Digitalisation of Bill of Lading

July 28, 2023
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Technology

Introduction – Bill Of Lading

The bill of lading (B/L) holds significant importance within the shipping industry. Having its origins in Italy during the 13th century, this document is issued by a contracting carrier to the shipper, serving three primary purposes:

Acting as a Receipt for Carriage of Goods – The bill of lading acknowledges the carrier’s receipt of the listed items. In case of any loss or damage to the goods, the carrier is liable if they fail to deliver the items specified in the bill of lading.

Serving as Proof of a Carriage Contract – The bill of lading provides evidence of the agreement for carriage between the shipper and the carrier. It contains vital information about the shipment, such as the ship’s name, load and discharge ports, date of issue, freight details, and pre-printed terms and conditions. These terms and conditions become binding for any subsequent holder of the bill of lading after it has been transferred to another party.

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Functioning as a Title Document – When the bill of lading is handed over to the carrier, the lawful holder becomes entitled to receive the goods. This aspect allows the transfer of cargo ownership from one party to another, often referred to as a “document of title.” Traditionally, the transfer occurs through the physical exchange of a paper bill of lading, sometimes requiring endorsement depending on the situation. However, time constraints may limit how swiftly the paper bill of lading can be physically transferred.

Lacunaes Present In Traditional Bill Of Landing

One of the major drawbacks of the traditional bill of lading is that it is a physical document that requires physical transfer, unlike an electronic transmission. The advantages of replacing paper bills of lading include:

Administrative expenses: From an administrative perspective, paper bills can be costly.

Practical considerations: In modern international trade, it is uncommon for the bill of lading to be ready at the discharge port when the goods arrive. Therefore, due to multiple intermediaries, bills of lading are often passed along. Consequently, ship owners frequently deliver goods based on a letter of indemnity, protecting them from the costs associated with delivering the cargo without having the actual bill of lading. Additionally, making corrections or splitting cargos on a printed paper bill is difficult.

Fraud exposure: The concern with paper invoices is the possibility of forgery or unauthorized exchange, leading to potential fraud. In English law, delivering goods against a forged bill of lading is considered a mis-delivery, and the unintentional nature of the act is not a defense.

ELECTRONIC BILL OF LANDING (E-B/Ls) AND ITS WORKING

Contrary to popular belief, electronic bills of lading (e-B/Ls) are a series of computer-generated electronic messages exclusively transferable and readable electronically. They should not be mistaken as mere “softcopies” or electronic versions of traditional bills of lading. According to the BOLERO rulebook, an e-B/L is considered a receipt for goods shipped or accepted by the Carrier, serving as evidence of a negotiable contract of carriage, the legal implications of which are outlined in these Rules.

Private platforms that enforce the use of e-B/Ls through a multi-party agreement grant the holder the same rights and responsibilities as a legitimate holder of a paper bill of lading, thereby establishing a legal framework for these digital documents to be recognized as documents of title.

Functionally, an e-B/L operates similarly to a traditional paper bill of lading. The document is generated after both parties agree on the contract terms, and it is received by the carrier responsible for transporting the goods from the shipper. The primary difference lies in its electronic production and accessibility through a secure online portal, accessible to all involved parties in the shipment, unlike the paper bill of lading. This portal allows tracking the shipment from its origin to the final destination.

The Benefits Of E-B/Ls Over Traditional B/Ls

Following are the benefits of the e-B/Ls:

Cost Reduction: Apart from saving expenses on printing and physically transferring documents, operational costs, including cargo storage at the discharge port, will be significantly decreased.
Faster Processing: Digital storage enables e-B/Ls to be transferred within minutes, unlike traditional couriers that take weeks for the same task.
Enhanced Security: Transaction records are encrypted and stored in secure systems, reducing the chances of document forgery, tampering, or theft. Moreover, the risk of human errors is considerably minimized.
Improved Transparency: With almost instantaneous transfers of e-B/Ls, timely delivery is assured even for shorter voyages. As a result, the need for letters of indemnity is eliminated, leading to enhanced transparency.
Environmental Benefits: Considering that bills of lading are typically issued in sets of three, adopting a paperless process significantly contributes to a better environmental impact.

Electronic Bill Of Lading (E-B/L) Adoption In India

The timing is appropriate for the introduction of e-B/Ls in the Indian shipping industry. Despite their continued use, traditional paper-based B/Ls have shortcomings. These paper B/Ls involve significant administrative costs. Data from the Digital Container Shipping Association (DCSA) shows that processing paper-based B/Ls incurs three times the expenses compared to e-B/Ls. Moreover, traditional B/Ls, being passed through multiple hands, are inconvenient and impractical. Additionally, they are more susceptible to fraud and forgery, just like any other paper document. To address this, DCSA has established standards for shippers and carriers, ensuring uniformity in both physical and electronic B/Ls, with appropriate revisions for e-documentation. These standards enable easy production, sharing, and modification of standard B/Ls for multiple transactions of the same kind.

BIMCO, a non-governmental organization and arguably the world’s largest international shipping agent, is currently working on developing a standard for e-B/Ls in the liquid and dry bulk sectors of the shipping industry. BIMCO is renowned for its widely adopted standard form charter party agreements and clauses used by ship owners and charterers worldwide. Hence, BIMCO’s efforts in creating a standard e-B/L are expected to bring uniformity to the industry.

Conclusion

The primary goal of developing the e-PCS was to enhance the simplicity of conducting business transactions within the marine sector of the country. The system aims to centralize the exchange of trade-related documents and information through a unified electronic platform, among other functions. By facilitating the immediate transfer of e-B/Ls on a shared platform, the e-PCS eliminates human errors, reduces administrative time and costs, and provides a practical solution to India’s challenge of managing paperwork-heavy documentation for cargo export-import.

Having a single platform available would eliminate the need for B/Ls to pass through multiple hands, enabling swift issuing and exchange of B/Ls and preventing any potential violations of statutory laws and their accompanying sanctions. The implementation of e-B/Ls in Indian ports would lead to substantial savings in document processing expenses, while also ensuring timely delivery of cargo to owners, reducing the likelihood of vessels or ports incurring surcharges and being forced into taxation lawsuits for recovery. Additionally, this could contribute to faster turnaround times and alleviate congestion at ports.

Author : Kaustubh Kumar is a fourth-year law student at the National University of Study and Research in Law, Ranchi, in case of any queries please contact/write back to us via email to [email protected] or at IIPRD.

REFERENCES

https://www.bolero.net/what-is-an-electronic-bill-of-lading/index.html.
https://maritime-executive.com/article/india-launches-digitization-of-the-bill-of-lading-and-trade-documents