An e-bill of lading service using proven scalable technology can have easy ROI based on prime service revenue, faster delivery, time savings, removal of fraud risk and heightened security.
Opportunities from the digitization of shipping documents, from bills of lading to certificates to letters of credit, are massive.
It is estimated that 15 percent of transportation costs are attributed to paperwork, documentation and administration. Bad timing and quality in document transfer rapidly can double these costs through clearance delays, letters of indemnity and detention and demurrage fees.
The shipping industry has embraced digitization, but the complexity has surrounded the alignment of all stakeholders in the bill of lading transfer process — shippers, carriers, logistics providers, banks, insurers and customs agents. And consolidation has led to system and process convergence.
Digital marketplaces are not seen as disrupters but facilitators. As a result, 80 percent to 90 percent of ocean carriers’ bookings now are done electronically. The bill of lading certainly is the next piece to be digitized.
Until now, bills of lading have remained highly paper or email dependent. The use of web bills of lading printed on a carrier’s website is just a remote print function that still generates courier and handling costs on the shipper’s side and exposes the parties to delay, loss and fraud risks. Although the use of original bills of lading is trade specific, they represent an average of 40 percent of the shipments among global carriers — and the majority of documentation-related risks and costs.
It has never been so easy for hackers to forge paper documents. Fraud and security breach are an endemic and critical issue in shipping. With more and more automated transactions, any paper/email handling becomes costly and a weak point in an organization.
The International Chamber of Commerce and the International Maritime Bureau (IMB) recently launched an initiative aimed at curbing bill of lading fraud among NVOCCs. According to the IMB, 95 percent of false bills of lading are issued by NVOCCs.
The main missing features to ensure a full end-to-end digital experience for shippers and consignees are secured digital bills of lading and cargo releases. Carriers and logistics providers now are addressing the matter and looking to new technology.
Emerging technologies like blockchain allow us to reopen discussions among the players to push the boundaries, creating new cross-industry partnerships. There are strategic blockchain initiatives such as TradeLens, led by Maersk and IBM, and the Global Shipping Business Network, made up of nine ocean carriers and terminal operators and engineered by CargoSmart technology aimed at creating utility platforms providing secured documentation flow of bills of lading, invoices, certificates and cargo releases as core services.
On the shippers’ side, commodity traders have experienced and used digital documents and L/Cs in bulk for several years, and they believe technology also could play a role in container shipping. Cargill and Louis Dreyfus Company both are active in this domain.
Members of the International Port Community Association have been actively testing electronic bills of lading since June, and they also demonstrated ePhyto certificate transfer and secure container release at the Port of Antwerp. Port community systems’ role as single windows to the authorities is instrumental.
Customs’ approach to e-documentation is changing as well. Since Aug. 1, customs authorities in China have been accepting electronic documents for customs declaration, ending the requirement for paper documentation.
Still, trade finance organizations, ocean transport operators and customs authorities cannot work independently. Otherwise paper still will be used as a bridge.
Blockchain has brought back the opportunity for and discussion of e-bills of lading. But the problem is not whether it is blockchain or any other secured technology. You can have a perfect fraudulent document validated by the blockchain if inserted in the chain.
Blockchain will turn out soon as just another form of technology. We will see more hybrid solutions in which blockchain only is used when needed. Moreover, there is a risk with multiple platforms of developing digital siloes.
Regardless of the data transport channel, it is important to have core components in place such as a legal framework, a title registry process and API messaging working in a standardized way to avoid each project having to reinvent the wheel.
The e-bill of lading solutions require a network infrastructure based on:
• A legal framework that counts as much as technology. The legal rules of the permissioned network must be embedded in the technology. It ensures the role-based governance, the transfer of ownership and sharing metadata. Today it is described in blockchain as a “smart contract.”
• Recognition by banks, insurance companies and authorities allowing e-presentation of documents for financing or customs declaration.
• Data modeling, interoperability and business standards agreed to by the parties.
The standards bodies have studied and brought guidance to the industry. They support the permissioned network principles in which all parties must sign on to electronic service rules with necessary compliance checks. ICC has been promoting the electronic Uniform Customs and Practice for Documentary Credits (e-UCP), which are today the most successful rules for trade developed so far with real technology applications.
Now that they have digitized most of their booking transactions and shipping instructions, ocean carriers are looking closer at offering e-bill of lading solutions as a valued digital service. Evergreen, for example, has integrated the Bolero e-bill of lading technology into its system. Evergreen onboards customers and provides a paperless original bill of lading through its own portal, which has the same value as paper and is covered by the P&I clubs.
An e-bill of lading service using proven scalable technology can have easy ROI based on prime service revenue, faster delivery, time savings, removal of fraud risk and heightened security.
Electronic documents give carriers and logistics providers the opportunity to develop value-added services such as trade finance; e-bill of lading technology can better serve the entire process with faster turnaround time, extended cutoff times and serving hours, and faster financing decisions if linked to application management of each step from PO to payment.
Carriers can make a straight bill of lading as easy as a SeaWayBill with cargo control, financing and retention capabilities on top. The good old practice of “cash against documents” payment causes extensive manual verification of hard copy payment and shipping documents and are responsible for a substantial part of the $30 billion in transaction cost inefficiencies that Drewry identified in a white paper on invoicing and payment processes in May.
The e-bill of lading opens opportunities for payment guarantees or financing at a much lower cost than the current process inefficiency. Banks will certainly benefit from the technology working on open account trade finance first rather than complex trading scenarios.
Documentary credit only represents 15 percent of global trade, although L/C is key in growing markets such as Asia Pacific, Africa and Latin America. It brings opportunity for an easy e-bill of lading-based financing service powered by trusted operators that can well be carriers or logistics providers.
As carriers, logistics providers and port community systems grow their end-to-end services, they can act as trusted parties between exporters and importers. Their current experience on shipment compliance can be extended to KYC service.
Data-matching technology Internet of Things shipment tracing allows them to cross-check data and documents. They can retain the shipment if required.
Looking ahead, they can use their IT infrastructures and networks as utility platforms to facilitate trustworthy trade among their partners and grow their ecosystems.
Electronic bills of lading and documents are the core toward a new industry shift.
Philippe Salles is the head of e-business, transport and supply chains at Drewry Supply Chain Advisors. He may be contacted via email at salles@drewry.co.uk.
