Tuesday, May 19, 2020

Vested Interest Makes a Case for Digital Container Bills of Lading as the Pandemic Bites

We Have Video Conferencing and Cashless Transactions so Why Not the eB/L?
Shipping News Feature

WORLDWIDE – One of the keystones of the international shipping trade is the Bill of Lading (B/L), a document that has been around, in one form or another, since medieval times. Older readers will have memories of the purple ink printed Roneo documents which accompanied every ships manifest, and some may indeed recall the copperplate, hand written examples turned out by the River Thames barge skippers.

As transport modes have evolved so too has the phraseology, hence the inclusion in the, so far unratified, Rotterdam Rules, changing any such authority to a ‘transport document’ although so deeply embedded is the term that Bills of Lading will probably still survive any such regulation.

However one major change is being called for, albeit by a party with a vested interest. The Digital Container Shipping Association (DCSA) says that the time to switch to an electronic, digital document, the ‘eB/L’ is with us, and it makes a pretty strong case for doing so, claiming eliminating paper from shipping transactions will make every aspect of commercial container shipping better, faster, cheaper, more secure and environmentally friendly.

Despite the lack of any standardised approach to digitalisation, some carriers and solution providers have continued to move forward with proprietary eB/L initiatives, albeit at a limited scale. However as 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.”

As with so much else it may be that very current pandemic that causes the sea change in approach to documentation. Certainly when considered in conjunction with the tentative steps many of the major carriers and logistics outfits are pursuing with blockchain technology it would seem a short step to take.

The DCSA says it carried out a financial modelling exercise to quantify the potential cost savings for switching from paper Bs/L to eBs/L. The complexity inherent in using Bs/L means the actual process cost for a single B/L can vary widely. Nonetheless, it claims the research derived a comparison that indicates the total cost of processing paper bills is almost three times that of eB/Ls. At a global economic growth rate of 2.4% through to 2030 (as forecast by the OECD) it estimates that the industry can potentially save more than $4 billion per year if just 50% eB/L adoption is achieved.

In the decade since IATA introduced e-Air Waybills (e-AWBs) they have seen adoption in 68% for consignments carried. Maintaining the unique nature of the B/L as it passes along the supply chain is of paramount importance and hitherto maintain such integrity has not been possible using an electronic document.

DCSA now says new technologies such as distributed ledger technology (DLT), peer-to-peer and Blockchain offer potential solutions for eliminating the risk of a single catastrophic failure or attack that would compromise the integrity and uniqueness of an eB/L.

Obviously any new format would require acceptance by government authorities, banks and insurers but in many cases these are now the very bodies which are forcing others to utilise their own streamlined electronic and cloud based requirements. In addition, the International Group of P&I Clubs (IGP&I), which provides indemnity insurance to around 90% of the world’s ocean-going tonnage, have picked up the pace on approving eB/L solution providers, with two added in the last six months to a total of six approved so far.

For any robust technology, such as blockchain or digital ledger, to safely deliver an eB/L from end-to-end, data model and transmission standards need to be in place. If everyone who touches the eB/L is using the same data format and communication standards, it can be transported seamlessly regardless of pre-existing relationships between stakeholders. Digital standards will enable interoperability between all stakeholders, such as system providers, shippers, carriers, banks and regulators.

Different parties can be involved in a transaction as long as they have implemented the standards. Once a standard eB/L is available, it will also be easier for regulators, banks and insurers to accept the eB/L as a viable alternative to a paper B/L. Digitalisation of the container shipping industry documentation system will however require additional changes to fully modernise it.

This month, the DCSA will embark on an initiative to enable the open collaboration necessary for achieving full eB/L adoption. As part of this initiative, DCSA will develop open source standards for necessary legal terms and conditions, as well as definitions and terminology to facilitate communication among customers, container carriers, regulators, financial institutions and other industry stakeholders. Thomas Bagge, CEO of DCSA has the last word:

“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.

”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 eB/L maximally useful and relevant for ensuring their goods are delivered safely and seamlessly to their final destination.”

Photo: A Bill of Lading prepared in Marseille in the 19th Century. From the collection of Ahmet Aytoğan.