Posted: August 14th, 2022
Adopting Blockchain Solutions to Digitize Bill of Lading Processes and Reduce Shipping Document Fraud Between South American and European Ports
Adopting Blockchain Solutions to Digitize Bill of Lading Processes and Reduce Shipping Document Fraud Between South American and European Ports
The bill of lading (BL) is one of the most important documents in international trade, as it serves as a receipt of goods, a contract of carriage, and a document of title. However, the traditional paper-based BL process is fraught with inefficiencies, delays, and risks of fraud. According to a report by the International Chamber of Commerce (ICC), the average cost of processing a paper BL is $100, and the average time to issue one is 10 days. Moreover, paper BLs are vulnerable to forgery, theft, and loss, which can result in disputes, claims, and litigation.
Blockchain technology, which is a distributed ledger that records transactions in a secure, transparent, and immutable way, has the potential to revolutionize the BL process and address its challenges. Blockchain can enable the creation of electronic BLs (eBLs) that can be issued, transferred, and verified digitally, without the need for intermediaries or physical delivery. This can reduce costs, save time, enhance security, and improve traceability of cargo movements.
Several initiatives have been launched to explore the use of blockchain for eBLs in different regions and trade corridors. For instance, in 2018, IBM and Maersk developed TradeLens, a blockchain platform that allows shippers, carriers, freight forwarders, customs authorities, and other stakeholders to share information and documents related to cargo shipments. TradeLens has been used to issue eBLs for various routes, including between South America and Europe. In 2019, TradeLens issued the first eBL for a shipment of fresh oranges from Brazil to Spain, which reduced the transit time from 20 days to 4 hours.
Another example is CargoX, a blockchain platform that provides a smart eBL solution that can be integrated with existing systems and processes. CargoX claims that its eBL solution can reduce the cost of issuing a BL by 85% and the time by 90%. CargoX has also been involved in several pilot projects involving South American and European ports. In 2018, CargoX issued the first blockchain-based eBL for a shipment of soybeans from Argentina to Malaysia via Geneva. In 2020, CargoX partnered with Fracht AG, a Swiss logistics company, to offer eBL services for container shipments from Europe to South America.
The adoption of blockchain solutions for eBLs can bring significant benefits for both South American and European traders and transporters. For South American exporters, blockchain can help them access new markets, comply with regulations, and reduce trade barriers. For European importers, blockchain can help them improve their supply chain visibility, optimize their inventory management, and ensure the quality and safety of their products. For both parties, blockchain can also help them reduce their environmental impact by eliminating paper waste and carbon emissions associated with paper BLs.
However, there are also some challenges and barriers that need to be overcome before blockchain solutions for eBLs can become widely adopted. Some of these include:
– Legal uncertainty: The legal status and validity of eBLs vary across different jurisdictions and conventions. There is a need for harmonization and recognition of eBLs as equivalent to paper BLs in terms of their functions and effects.
– Technical interoperability: There are multiple blockchain platforms and standards that offer eBL solutions, but they may not be compatible or interoperable with each other or with existing systems. There is a need for common protocols and interfaces that can enable data exchange and integration across different platforms and systems.
– Stakeholder collaboration: The adoption of blockchain solutions for eBLs requires the involvement and cooperation of multiple stakeholders along the supply chain, such as shippers, carriers, freight forwarders, banks, insurers, customs authorities, port operators, etc. There is a need for trust-building and incentive alignment among these stakeholders to ensure their participation and adoption.
In conclusion, blockchain technology offers a promising solution to digitize the BL process and reduce shipping document fraud between South American and European ports. However, there are also some challenges and barriers that need to be addressed before blockchain solutions for eBLs can become mainstream. Therefore, it is recommended that:
– Stakeholders should engage in dialogue and consultation to develop common standards and best practices for eBLs that are aligned with legal requirements and industry needs.
– Stakeholders should participate in pilot projects and trials to test and evaluate the feasibility and benefits of blockchain solutions for eBLs in different scenarios and contexts.
– Stakeholders should invest in education and awareness campaigns to promote the advantages and opportunities of blockchain solutions for eBLs among their peers and customers.
References:
– ICC (2019). Digitalisation in Trade Finance: The ICC Survey Report 2019. Retrieved from https://iccwbo.org/publication/digitalisation-in-trade-finance-the-icc-survey-report-2019/
– Wang, F. (2021). Blockchain Bills of Lading and Their Future Regulation. NUS Centre for Maritime Law Working Paper 21/01. Retrieved from https://law.nus.edu.sg/cml/wp-content/uploads/sites/8/2021/04/CML-WPS-2101.pdf
– Benson, E. and Judd, L. (2021). Ships Don’t Lie: Blockchain and a Secure Future for Global Shipping. CSIS Critical Questions. Retrieved from https://www.csis.org/analysis/ships-dont-lie-blockchain-and-secure-future-global-shipping
– CargoX (n.d.). CargoX Smart B/L™ – the easiest, fastest, and most secure way to transfer original bills of lading. Retrieved from https://cargox.io/smart-bill-of-lading/
– TradeLens (n.d.). TradeLens: A Connected World of Trade. Retrieved from https://www.tradelens.com/
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