Electronic bills of lading (eBLs) are not new to the shipping practice but have not been industry-wide accepted as the global trade heavily relies on paper BLs. However, the adoption of eBLs is gaining momentum in recent years with the development of blockchain technology. Generally, eBLs are issued and transmitted on electronic trading systems and to better support shipowners, and the carrier’s liabilities arising from the use of such systems are evaluated by the International Group of P&I Clubs. Using IG-approved systems can ensure eBL’s functional equivalence with paper BLs and effectively avoid mis-delivery claims or other legal disputes regarding title to the goods.

I.     Introduction to eBL

Electronic bills of lading, a means of paperless trading, are operable on primarily two types of eBL systems in the current market.

The first type, taking advantage of Electronic Database Interchange (EDI), is supported by the Internet and applicable legal framework, and based on the core information platform. The system enables exchange of documentation, examination of data and further the generation and transmission of eBLs. It also has central registries for online transfer of the title.

The second type of system is backed by blockchain technology with support from the legal infrastructure. The entire process of digital transaction is recorded and relevant parties including carriers, shippers, consignors/consignees, financial institutions, customs, and commodity inspection officers can participate online in the issuing, transferring and endorsing of eBLs, all at the same time. Blockchain technology offers an open decentralized solution where an encrypted database is maintained by multiple participants. This allows easy access, preservation and tracking of data and prevents tampering of data with the online chain of blocks structure.

The blockchain technology was soon embraced by shipping companies worldwide. One of the successfully developed systems is Smart B/L powered by Cargo X, Wave, and Maersk-IBM partner TradeLens. ZIM Shipping has also cooperated with Wave and Sparx Logistics to launch blockchain version of eBL. The Digital Container Shipping Association (DSCA, established by MSC, Maersk, Hapag-Lloyd and Ocean Network Express) has also embarked on a program of standardized eBL. At home, Chinese shipping companies have also been exploring advanced eBL solutions to address industry pain point and improve supply chain operations.

The blockchain technology without doubt heralds a future business model for global shipping due to the benefits of an eBL in terms of facilitating BL transmission, ensuring trading security, lowering operational costs, and improving management standard. We must admit that there is a gap between the progress achieved by domestic companies and international companies. China needs to step up the research on legislation and industry standard of eBL systems by leveraging all resources if it hopes to have a louder voice in the international shipping community.

II.       P&I Clubs and eBL

P&I Clubs excluded liabilities and losses arising from the use of any electronic trading system to the extent that such risks would not have arisen under a paper trading system until the 2010/11 policy year. This changed in February 2010 when IG decided that these liabilities would be covered, but only on systems that it had first approved in written. The latest approved systems at the time of writing include essDOCS, Bolero, e-titleTM, edoxOnline, WAVE and CargoX. It is always advisable to check that the system preferred by Members bears correct legal documents and is the approved version.

EssDOCS, Bolero, and e-titleTM are all based on traditional EDI technology and edoxOnline was the first blockchain system that IG will cover. WAVE was the second and the first to be fully decentralized, followed by the latest approved CargoX, which was in February 2020. Although these systems have saved the needs for paper documentation, Members may switch back to the old paper-based system if it is necessary.

III.    P&I cover under eBL

The IG in approving these systems wanted to ensure that these systems would be capable of performing the three functions of a bill of lading, namely as a receipt, as a document of title and as a contract of carriage which incorporated the Hague or Hague-Visby Rules. The Group would also review the legal documentation associated with the use and operation of such systems if and when they are amended to ensure that any modifications introduced meet IG requirements.

For liabilities arising under eBL, cover is available for typical P&I liabilities to the extent these liabilities would also have arisen under paper bills of lading. To the extent these liabilities would have arisen because an eBL has been used instead, cover is discretionary unless the electronic trading system has been approved by the International Group. It is because unapproved systems are not recognized as performing all the functions that a paper bill of lading would have performed and may give rise to disputes about ownership and mis-delivery of cargo.

However, it is important to note that all exceptions and exclusions under the Club Rules continue to apply to eBL systems. This includes discharge of cargo at a port/place other than the port/place provided for in the contract of carriage, the issue of an ante or post-dated electronic document/record, and delivery of cargo without production of the negotiable electronic document/record.

Members should also be aware that they are required to be party to particular contractual arrangements under which they assume obligations necessary for the systems to operate before participating in such electronic trading systems. By doing so they may be exposed to certain liabilities which are not of a traditional P&I nature, namely cyber risks and business risks. Typical cyber risks include the risks of viruses and hack attacks, while business risks include risks arising from owners’ contractual liabilities, such as obligations to maintain computer links, maintain confidentiality, and not to carry/upload viruses.

IV.    Advice to Members

1.      Owners should make sure that the eBL system they use is the correct version approved by the group with proper designation and legal documentation.

2.      The use of eBL systems may expose owners to cyber or commercial risks that are excluded from P&I cover, and owners are advised to consider some additional commercial insurance for their own interests.

3.      Owners may incorporate the BIMCO eBL Clause into charter parties to clarify the liabilities arising from the use of such systems.

4.      Members should be aware of the disadvantages of such systems, as current conventions and national laws that would have been applicable to paper bills of lading may not govern the eBL systems.

For more information, please contact your manager at the Club.