Circular 9/07 (August 2007) Paperless Trading - Electronic Shipping Solutions

TO THE MEMBERS

Dear Sirs

PAPERLESS TRADING - ELECTRONIC SHIPPING SOLUTIONS

Members will recall that the Association issued circulars in 1998 (ref 20/98) and 1999 (ref 17/99) on the subject of paperless trading. The circulars were written at the time of the development of Bolero, a system which intended to replace bills of lading and other paper trade documentation by electronic messages.

As described in the circulars, all International Group clubs introduced a Paperless Trading Endorsement in the 1999 policy year, which is contained in the Addendum to the Rules. The effect of the endorsement, which appears in all Members' terms of entry, is to exclude from normal cover liabilities that arise under paperless trading systems such as Bolero to the extent that they would not have arisen under conventional paper documentation systems. The Association is only able to provide cover for those liabilities which would have arisen if shipments had been made on the basis of conventional paper documentation.

The International Group has, however, maintained a market insurance available for Members participating in Bolero, which provides limited ($50 million) cover for certain P&I liabilities excluded from normal Club cover by the Paperless Trading Endorsement. Members are asked to note that this cover is now also available, on the same terms, for Members who participate in the Electronic Shipping Solutions (ESS) paperless system, which functions in a broadly similar way to Bolero.

Members are reminded that this cover is available upon declaration to the Managers. It continues to be important therefore that Members who wish to benefit from the cover advise the Managers before commencing use of Bolero or ESS. Further details of Bolero and ESS are available from their websites at www.bolero.net and www.essdocs.com.

Members should be aware that the Paperless Trading Endorsement is widely drafted and will, for instance, apply to liabilities (other than those which would in any event have arisen under a conventional paper system) arising from a document containing or evidencing a contract of carriage (eg a bill of lading) which is created or transmitted under a paperless system.

The International Group has examined the practice of a carrier electronically transmitting a bill of lading to a shipper, who is then expected to print the bill of lading, and felt that this practice did not constitute use of a paperless system within the scope of the Paperless Trading Endorsement. Nonetheless, Members who are involved in the electronic transmission of bills of lading are recommended to advise the Managers so that the Managers can ensure that P&I cover is not prejudiced.

A similar circular is being sent by the other members of the International Group of P&I Clubs.

Yours faithfully
THOMAS MILLER (BERMUDA) LTD.

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