Shipping is the lifeblood of the world economy. It makes sense, right? We are only as efficient as the pace with which the parts, products, and materials the economy needs are transported. So it stands to reason that improving the shipping industry can significantly and positively impact the world economy.
Today, we will look at how we can improve the maritime shipping industry, which accounts for 85% of all transported goods.
We will take a look at the difference between a physical and a digital bill of lading, how each works, and what the industry thinks of this new technology.
Where Do Bills of Lading Come From?
Maritime shipping is an ancient practice.
The first recorded instance of a Bill of Lading goes back to the Romans, with the earliest example being traced back to 15AD. And if we are to look at the practice of recording cargo, that goes back all the way to the inception of shipping itself.
The middle ages saw the creation of the ‘Rôles d’Oléron’, or the ‘Rolls of Oléron’, Oléron being an island in France, which codified the trading practices of wine between Southwest France and Northern Europe. The Renaissance brought with it a new era for merchants, and this was reflected in what was known as the ‘Lex mercatoria’, Latin for ‘Merchant law’. ‘Lex mercatoria’ codified existing principles and practices into a single international document, making it the first real blueprint for what would become the future bill of lading.
But as much as the document has evolved over the years, it is still essentially the same idea as it has been throughout history.
What Does a Modern Bill of Lading Do?
Essentially, a Bill of Lading is a legal contract between the shipper and the carrier for the safe and efficient transport of goods to the receiver (usually referred to as ‘the consignee’). This includes information such as:
Where the shipment is coming from and where it is going
What you are shipping (including details, quantity, and weight)
Instructions for handling
Potential charges and authorisations
Which company is carrying the freight
Who is covering the costs
This document is given to at least three entities - one copy is kept for the shipper, one is attached to the shipment, and one is given to the shipping company. To simplify - a shipment is nothing more than the transfer of ownership between two parties, with a third party handling the transfer between them.
But the real-life reality of shipping is a lot more complicated.
Traditional Bills of Lading Present a Number of Issues
Bills of Lading carry the same main flaw that most paper documents have - they are destructible. While companies take care to package their copy as safely as possible, it is a physical object, which means that it can be damaged, lost, and in certain cases, purposefully “misplaced”.
Second, a shipment’s lifecycle is significantly more complicated than just going from A to B. One single shipment can go through multiple ships, different customs and regulatory bodies - what is known as a ‘paper trail’.
This means that handling the entire process gets exponentially more difficult and prone to error with every next step. And if an error or dispute does occur (and they often do), the entire process of going back and retracing every step along the way costs time and money.
Multiply this by the thousands of tons of different shipments that go on across the globe daily, and you can begin to see what the problem is.
What is an Electronic Bill of Lading?
Just as Central Bank Digital Currencies (CBDC) are to the ancient practice of banking, so too are Electronic Bills of Lading to the equally ancient practice of shipping.
The benefits of a shipping system based on blockchain technology become immediately obvious.
The immutability of blockchain means that every single action taken in a shipment’s lifecycle - from the initial document until delivery and potential disputes - is locked down, accessible to all participants, and cannot be changed, effectively making it tamper-proof.
Second, all necessary instructions, legal requirements, etc., are built into the document and automatically sent out to the required parties when appropriate. The best part? Because an Electronic Bill of Lading (eBL) is completely identical in functionality to its paper counterpart, it is fully legally binding as well.
Furthermore, payments between the different parties can also be automated to be sent out the moment they are requested.
All of this adds up to an incredibly more efficient and streamlined workflow that can now handle every existing process with minimal risk, is flexible enough to be quickly adapted to new requirements, and handles all its functions in real time.
Again, consider how this would affect the shipping industry - using blockchain technology for one shipment is incredible, but adapting it across every aspect of every shipment can have immediately beneficial results and lead to an exponential increase in efficiency, time saved, lowered risk, and savings.
And with all those, the potential to boost the entire world economy - for good.
A Growing Confidence in eBL
The industry has been aware of the possibility of eBL since the 90s, but thanks to the recent maturing of distributed ledger technology, it is now a reality that is beginning to take shape and grow closer. The push for eBL is finally gaining momentum, and companies and institutions are wasting no time promoting eBL’s value.
According to the DCSA’s (Digital Container Shipping Association) whitepaper on eBL adoption, the industry can save upwards of $4B a year with 50% adoption.
From the whitepaper:
“Eliminating paper from the shipping transaction will make every aspect of commercial container shipping better, faster, cheaper, more secure and environmentally friendly.
Cargo in ports cannot be gated out because of paper that is stuck elsewhere due to airfreight delays caused by the pandemic.
Research shows paper bill processing costs three times as much as eBL Processing.
Such digitalisation will benefit all parties involved: customers will see a significantly improved experience; regulators – and especially customs authorities – will benefit from improved targeting; container carriers will become more efficient; and vendors will be able to sell their solutions to many more industry participants.”
Additional excitement for and trust in the technology can be found at TradeLens, who call eBL “the Holy Grail of global trade”.
From the article:
“Succeed in [the implementation of an eBL standard], and partners up and down the supply chain would benefit from the days and weeks that paper BLs add to the process as they are printed, pouched, messengered, lost, found and waited upon.
It is ironic because there is not a single aspect of the BL that could not be done better digitally.”
The Electronic Bill of Lading has the potential to revolutionise the shipping industry and have a positive ripple effect on the world economy. The technology promises to boost every aspect of the shipping industry, transforming it into something that is only possible with the help of a distributed ledger. There is growing excitement and confidence in its potential from within the industry.
While there are only a handful of eBL projects that are already fully realised, there are more incoming projects than ever before, and it is not unrealistic to expect a sort of arms race becoming a reality soon.
With continued development and industry adoption, eBL will streamline the shipping process, saving time and money while increasing efficiency and compliance.
INDUSTRIA is a global technology consulting, development, and ventures company with expertise in the field of enterprise blockchain, confidential computing, process automation, and digital experience. As one of the official partners of R3, we are implementing cutting-edge blockchain technologies and reshaping the fintech world.
At INDUSTRIA, we are focused on providing permissioned blockchain solutions, such as Central Bank Digital Currencies, Electronic Bill of Lading, and Smart Legal Contracts. Our solutions apply to a wide range of industries and use cases to empower and modernise society.
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