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Brewer’s World - with thanks to www.insuranceday.com
YOU might think its day would have been done two or three decades ago, but the bill of lading in paper form persists throughout the vast shipping industry, laboriously recording the movement of eight billion tonnes of cargo a year. There have been 30 years of attempts to produce and win acceptance for an electronic version of the bill, which has an 800-year history and relates to title and acceptance of goods for shipment, and specifies quantity, value, name of vessel, ports of call and so on.
Anyone who thinks the insurance market has been slow to adapt to e-commerce should consider the angst over re-formatting the humble bill of lading. Legal, regulatory, insurance and security issues have hampered efforts to “dematerialise” this contract to carry goods and perform duties in relation to the payment of freight, which amounts
every year to some $380bn globally.
Streamlining the cumbersome paper process, a growing reliance on information technology in international trade and vulnerability to fraud are among the drivers for change. Fraud is conservatively estimated to cost $400m annually, and container shipping lines have had to introduce specially marked paper to make life difficult for forgers.
With giant boxships of 18,000 teu on the stocks, one can imagine the mass of documentation needed for each trading voyage and the laborious task of manually entering details of cargo and much other data.
Switching to online documentation might look straightforward, but the many parties involved in each transaction, not to mention customs and other authorities, must have confidence it will work, a forum of London Shipping Law Centre heard last week.
Over time, some $250m has been ploughed into trying to invent a solution and it seems the insurance sector has helped move things forward. One year ago, the International Group changed tack and accepted liabilities arising from paperless trading would be included in pooled and reinsured cover, as long as the systems concerned were
approved by the group. Some liabilities such as breach of confidentiality undertakings or obligation to maintain computer links will still have to be insured separately. “The extension of normal club cover, however, represents a notable coming of age for electronic commerce,” Russell Harling of law firm Holman Fenwick Willan told the meeting.
Three commercial systems for electronic maritime transport records are on the market, including one named Bolero, launched in 1998 before most of the conservative customer base was ready for it. Bolero has restructured financially to become majority backed by venture capital and is pushing ahead as part of a broader e-commerce offering. A rival, privately funded E-Title, was founded in 2004, is based in Singapore and expects transactions to start this year. A third contender, run by Electronic Shipping Solutions (ESS), is
backed by two investment funds and facilitates many shipping documents apart from bills of lading, on which live transactions began in 2009. It says it has won acceptance from leading oil firms for its e-bill of lading system, which looks attractive to traders who want maximum efficiency in being able to buy and sell oil and products still at sea. Traders cannot afford any slip-ups or delays in dealing with bills of lading.
ESS itself says it has to maintain insurance with a limit of $20m for any one incident such as a failure over issuance or delivery of a document, and against crime risks such as hacking.
Progress seems such that users – shippers, carriers, receivers, traders and others – will begin to reap the promised efficiency savings this year.