India's maritime sector is at the edge of a significant transformation, driven by the global shift toward digitalisation. As the global shipping industry increasingly embraces technologies like blockchain, artificial intelligence, and automation, the need for efficiency, cost-effectiveness, and streamlined operations has never been more pressing. One of the key aspects of this digital revolution is the transition from conventional paper-based transaction documents to electronic formats, with the Bill of Lading at the forefront.
In this blog, we discuss India's implementation of electronic Bills of Lading and explore how this shift is reshaping the nation's maritime industry.
The Bill of Lading in the Shipping Industry
A Bill of Lading (BL) is a fundamental document, serving multiple crucial functions. According to the United Nations Conference on Trade and Development aka UNCTAD, a Bill of Lading can be seen as a receipt confirming goods were shipped on a specified vessel, an official document confirming the terms of the carriage contract, and an official title deed, granting possession to the consignee.
Despite India's longstanding Indian Bills of Lading Act of 1856, the move lacks a clear definition of what a Bill of Lading is. However, Indian courts have offered significant insights into its meaning and importance through historical cases such as:
- C.L. Jain Woollen Mills .v. Shipping Corporation of India Ltd.
- Shanmughavilas Cashew Industries .v. British India Steam Navigation Co. Ltd.
Traditionally, Bills of Lading are paper documents, typically issued as a set of three originals, and are essential in transactions due to their legal status. They are commonly used as collateral by banks that finance the related trade.
India’s Shift to Electronic Bills of Lading in Maritime Trade
In response to the digital transformation and challenges brought about by COVID-19 in the shipping industry, the Indian Ministry of Shipping launched the adoption and development of Electronic Bills of Lading for the maritime sector. These eBLs are integrated into India's Electronic Port Community System, which connects around 16,000 stakeholders across 19 major ports.
The Electronic Port Community System was designed to streamline business operations in the maritime sector by centralising trade documentation and information exchange on a single electronic platform. This system makes it easy for key maritime authorities, such as Indian Customs, to expedite document clearance, thereby bringing various industry stakeholders together. In 2018, the Ministry of Shipping mandated information and documents related to maritime trade be exchanged electronically using the e-PCS, requiring all maritime organisations to register and utilize the platform. This initiative significantly improved India's position on the Ease of Doing Business Index, improving from 77 to 62 in one year (2018 to 2019).
A critical document exchanged through the Electronic Port Community System is the e-BL. The system facilitates the transferring and process of e-BLs using platforms like the cloud-based encryption of BOLERO and the blockchain technology of CargoX. These platforms, recognised by the P&I Club (International Group of Protection & Indemnity), ensure the confidentiality, auditability, and traceability of authentic e-BLs via blockchain technology, maintaining the integrity of the document, which is crucial for sea trade.
The transition to e-BLs is timely, addressing the shortcomings of the paper-based BLs, which are still widely used but come with significant administrative costs. Research by the DCSA (Digital Container Shipping Association) indicates that processing paper BLs is three times more expensive than handling e-BLs. Paper BLs are cumbersome and impractical, often passing through many hands during a shipment, leading to a high risk of fraud and forgery. This process also necessitates the P&I clubs to issue letters of indemnity to protect shipowners from distributing goods without a BL, adding further costs to the transaction. The introduction of e-BLs aims to eliminate these inefficiencies, making the shipping process more secure, cost-effective, and efficient.
Challenges of Paper-Based BLs and the Benefits of Digitalisation in Indian Shipping
The challenges of using paper-based Bills of Lading (BLs) are well-known in the Indian shipping industry. The manual nature of these documents makes the process labour-intensive and time-taking. Traditional BLs often pass from shippers, agents, and various authorities like Customs. In the meanwhile, cargo can remain idle on vessels, leading to extended port stays and potential demurrage charges, which are costs incurred due to delays in a vessel's departure from a port. The average turnaround time in India's major ports is 26.5 hours, which increases the chance of demurrage.
The process of creating traditional BLs is lengthy and involves multiple steps. Shippers procure the BL, fill in the required details, and pass it to the Ship Master for verification and signing. The signed BL is then returned to the person who shipped it, who then delivers it to the owner of the cargo or their agents. This multi-step process, often slowed down by bureaucratic red tape, increases the likelihood of delays and potential legal liabilities for the parties involved.
Moreover, ports where cargo is kept while awaiting collection are entitled to charge demurrage fees. This puts additional financial pressure on cargo shippers, owners, and their agents as they navigate the cumbersome paper-based process.
The introduction of Electronic Bills of Lading (e-BLs) through India's Electronic Port Community System (e-PCS) aims to address these issues. By integrating e-BL service providers like BOLERO and CargoX into the system, the e-PCS offers a streamlined platform for creating, sharing, and processing e-BLs. This digital approach is expected to significantly improve the efficiency of Indian ports, reducing documentation costs, minimising delays, and decreasing the chance of demurrage.
The e-PCS enables the instant transfer of e-BLs on a unified platform, reducing human error, administrative time, and costs. By eliminating the necessity for BLs to pass through multiple hands, the system ensures the well-timed exchange and issuance of these crucial documents. This not only helps prevent infringing on statutory law but also contributes to a more efficient and decongested port environment, ultimately improving the overall efficiency of India's maritime industry.
India's Move to Digitalize Bills of Lading:
India continues its progress in digitalizing the maritime sector with several key advancements. One of the most notable recent developments is the move to electronically exchange Bills of Lading between customs authorities, further enhancing the ease of doing business. According to India’s Director General of Foreign Trade, Santosh Kumar Sarangi, this electronic submission of records is expected to eliminate the need for physical documents within the next 1 to 1.5 years. This transition aligns with efforts led by the United Nations Commission on International Trade Law (UNCITRAL), focusing on global digital trade documentation.
Additionally, real-time tracking technology, such as RFID tags used on shipping containers, is being implemented to monitor goods throughout their journey. These innovations, combined with platforms like the Trade Connect e-Platform—launched to streamline business processes for exporters and importers—signal India's ongoing commitment to modernising its trade infrastructure.
This integration of digital tools not only accelerates the adoption of Electronic Bills of Lading (e-BLs) but also supports India's overall goal of increasing operational efficiency and reducing trade bottlenecks.
Barriers to e-BL Adoption
e-BLs hold the promise of addressing the challenges of conventional paper-based Bills of Lading (BLs) by enabling more convenient cross-border shipping transactions. However, a significant obstacle to the widespread adoption of e-BLs is the lack of a standardised system for creating, processing, and transferring.
Currently, e-BLs operate on a "club" system, which India has adopted through platforms like BOLERO. The Indian Electronic Port Community System (e-PCS) follows a similar approach, requiring user registration before accessing its services. These club procedures rely on pre-established contractual agreements among parties, meaning that only those registered with a specific platform can use its e-BLs services. As a result, parties not registered with the platform’s electronic documents cannot be exchanged with those who are.
Another challenge is the disinclination of banks to finance dealings involving e-BLs. Traditionally, BLs serve as security for banks financing trade transactions. Banks are more comfortable holding documents recognised and accepted internationally, ensuring legal enforceability. The absence of a standardised system and legal acknowledgement for e-BLs makes banks hesitant to accept them as security. This lack of confidence in e-BLs by financial institutions is a significant barrier to their adoption and diminishes their potential benefits in the shipping industry.
BIMCO's Role and the Benefits of Standardisation
A promising resolution to the challenges of adopting e-BLs lies in BIMCO’s recent initiative to develop a benchmark for e-BLs in the dry bulk and liquid shipping sectors. As the world’s major international shipping organization, BIMCO is well-known for its standardised charter party deal and clauses widely used by charterers and shipowners. Their efforts to create a standard e-BL could introduce much-needed uniformity and consistency in the global adoption and use of electronic Bills of Lading.
For example, the Digital Container Shipping Association (DCSA) has suggested standards that both carriers and shippers can abide by to create and exchange uniform BLs, whether electronic or physical. These standards include standardised terms, preset data fields, and user-friendly interfaces, ensuring that BLs can be used across various transactions efficiently. According to the DCSA, its guidelines are technology-independent, open source, and easily accessible, aiming to facilitate seamless communication among industry stakeholders, including carriers, regulators, and financial institutions.
The launch of a standardised e-BL would have several key benefits. It would create a uniform system that banks are more likely to accept as security, promoting wider adoption. Clear definitions and standardised terms would enhance communication and reduce misunderstandings among parties involved. Unlike the current club-based systems that require registration with specific platforms, a standard e-BL would allow any party to utilise it simply by adhering to the set guidelines.
BIMCO’s standardised e-BLs are expected to comply with UN/CEFACT Multi-Modal Reference Data Model, DCSA standards, and other members of the Future International Trade (FIT) Alliance. This alignment could enable seamless interoperability across different sectors of the shipping industry, leading to more efficient and cost-effective documentation processes.
While BIMCO’s specific norm for e-BLs is not yet fully defined, it is anticipated that they may incorporate Distributed Ledger Technology (DLT), which underpins blockchain. This technology, already used by India’s CargoX platform within the e-PCS, offers robust security features that could protect the uniqueness and integrity of e-BLs. By moving away from the restrictive club-based systems, a standardised approach could allow a broader variety of stakeholders to advantage of e-BLs, ultimately advancing the digitalisation of the shipping industry.
Challenges and Opportunities in Adopting e-BL Standards in India
As India becomes more familiar with electronic Bills of Lading (e-BLs) and integrates them into its established platforms, there is hope that the country will soon adopt BIMCO’s e-BL standards. This transition could address current challenges associated with club-based systems and the hesitancy of banks to finance dealings involving e-BLs exclusive to these platforms. Despite the many advantages of standardised e-BLs, the lack of specific legislation recognising their use could limit their full benefits within the shipping industry.
Presently, Indian legislation is not explicitly addressing or recognising e-BLs. The Indian Bills of Lading Act, of 1856, which governs traditional BLs, does not specify the format for BL transactions and focuses primarily on the holder's rights. While the Act does not directly impede the utilization of e-BLs, the introduction of electronic documentation cause new challenges. Therefore, it is longed-for that the Indian government will enact legislation aligned with UNCITRAL Model Law on Electronic Transferable Records to enhance the enforcement and governance of e-BLs.
India might look to Singapore for guidance. Singapore recently passed the Electronic Transactions (Amendment) Act, of 2021, incorporating the UNCITRAL Model Law on Electronic Transferable Records with a legal framework. This has granted legal recognition to e-BLs under Singaporean law, allowing parties to make claims and enforce rights based on these documents. The Act stipulates that e-BLs are considered valid if the details are retrievable and if an authorised person uses a reliable method to confirm the data. These conditions align with the requirements for a valid BL under Indian law, such as endorsement or signature. By adopting similar provisions, India could ensure that e-BLs are recognised as valid under its current legislation.
While the UNCITRAL Model Law generally complements existing laws on BLs, India should carefully review its legislative framework before fully integrating the Model Law. It is crucial to examine existing laws, rights, and obligations in order to ensure a smooth transition. Despite the legislative challenges, India must continue exploring amendments to recognise e-BLs and establish effective mechanisms for their enforcement explicitly.
Conclusion
In conclusion, embracing electronic Bills of Lading (e-BLs) represents a significant step forward for India’s shipping industry, promising smoother global transactions, enhanced port efficacy, and increased appeal for international stakeholders. However, for the full benefits of e-BLs to be realised, India must establish a legal framework that explicitly recognises and supports their use, ensuring alignment with international standards. Only with such legal backing can the transition to e-BLs truly succeed and transform India's maritime sector.
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