DCSA addresses eBLs in shipping

DCSA addresses electronic bills of lading in shipping

Dom Magli, Staff Reporter at PTI, interviewed Omer Guy, Legal Advisor of Digital Container Shipping Association (DCSA), during the Commodity Trading Week Europe conference in London’s Chelsea Football Club stadium, Stamford Bridge. The discussion focused mainly on the demand for electronic bills of lading (eBLs) to be used more widely in the maritime sector.

Why does DCSA consider eBLs to be a very important factor for the maritime industry?

OG: There were a few surveys commissioned by different bodies, the World Trade Organization (WTO) is one example. But we also commissioned a survey together with our FIT Alliance members.

The FIT Alliance is an alliance between five industry bodies, including DCSA, BIMCO, FIATA, ICC, and Swift. We all commissioned a survey of our own. What we realised, or what that survey showed, is that 100 per cent eBLs can unlock between $30 and $40 billion in ecosystem gains, which is huge. That’s where the value is.

The benefit is there, the value is there, so that is one thing. But also, if you think about it, we’re in 2024 and still more than 90 per cent of bills of lading are being generated on paper. That’s quite astonishing when you think about it. It’s rare to find any other instrument being generated on paper today.

There’s a lot to be done, but the benefits are huge. That’s why we’re advocating for it so aggressively.

READ: DCSA’s member carriers commit to trade digitalisation with electronic bill of lading

How do eBLs combat the traditional methods of trade documentation?

OG: Grant Hunter from BIMCO in our panel touched on one prevailing example, and that is the use of letters of indemnity (LOIs). A bill of lading is a document issued by a carrier that transports goods from one location to another. The process starts when the shipper hands over the goods to the carrier at point A. The carrier then issues the bill of lading and hands it over to the shipper. The shipper will then send the bill of lading to either a bank, if a bank is involved, or to the buyer of the goods, the consignee, through a courier. Finally, the buyer consignee will surrender the original bill of lading to the carrier to receive delivery of the goods.

Now, what happens if the goods have arrived at the port, but the bill of lading is still on its way, or is still held by an overseas bank? The carrier might provide a LOI in case the original bill of lading isn’t available. However, this process poses some risks for both the buyer and the carrier: it poses a risk to the carrier because they might end up delivering the goods to the wrong person, and also to a third party such as a bank that possesses the original bill of lading as security and might seek delivery of the goods, which may have already been delivered to someone else.

There have been many cases of such mishaps, specifically in the UK, where there was a dispute around the question of the party having the rights of delivery, resulting in millions of dollars in damages. An eBL, on the other hand, can now be transferred instantly with just a click of a mouse button, which decreases the risk of such incidents occurring significantly.

In the digital world, a bill of lading cannot be lost anymore. If you need to amend it, for example, you can just surrender it by digitally transferring it to the carrier who can reissue it in a matter of seconds. This eliminates the possibility of losing the bill of lading and makes the process faster and more efficient. It simply depends on the availability of the person who will click the button. You no longer have to rely on couriers and face potential delays, which can result in additional costs such as storage fees and demurrage charges.

All of those are being tackled by ebL. So those are the kinds of issues that the eBL solves for the paper bill.

Should shippers in the maritime industry be afraid of cyber security threats/risks when switching to the eBL?

OG: Whenever people discuss using electronic means to interact, the first concern that comes to mind is cybersecurity. The biggest fear in bills of lading is having more than one original. In bills of lading, we like to call it the risk of duplication, because you cannot have two people claiming delivery of the same piece of goods. So what you’re afraid of might be hacking into a platform and perhaps duplicating an eBL. So those are the types of risks which shippers and banks are very much afraid of.

It’s okay to be afraid, but what we mentioned during the panel was that the traditional paper process involved far greater risk. When you were in the paper world, anyone with a printer could potentially print a bill of lading, and people ignored that completely. In the paper world, fraud is dealt with post-mortem through litigation, but there are hardly any lessons learned. We have exhausted all of our fraud prevention efforts. You have entire departments in banks that attempt to prevent fraud, but they all do the same thing – there’s not much learning, and there’s no cross-learning between different companies.

When a cyber-attack occurs, on the other hand, companies respond and learn lessons that may be applied pre-emptively industry-wide to avoid similar attacks from occurring in the future. That’s something you don’t have in the paper world. Cyber risk exists, but it is being addressed, and it is significantly less risky than the risk of fraud that you face with paper.

How will DCSA ensure that you reach your 100 per cent eBL commitment target by 2030?

OG: We do that by collaborating with industry bodies. We are not only focused on carriers, this is what we have within our own company. We’re very externally focused, and we try to look at it from a holistic point of view. We talk for example to banks, shippers, and freight forwarders.

The FIT Alliance is a good example of how the industry is coming together to reach this target. The alliance includes BIMCO, which represents the bulk shipping and general cargo industries. We have FIATA, which represents freight forwarders. We have the International Chamber of Commerce (ICC), which represents the industry as a whole. Finally, we have SWIFT to represent the banking industry. We’re kind of throwing ourselves out there to the whole ecosystem.

We’re only at 5 per cent, but it’s still twice as much as we had last year. We see a good trajectory, and whilst I’ve only been in the business of eBLs specifically for about two-plus years, I’ve been speaking to people who have been trying to do this for 20 years and 25 years, and they say there’s never been such momentum for going digital.

READ: GSBN issues inaugural eBLs with COSCO Energy and COSCO Bulk

What are DCSA’s goals for the remainder of 2024?

OG: We intend to become the voice of the industry. We are the de facto organisation for standards in the container shipping industry, and this year we want to see widespread adoption and implementation of our standards. This is true not just for the eBL but also for all our standards like track and trace, booking, just-in-time port calls, and commercial and operational vessel schedules.

With the eBL, we have a very clear target. It’s 100 per cent eBL by 2030, and 50 per cent by 2027, but that’s not the only standard we have. We’re working very hard to make sure the industry adopts and implements eBLs as widely as possible.

In April, Pacific International Lines (PIL) joined DCSA, to drive standardisation and digital innovation in the container shipping industry

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