoL labor-intensive, error-prone, and costly.
Plus, a document can be easily forged, lost, or stolen, potentially compromising the on-time delivery of goods and causing significant consequences for all parties involved.
Because of express courier services, global trade is losing over 5 billion dollars every year. Not to mention a time loss of document transfer, which averages 5-8 days.
All these restrict the efficiency of global trade and increase costs for operations.
RISE OF THE ELECTRONIC BILL OF LADING (EBOL)
To eliminate unavoidable problems associated with physical documents and cut time and costs for operations, the industry constantly demands solutions capable of improving document processing and offering significant convenience and savings.
Since the late 90s, the industry has witnessed many attempts to develop solutions capable of fulfilling the need for paperless trade operations. Given that BoL is a key document in international trade, finding a solution that would provide the functional equivalence of an original paper was part of the task.
Some of those attempts resulted in eBoL- a digital alternative to a traditional paper-based bill of lading document.
In the last few decades, technological advancements have brought us blockchain and cloud technologies that gave a new boost to the electronic bill of lading (eBoL) and elevated solutions to a new level.
The modern eBoL solutions available on the market today aim to replace the traditional paper, that based BoL document and courier services with a digitally released document transferred via peer-to-peer blockchain or cloud-based technology. Giving that, to be legally and commercially effective, eBoL must be secure and have a unique holder at any one time, “a digitally released document” means not just a digitized version of paper BoL (a PDF copy of a paper document). But an electronic document completely created it is then approved, and transmitted electronically through the mentioned above technologies.
These results in the following perks businesses can expect adopting modern eBoL solutions:
- Faster document transmission – transfer of eBoL happens almost instantaneously. This leads to cutting down document transfer time from weeks to minutes. Moreover, eBoL can be easily canceled and re-issued. Hence the time involved in handling documents or dealing with possible errors is also significantly reduced compared to traditional paper-based BLs.
- Lower cost – besides savings caused by the time-saving aspect, we can expect significant savings from having no administrative overheads or costs involved in paper BoL.
- Higher security – as the eBL process implies no physical documents, the risk of theft, fraud, or accidental loss is eliminated or reduced, depending on the technology in use.
- High operational efficiency – since eBoL comes hand-in-hand with process automation, reduction in manual processing, and reduction in paper use, businesses can expect an increase in operational efficiency.
All those make eBoL an obvious choice for many stakeholders involved in global trade and ensure fast movement of shipments and a smooth payment process.
THE CHALLENGES OF EBOL SOLUTIONS
You might see that if eBoL solutions are so good, why do paper documents still exist and dominate the market?
To answer this question, we need to look at the challenges associated with the adoption of eBoL.
1. LACK OF SUPPORTIVE LEGISLATION IS A SIGNIFICANT BARRIER TO EBOL’S WIDESPREAD ADOPTION AND USE
Electronic bills of lading have been around for decades, but the legislative framework existing worldwide today, in the big picture, supports the use of paper documents only. Of course, some countries acknowledge eBoL, but usually, it is rather an exception. So, only a tiny percentage of cargoes worldwide are carried under eBoL.
The Hague-Visby Rules is a mandatory framework of rights and obligations that governs the carriage of goods by sea. Being last revised and updated before 1980, the document doesn’t provide clear instruction or clarification whether an electronic document has the same legal power as a paper one. This causes some legal uncertainty, and creates a barrier for eBoL adoption.
Such a framework lags behind the speed of technological development and the modern business environment’s needs. To bridge that gap and push the adoption of eBoL forward, there were some law initiatives. The Rotterdam Rules 2008, an Electronic Bills of Lading Clause for charter parties released by BIMCO in 2014, and the Modern Law on Electronic Transferable Records (MLETR) formulated by UNCITRAL in 2017 are just a few examples of such initiatives.
Although the response to the initiatives is slow, there is a small but constantly growing number of countries, little by little, are implementing changes to their legislation. Good examples are Singapore and Bahrain.
And today, these countries are the true champions in terms of legislation amendment and eBoL facilitation. The USA also has some legislation supporting the use of eBoL. However, in the laws of most countries worldwide, the legal status of eBoL is still rather unclear.
2. LACK OF COMMON STANDARDS, INTEROPERABILITY ISSUES
Besides unclear situations with the legal framework, the lack of common standards and interoperability issues also slow down the adoption of eBoL.
Since there are no common standards for electronic bills of lading, providers of solutions try to use approaches, data standards, and technologies convenient for their use. This leads to a situation where we have multiple systems, even ecosystems incapable of communicating with each other. So, they exist in isolation and are not ready to be integrated with any other platform.
To help the industry with interoperability challenges, Digital Container Shipping Association (DCSA), a consortium of largest carriers such as CMA CGM, MSC, ONE, Evergreen ,Maersk, Hapag-Lloyd, HMM, Yang Ming and ZIM, has recently published “data and process standards for the submission of shipping instructions and issuance of the bill of lading (BoL)”. The standards aim to facilitate acceptance and adoption of an electronic bill of lading by regulators, insurers , and banks, as well as to unify communication between parties involved in the transaction.
It is not clear yet how the industry received the initiative, some document might be a significant step forward to help providers of eBoL solutions and other industry stakeholders “speak the same language” and break down the interoperability challenge.
3. OTHER CHALLENGES AND ISSUES WITH IMPLEMENTING EBOL SOLUTIONS
Technical barriers such as lack of awareness (many companies do not understand what eBoL is and why they need it) and lack of in-house resources to adopt and maintain solutions are also significant blockers for the wider adoption of eBoL.
To overcome these challenges, all vendors providing solutions should raise awareness of the benefits eBoL provides and explain the difference between an electronic bill of lading and simple digitization of trade documents.
Also, All vendors should partner with companies specialized in data connectivity to ensure a seamless adoption of their solutions for all those who want to benefit from eBoL but have no internal resources available.
The above-mentioned challenges have been holding actors of global trade back from shifting to a modern electronic approach of handling BoLs in many years. Today, we see a growing number of companies changing their conservatism and wait-and-see attitude to a willingness to dip their toes into the waters of modern electronic bills of lading services.
WHERE ARE WE NOW?
Today, absent any substantive law supporting the use of eBoLs, achieving the functional equivalence of an original paper BoL, it is possible through the so-called “club” system only – a closed party network based on contractual arrangements agreed in advance between the parties. All parties involved in a specific transaction have to be members of the club and sign up to a single contract, which is itself subject to an established legal system.
The club’s name is IG P&I, which stands for International Group of Protection & Indemnity (IG P&I). The club represents an international group of 13 individual P&I clubs that provide marine liability cover for approximately 90% of the world’s ocean-going tonnage.
By agreeing to cover liabilities arising regarding the carriage of cargo approved by the club solutions, IG P&I provided a kind of equivalent status to an eBoL as if it were a paper document. The P&I approval also guarantees that the approved solutions have been checked for security and validity.
