Electronic Bills of Lading - An Update: Part II
In Part I1 of this article, the authors introduced the three new eBL providers whose blockchain based systems were recently approved by the International Group (IG), and provided an overview on how their systems work. Here in Part II, we take a look at the recent products and initiatives of Bolero and essDOCS, two of the first generation eBL providers. We also take a look at cyber risks again and at whether the paper BL, as a tool, is still fit for purpose in today’s international trade.
Bolero and essDOCS
The IG approved the Bolero and essDOCS systems in 2010. The initial take up of eBLs within the shipping industry was low. This was however only to be expected as there was at the time still little understanding of, and indeed some scepticism over, the concept of the eBL. The paper bill of lading’s use can after all be traced right back to the 13th Century. Nevertheless, through widespread marketing and presentations to the industry, IG and Bolero have been successful in demonstrating to the industry the many benefits of the eBL trade over the paper BL trade (the predominant benefit being the speed at which a transaction can be completed), and provide reassurances with regards to the simplicity of use and the security of their systems. The uptake of eBLs has since been on the increase, and Bolero and essDOCS have not looked back. Instead, they have looked forward and have initiated many new e-solutions to meet their customers’ additional needs. We list below the recent activities of Bolero and essDOCS.
• In Feb 2020 Bolero launched its new Galileo platform transforming trade digitisation for both existing and new clients. It delivers many new features including a brand new user interface, significant enhancements to Bolero’s existing trade applications and many connectivity and integration options.
• Working in collaboration with Blockchain consortia such as Voltron (now Contour), Marco Polo and others to develop a new, blockchain based eBL service that opens up seamless connectivity across multiple trade networks. A number of live transactions have already taken place helping to reduce the time it takes to execute the entire process of paper-based Letter of Credit from 5-10 days to under 24 hours.
• Bolero has successfully integrated its eBL technology as a white label solution with 2 of the top 10 Ocean Carriers. The eBL service is accessible via the operators’ own websites, thereby avoiding the need for customers to sign up through a separate app.
• Developed new API connectivity solutions for Carriers to allow greater and more flexible integration and connectivity options when connecting with back-office systems
• Launched a new carrier portal giving carriers the ability to issue eBLs to their customers as a manual, semi or fully automated process. Users are able to create, send and amend eBLs as well as switching to paper if required
• A project with the National Grain and Feed Association, the trade association representing U.S. agribusinesses, and their 10 member companies, to digitise the 70,000-100,000 negotiable barge Bills of Lading that NGFA members handle each year.
• Launching a self-service SaaS variant of CargoDocs DocHub, its document preparation/document management module.
• Launched CargoDocs Open API, enabling data connectivity and transfer between the eBL (CargoDocs) platform and third party systems/ solutions without the need for custom interfaces. This does away with the need for users to log in separately to CargoDocs.
• Released an integrated blockchain-based application in partnership with Contour, a platform used by various banks in relation to Letters of Credit and Gateway, a blockchain platform to digitise the energy and chemicals post trade market in Asia Pacific. This application provides member banks with easy access to the CargoDocs platform, enabling electronic presentation of eBLs and accompanying documents for checking.
• Launched a tool to enable the auto-creation of LOIs within the system.
Bolero and essDOCS have both reported substantial growths in user numbers since May 2017. Bolero particularly mentions the container ship trade where carriers are keen to offer an ever increasing suite of trade finance solutions to their customers, while essDOCS advise that the number of dry bulk vessels that have signed up to their eBL platform has increased by 48%.
Cyber risks nevertheless remain very much a concern for shipowners and operators. These concerns have probably been further fuelled by recent reported cyber attack cases including the NotPetya attack on Maersk in 2017 which caused outages of the company’s computer systems across the world, the ransomware attack on Cosco Shipping Lines in 2018 which impacted on the company’s internet connection within its offices in the US, a malware attack on a deep draft vessel on its way to the port of New York and New Jersey which significantly degraded the functionality of the vessel’s onboard computer system, and just very recently (on 04.02.2020), the malicious ransomware attack on the Australian courier and logistics company, Toll Group, which caused huge disruption to the company’s delivery services.
These concerns are understandable as a cyber attack can have catastrophic effect on a company’s business. We would nevertheless remind Members that cyber risks are risks associated with our general, and increasing, use of computers to conduct our businesses and our daily lives; they are not risks specific to eBLs.
Cyber risks could arise from:
• a failure to have an efficient and effective corporate cyber risk policy that is regularly updated
• a failure to maintain and to upgrade IT systems when such may be necessary
• a failure to install up to date anti-virus software on the computers
• a failure to provide employees with essential cyber risks training
• a failure to keep passwords, private keys and unique identifier codes confidential
• a mis-use by authorised employees of the company’s IT systems and the eBL platforms for malicious or criminal purposes
• breaches of the duty of confidentiality owed to other users of the eBL platform and/ or to third parties.
None of the above risks is a P&I risk. They are “business risks”, albeit a special category of business risks. Increasing demand for specialist cyber insurance to address this category of business risks has seen a huge growth in this insurance sector. The high profile cyber-attack incidents referred to above have demonstrated to businesses not just the importance of protecting themselves against the financial impact of such attacks, but also in how they respond to such attacks. The speed and manner in which a business responds to an attack will have an impact on the business’s reputation, and may be a determinative factor in the ability of the business to rebound from such an attack. The majority of prudent businesses would therefore today ensure that specialist cyber insurance is included in their business risks insurance package.
Shipowners and operators may also be concerned that in an unexpected scenario, the eBL could somehow fail to fully replicate the functions of a paper BL, or fail to be accepted as an equivalent of a paper BL. While such risks do exist because some jurisdictions may have stricter or more formal requirements with regards to the eBL, they are remote. We would point out that since the IG’s approval of the Bolero and the essDOCs systems 10 years ago, with many thousands of eBLs issued, the Club has not been made aware of a single case in any jurisdiction where the eBL’s ability to fully replicate the functions of a paper BL, or the validity of the eBL, has been challenged.
Conclusion - Is the paper BL still fit for purpose in our digital and information age?
The shipping industry, like the rest of the world, has been progressing further and further into the digital and information age. This can be seen in every part of the industry; from the streamlining of administrative procedures, increasing safety, improving environmental performances to increasing competitiveness.
A recent example of digitization in international trade is the eCMR protocol which entered into force on 5 June 2011, and to which the UK became the 24th country to ratify on 20th December, 2019. Another recent example in the shipping industry is the revision to the IMO’s FAL Convention making it mandatory for ships and ports to exchange information electronically. This requirement, which entered into force on 1 January 2019, led to the development of standardized digitized documents recommended for use by all contracting governments.
Turning manual paper processes into electronic processes has many benefits, not least of which are: a massive reduction in administrative time and costs (no filling, photocopying or posting of documents), no documents going missing, a reduction in documentary discrepancies, greater transparency, all doing away with the need for letters of indemnities, quick and easy access to information on-line, real time monitoring of exchanges and movements in trades, the speed at which transactions can be completed and an overall improvement in operational efficiency. A lot of the problems we are currently witnessing during the coronavirus pandemic such as delays in the arrival of paper BLs, difficulties in presenting paper BLs due to closures of agents’ offices, vessel quarantines and restrictions imposed on human to human contact can all be avoided if the trades had been conducted using eBLs.
As the shipping industry embraces the digital and information age, along with all the solutions that this technology brings, the impracticalities and the problems associated with the use of the paper BL in international trade are becoming more and more apparent. With the providers of eBLs approved by the IG now numbering six, and the huge expansion in e-documentary solutions provided alongside the eBL, it is not difficult to foresee that trades in eBLs will very soon be overtaking trades in paper BLs.
The UK P&I Club would like to express our thanks to edoxOnline, WAVE, CargoX, Bolero and essDOCS for their valuable input in the preparation of this publication.
Source UK P&I
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Three years ago, the UK P&I Club issued a Legal Briefing on Electronic Bills of Lading (eBLs) in which we tried to de-mystify the concept of the eBL, by providing an insight into how the systems of the three eBL providers approved by the International Group of P&I Clubs (the “IG”) at the time, namely Bolero, essDOCS and e-Title™, work. We explained the legal principles relied upon by these providers to enable their eBLs to replicate the essential functions of a paper BL. We also tried to put cyber risks in context by explaining that these risks are risks associated with the general use of computers in our businesses, and are not risks specific to the use of eBLs.