An Overview of Paper and Electronic Bill of Lading
If a company sends its goods to another by way of sea routes, how the parties ensure themselves that their trade contract will not be revoked? How does the ship owner know while delivering the goods, that he is delivering it in correct hands?
Bill of Lading (hereafter referred to as BOL) is a document that helps the parties to complete their international trade smoothly.
Table of Contents:
- Introduction
- Bill of Lading
- Sample of Bill of Lading
- Functions of Bill of Lading
- Disadvantages of Bill of Lading
- Laws Applicable to Bill of Lading
- Electronic Bill of Lading
- International Instruments Governing Electronic Bill of Lading
- The Emergence of Electronic Bill of Lading in India
- Conclusion
Bill of Lading
Nearly 85% of international trade is done through sea routes. With markets growing in countries, international trade is also increasing. In such a scenario document of BOL plays a pivotal role. It is the most important document in international trade.
BOL is a document issued by carrier to shipper. A shipper is the seller person or a company sending its goods to another. Whereas, a carrier is a shipping or logistics company, who has the responsibility to transport the goods from the seller to the buyer. It binds the parties legally.
The BOL consists of important information of goods to be transported. It contains the quantity of goods, condition of goods etc.
Sample of Bill of Lading
Functions of Bill of Lading
- Acts as a Receipt of goods
Earlier various disputes between merchants regarding the quantity and condition of goods used to arise. Therefore, a need was felt to have proper documentation. So, the BOL is used as a receipt of the goods loaded on the ship.
When the carrier receives the goods to be exported, he generates a BOL and signs it at the request of the shipper.
It is thus a receipt that indicates that the carrier has received the goods and have been loaded in the ship.
This is the most primary function of BOL. The BOL in the form receipt contains important information. It indicates the name of the shipper. It mentions the description of goods along with the quantity and condition of goods when received by the carrier.
In the case of any kind of disputes arising on the condition of goods, BOL will act as evidence to prove the condition when shipped.
However, it is important to know that the information of the condition of goods is only with respect to the external state that is visible. The carrier cannot be made liable for any internal condition of the good.
In the case of Campania Naviera Vascongada v. Churchill, it was held that the carriers are not liable for any of their statements made with respect to the internal condition of goods. Nor the carrier can be stopped from denying any information made with regards to it.
- Evidence of Contract between shipper and carrier
It is wrongly presumed that BOL is a contract between the buyer and seller for the trading of goods and services. But it is not true, as already a sales contract for the trading of goods between the parties exists. Thus, a sales contract is entered between parties earlier than BOL. Thus, a BOL is not a contract, but it is ‘evidence’, that there exists a contract between them.
- Document of Title
BOL also acts as a Document of Title. The person possessing the BOL can after presenting it to the carrier has a right to collect the goods from them. The person who holds the BOL is said to have constructive possession of the goods.
As a document of title to the goods, it also mentions the name of the legal owner of the goods.
Disadvantages of Bill of Lading
With time, the paper BOL started to pose various difficulties, which made it irrelevant as per the growing needs of the people and trade.
The disadvantages of BOL are as follows:-
- Increased Paper Cost
Using paper for Transactions in physical BOL leads to a huge amount of investment in papers. As various sets of bills are made, the process of its issuance becomes expensive.
- Time-consuming
The process of issuance of paper BOL is time-consuming. It requires hours of physical transfer of the bill from one person and one place to another. This makes the process lengthy.
- Delayed verification process
The verification process of the paper BOL also requires time. Sometimes, due to this, the goods are not released from the vessel and thus the buyer also fails to receive his goods on time which leads to goods being destroyed in transit.
- Chances of Fraud
Chances of fraud in a paper BOL are also high. A fraudster by easily making a fake BOL can take credit from a bank. Thus, a person by imitating others signatures and making false documents can fraudulently obtain goods from the carrier.
Laws Applicable to Bill of Lading
- Hague-Visby Rules
They rules are applicable on the carriage contracts involving BOL. The Hague-Visby Rules are the most used rules to date. The rule under Article V, allows the carrier to increase or decrease his liabilities. He can also do the same with his responsibilities. But if he choose to do so, he has to accordingly mention it in BOL. These rules still have their command over the shipping industry.
However, the rules are criticized as they are favourable to ship owners. They do not make the shipping company liable for any mishap that occurred due to their non-disclosure about of the cargo’s full information. Similarly, there are various points that favour the ship owners.
- Hamburg Rules
As stated above, the Hague-Visby rules favoured ship owners. So the Hamburg Rules were brought by United Nations Conference on Trade and Development. The rules were adopted in the year 1978. The rules define BOL as a document that evidences the existence of a carriage contract through a sea route where the carrier loads the goods and surrenders them against the document.
The Rules in Article 15 lists necessary particulars which a BOL should possess. According to it, the BOL should contain the nature of goods, their condition, quantity, carrier’s name, shipper’s name, carrier’s place of business, carrier’s signature, name of loading as well as discharge port etc.
Electronic Bill of Lading
An increase in trade requires fast transportation of goods overseas. But, certain practices should be changed to cope-up with this increasing trade. The process of documentation is an important part of the shipping industry. This process is since long remained to be paper-intensive in our industry. Thus, the dematerialization of these documents will be of great help.
The disadvantages of BOL stated above, makes it necessary to find a solution for an alternative to paper BOL. It will not only help to reduce time but will also help to reduce the paper cost, chances of fraud and will thus improve efficiency.
Electronic BOL is a step in this direction. It is a functional equivalent of the paper BOL. It is necessary to note that, to be called BOL, the Electronic BOL should perform all three functions of BOL.
International Instruments Governing Electronic Bill of Lading
- SEADOCS
It is the first system that provides for electronic BOL. Trade parties communicated with each other through a bank. The system cannot be said to be fully automatic as users were communicated by the bank through telex.
But due to certain practical reasons, the system failed.
- The CMI Rules for Electronic BOL
The CMI Rules were published in 1990. They are made to govern transactions that involved Electronic BOL. However, the rules apply to the parties only when they imbibe them in their contract. A system of Private Keys is used under the rules. These keys help to replace BOL with electronic BOL.
- BOLERO System
The system was created in 1998. It provides a fully paperless system. The system is very advantageous as it efficiently performs all the essential functions of BOL.
However, the system has very limited liability towards its use for any kind of breach of contract.
- Rotterdam Rules
These rules cover the carriage of goods even if it does not involve BOL. They were adopted in the year 2008 by United Nations General Assembly. It is called as ‘modern successor of Hague-Visby and Hamburg Rules’. The rules provide for standards of liability in case any damage occurs. The rules also apply to multimodal transport. Rotterdam Rules were the first ones to talk about electronic bill of title.
The Emergence of Electronic Bill Of lading in India
In the year 2020, Gopal Krishna, Secretary of Ministry of Shipping, in his letter to Commerce Secretary conveyed that, amid the covid outbreak, the existence of lockdown restrictions and norms of social distancing, the delivery and the forwarding of the physical trade documents is getting difficult.
Especially, BOL whose issuance and delivery are already a long process is now taking more time. Thus, it is creating a threat to the lives of people, and a delay in cargo release.
Looking at the pandemic situation, some of the port-related activities were digitalized by The Indian Ports Association (hereafter referred to as IPA), but BOL was missing from it.
Thereafter, efforts to digitalize BOL was started in the year 2020. The Indian Port Community System to digitalize BOL started trial projects with blockchain platform, namely CargoX and the same got a green signal for use.
Conclusion
With fast-growing trade, the emergence of Electronic BOL became a necessity. Now digitalization of electronic BOL in India will remove all the difficulties faced by the shipping industry to carry out the trade processes. The buyers, as well as sellers, can now ship as well as receive goods on time which will eliminate the chances of any goods being destroyed in the transit. It will eliminate chances of fraud, lessen administrative costs and the time required in the process of complex paper BOL.