In recent weeks, we have witnessed a number of milestones in the leap towards digitising shipping processes leveraging the electronic Bill of Lading (eBLs). For instance, Digital Container Shipping Association (DCSA) with its shipping line members have pledged for 100% adoption of eBLs by 2030, while GSBN has signed a memorandum of understanding (MoU) with Saudi Basic Industries Corporation (SABIC), COSCO SHIPPING Lines, as well as Hutchison Ports and PSA International for eBL adoption.
While an eBL-enabled future is certainly an exciting one, as we look ahead, we also believe it is important to consider the potential challenges along the way to 100% eBL.
More Than Just Going Digital
The eBL transition goes beyond simply digitising documents and pursuing cost efficiencies. The very fact that current practices revolve around paper severely limits the ability to innovate and improve the workflow in international trade. With eBLs, we should no longer be thinking about a document, but much rather the data it contains. Through this lens we can realise a world of opportunities to improve the overall process and create new value previously unimaginable.
First, data can be embedded in digital workflows to improve operational performance in applications such as cargo release. Second, title ownership data, combined with visibility data of containers location can enable new applications where more complex types of transfer of ownership could be realized based on new logics.
Finally, payment flows can also be tied to this new data stream. This allows eBLs to play a role in the trade finance process which enables new applications as well as novel ways in which to distribute risks to investors. By bringing financial institutions previously on the periphery closer to live shipping data, new financial products can be developed to bridge the multi-trillion-dollar global trade finance gap standing in the way of economic growth.
Challenges Remain
Yet significant challenges remain. First is the legal uncertainty over the use of eBL solutions. Even if eBL has long established rule books, which has seen adoption for certain use cases, there are still many organisations, whose legal departments prefer the traditional paper Bill of Lading. Fortunately, the Model Law on Electronic Transferable Records (MLETR) which provides a legal framework to support electronic trade documents is fast gaining traction. Lobbying efforts from the International Chamber of Commerce (ICC) in the UK to push MLETR has resulted in an Electronic Trade Documents Bill, soon expected to become English law in mid-2023. This is significant given the influence of English law in international trade. Similar momentum can be found in France and Germany, and similarly the US and China have also begun to review their laws on electronic documents for trade.
Second, and paradoxically, if this legal uncertainty no longer exists, there will be an explosion of eBL solutions entering the market. While this might sound positive, the sheer quantum of choice may in fact push companies to wait and see which ones will ultimately become dominant over fears that not all will survive, thus delaying adoption. Another consideration is that global supply chains are invariably complex and diverse. Thus, organisations may not even have a choice on which solutions are used and often, these are dictated by their trading partners.
Get Ready to Respond
To respond to these challenges, the industry needs a trusted hub to connect multiple solutions from carriers, financial institutions to corporates. Thus, there can be many solutions available as the market decides on the best solutions with a common backend infrastructure serving as the lowest common denominator. eBL solutions would also benefit from tapping into different APIs to realise value beyond merely the eBL.
Shipping is multi-faceted. There also needs to be APIs to enable all forms of eBLs including bulk as well as container, and the eBL and associated documentation will need to work with customs and other regulatory bodies. A not-for-profit consortium like GSBN is best placed to facilitate the engagements with all these important but varying stakeholders.
For this reason, in addition to the DCSA, GSBN is actively collaborating with different bodies including International Chamber of Commerce (ICC), to ensure the full breadth of stakeholders can benefit.
The Case for A ‘Clearing House’
Another hot topic in driving eBL adoption is the interoperability between different eBL solutions. Technical interoperability is certainly achievable with strong leadership and collaborative efforts between different solution providers.
However, there are legal considerations that cannot be resolved by tech alone. For instance, consider a situation in which two solutions exchange an eBL and a problem occurs such that they could not agree on who is the current eBL holder. The solutions will likely be at different stage of growth. Dispute resolutions between a Series A start-up and a seasoned eBL provider with deep coffers would not be tractable.
Therefore, we believe there is a case for a clearing house to play the role of arbitrator. This is very common in financial exchanges. It would need to be independent, trusted and having access to the minimum data pertaining to the transaction necessary to enable the certainty of transfer between eBL solutions. The underlying technology can be a permissioned blockchain, public blockchain or even not blockchain at all.
The alternative is a “winner takes all” market instead of a vibrant ecosystem which serves everyone’s interests. The industry needs a variety of solutions that can best address the needs of different participants of all shapes and sizes. A clearing house mechanism would support this and allow for solutions to compete on how to best solve customer pain points and bring innovation in this market.
A ‘Schelling Point’ for eBL Solutions
The road ahead is promising filled with opportunities waiting to be unlocked. We need a Schelling point for this journey, or natural point of convergence, for people to adopt eBL solutions. Of course, the market will ultimately dictate where the point, or points of convergence will be.
The ability to look beyond profits, openness to collaborate with key organisations, inclusiveness across different participants together with trusted infrastructure like GSBN’s, will offer the industry a simple, value-creating and easy way to adopt eBL.
Bertrand Chen is CEO at Global Shipping Business Network
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