As efforts towards attaining 100% worldwide adoption of the electronic bill of lading (eBL) gain momentum, significant emphasis is being placed on the need for interoperability between different platforms – the feasibility of which is increasingly being questioned by industry experts, who argue that efforts dedicated to achieving it may be slowing down take-up.
Last month, nine of the world’s major ocean carriers, representing nearly three-quarters of global containerised trade, made a formal commitment to 100% usage of the eBL by 2030. This move added to the hype that has been building around trade digitalisation and served as a major statement of intent for the trade ecosystem.
But the path to achieving this lofty goal is not a smooth one. While eBLs have been in commercial existence since 1999, take-up has been slow. One of the reasons for this, according to the Digital Container Shipping Association (DCSA), is that with different, competing systems on the market, it is difficult for stakeholders to know where to commit themselves.
To try to overcome this resistance, the DCSA last year started work on creating cross-platform compatibility, with the aim of enabling shippers and beneficial cargo owners to choose any of the growing number of eBL providers on the market while maintaining the ability to exchange electronic documentation with carriers, banks and other parties that may use different platforms.
An initial proof of concept, completed in May 2022 with seven DCSA carrier members, oil and gas company ExxonMobil and four eBL solution providers, demonstrated the technological feasibility of mutual connectivity – but having different systems send data to one another is the easy part.
Under all but a handful of national legal frameworks, transferable records such as the bill of lading are only valid in paper form. To overcome this barrier, eBL solution providers have rulebooks or bylaws that they ask all parties to sign, which serve as a mutual agreement to treat an eBL as equivalent to its paper counterpart. Finding a way to connect these different contractual frameworks is key to achieving an interoperable eBL that will pave the way for full global adoption, the DCSA says.
“Our research shows us that interoperability is needed. Companies such as Exxon Mobil, which was part of our interoperability proof of concept, were very straightforward about this: Without interoperability, they are not going to consider adopting eBLs,” Niels Nuyens, DCSA programme director, tells GTR.
To solve for legal interoperability between platforms, the DCSA proposes a two-level approach, which involves creating a standardised annex to existing rulebooks at the user level, and a multilateral interoperability agreement between solution providers.
“We’ve been discussing this at length with the solution providers, and are being assisted and guided by top-tier legal professionals,” says Omer Guy, legal advisor at the DCSA, adding that these include Richard Lord, a barrister and King’s Counsel, and Miriam Goldby, professor of shipping, insurance and commercial law at Queen Mary University.
While theoretically, the DCSA’s proposal is feasible, putting it into practice will be a tough undertaking.
“The DCSA legal framework ‘bridge’ approach seeks to link the solution providers’ various contractual frameworks such that a bill created in one will be legally valid in the other,” says Marina Comninos, co-head of eBL provider essDocs. “As a matter of freedom of contract, that can work – it is, however, an extremely complex process to ensure that the legal frameworks which are currently approved, and any new ones that will come in the future, work seamlessly with each other, such as to provide the industry with sufficient legal certainty that an eBL created in one ‘legal club’ will be valid in all others.”
Another issue with freeing eBLs from the constraints of the systems in which they were created and allowing them to move between networks is the assignment of liabilities in the case of a loss – an issue the DCSA’s Guy says the organisation is working to clarify.
“A bill of lading is one unique identifiable asset, and we are working with solution providers to identify that moment of time where the asset is deemed ‘sent’, that is, when it leaves a platform, or a user on a platform and arrives at the user on the other platform on the other end,” he tells GTR. “We then incorporate that into the legal framework so that from a legal perspective, the risks and liabilities and responsibilities also transfer at that moment.”
Whose liability is it anyway?
But with data travelling at close to the speed of light, pinpointing the moment at which an eBL moves from one system to the next could become an important argument in the event of a legal dispute. Any uncertainty could deter acceptance of the solution by shippers and banks alike, given the potentially vast sums of money involved.
“If an eBL travels from one system to another, the liability framework is extremely complex,” says essDocs’ Comninos, who proposes a different means of achieving a similar result. “An alternative is for an eBL to remain within one system from a technical perspective, but users in other systems with the appropriate rights can control it,” she says. “If one platform is responsible for the security of the eBL from start to finish, the liability regime becomes a little less challenging.
“Providers can choose to work with other providers whose technology they trust, and agree back-to-back liability provisions. A standard set of such clauses would provide a lot of value, as solution providers could use these as a template for their interoperable bills.”
Another option, posited by Bertrand Chen, chief executive of Global Shipping Business Network (GSBN), a blockchain consortium that counts stakeholders including Cosco Shipping Lines, Cosco Shipping Ports, Hapag-Lloyd, Hutchison Ports, OOCL, SPG Qingdao Port, PSA International and Shanghai International Port Group, is the use of an independent central ledger or clearing house to arbitrate disputes and verify information.
“Unfortunately, I believe legal interoperability between platforms as currently designed will still face notable challenges,” he says, adding: “Dispute resolutions between a series A start-up and a seasoned eBL provider with deep coffers would not be tractable.”
His proposal would see a third-party intermediary given access to the minimum necessary data pertaining to the transaction to enable the certainty of transfer between eBL solutions. “What this could mean is that a user or a bank can independently come to the central ledger to independently verify the information. Without such a central clearing house mechanism, I don’t see a way that the issue of liability transfer can be handled,” he tells GTR.
A further option could be to avoid platform-to-platform transfers entirely by leveraging the one-to-many connectivity provided by solutions such as the Rivo platform developed by Surecomp, a provider of trade finance systems to banks and corporates.
“It’s important to focus on the user’s needs. What users are asking for is a convenient way to manage various eBLs,” says Enno-Burghard Weitzel, Surecomp’s senior vice president of strategy and business development. “This can be achieved in a much easier way than transferring eBLs between platforms. Enabling a common user interface to multiple platforms will solve for this. Imagine a request to change ownership of an eBL. This function is known on every eBL platform. We can simply call that API and the ownership is changed.”
A theoretical problem
Whatever the eventual solution to connecting the digital islands of eBLs together looks like, what is clear is that, with so many barriers to overcome, it won’t be happening any time soon – although this isn’t to say that the idea of interoperability isn’t welcomed by stakeholders.
“Interoperability is the goal, and there is a lot of value for all participants when we can unlock the current reliance on closed clubs. Inevitably, once we are interoperable, users will not know or care what is happening in the background, where the data resides or whose bill it is. eBLs will be commoditised, like emails are today,” says Comninos.
However, this end state might be achieved without having to stitch together disparate contractual frameworks as a growing number of jurisdictions adopt the United Nations Commission on International Trade Law Model Law on Electronic Transferable Records– which gives electronic trade documents the same legal standing as their paper-based counterparts – or reform their existing legislation.
As such, the idea that interoperability is a pre-requisite could slow down adoption of existing, viable eBL solutions.
“Interoperability will happen. It’s an eventuality, and it will make things easier, but we’ve got operability right now,” says Grant Hunter, director for standards, innovation and research at the Baltic and International Maritime Council (Bimco). “Spending time focusing on theoretical problems distracts from the very simple message that now is the time to get on board. It’s all great technology, it all works and we know that people are using it already; it’s not a case of companies adopting eBLs being first movers into this space.”
Indeed, within the bulk shipping sector, which Bimco represents, critical mass is already close to being achieved in certain commodities. “We will be announcing a commitment to achieving eBL usage across 25% of annual trade volumes in the next two years. Some commodity flows have already achieved this,” Hunter tells GTR. “Progress is being made on the legal recognition front, but governments need businesses to demonstrate that they’re actually using eBLs to justify the cost and time involved in legal reform, so the message is: get on and use them.”