The Digital Container Shipper Association (DCSA) recently announced that nine of the major ocean carriers “committed to converting 50% of original bills of lading to digital within five years and 100% by 2030 to accelerate the digitalization of container trade.” This is significant due to the major carriers involved and the importance of the bill of lading – a commercial document that fulfills three functions: evidence of a contract with a carrier, receipt of goods and documentation of the title of the goods. Beyond the commitment to electronic bills of lading (eBoL), there have been regulatory updates as well. The Ocean Shipping Antitrust Enforcement Act was recently introduced in Congress and provides extra protections for ocean shippers from things prevalent during COVID, like astronomical container prices, blank sailings and more.
We investigated the potential impact of these regulatory changes – here’s what we learned:
Adopting standards is generally a good thing – it facilitates partnership and collaboration and can make an industry more efficient. However, there will need to be widespread adoption for eBoL to work. Otherwise, the process will break down and many will fail to realize the full value of having digitized receipts of goods. While statements from the top major ocean carriers are encouraging, in past cases, like EDI, it took years for adoption.
Once software and technology providers take the next step to support the new standards, it will kick off a domino effect with other users, like forwarders, adopting eBoL, followed by their customers.
There is other risk lurking, however, with legal considerations potentially making it hard to recognize eBoLs. Until 2019, English law did not recognize eBoL unless they were explicitly mentioned in contracts.
The enforcement act is a proposed bill that removes the special exemptions that ocean carriers enjoy from antitrust laws. During COVID, shippers saw 10x higher container prices, constraints on vessels, blank sailings, cancellations and aggressive demurrage and detention fees.
This proposed regulation creates new responsibilities for the ocean carriers to:
This proposed bill could help shippers in a couple of ways:
If carriers were required to negotiate fairly, then cargo would be picked up and shipped instead of carriers refusing to carry it out of California ports and simply hauling empty containers back to China. You could expect container prices to moderate as well. Still, since there are a small number of carriers for a given route, we would expect a high degree of correlation in the market.
On the opposite side of the argument, carriers say they see a lack of commitment from shippers with last-minute cancellations. At FourKites, we’ve seen plenty of situations where shippers make multiple bookings for a shipment, but cancel all but the best one very late in the cycle. This means that carriers could have potentially lost revenue by not being able to sell that space in time.
We don’t know for sure. In the case of the electronic bill of lading, it depends on the sophistication and the type of TMS or ERP system. Shippers who use freight forwarders shouldn’t need to make any changes except wait for their shipments and copies of eBoL in their email.
Besides having to convert their documents to the electronic format, the core trade process for shippers will remain the same. Some work will need to be done to set up the transfer of eBoL between players in the ecosystem – shippers, carriers, forwarders, banks and others.
In the case of the proposed bill, carriers would have to operate more competitively and hold more reasonable negotiations with shippers. Further, the contracts negotiated by the U.S. importers and exporters could change. Currently, these contracts are not enforceable.
Some of the current issues with paper BoL arise when they are late. If a shipment is finalized late or there are technical difficulties in transmitting the paper to a bank providing financing, then delays could result. Worse, substitutes could be accepted and later turn out to be forgeries. So, eBoL should help reduce or eliminate this risk, but with the caveat that eBoL will need to be secure.
This announcement adds to the need for end-to-end visibility. Visibility is no longer just port-to-port but has expanded to the full journey from door-to-door, including the terminals, dray, and yard. The standardization of eBoL is an extension of visibility. With eBoL, there could be a deeper level of visibility, including more automated alerts or more sophisticated exception management. Ultimately, this could mean better planning, not only for getting goods from A to B, but for labor, demand and operational efficiencies.
The idea of the proposed bill is focused on ensuring the language is, together, more specific so that it could be more actionable. Shippers clearly want a better working environment and partially blame the chaotic ocean market of the last two and a half years on the carriers and COVID. Carriers, most likely, see it differently. I see further discussions, negotiations and wrangling for this bill.
Overall, I think Thomas Bagge, CEO of DCSA, said it well: “For the global supply chain, fully interoperable eBoL is a starting point for digital trade. It will make today’s practices more efficient, reliable and sustainable, but ultimately it will provide a foundation for further digitalisation.”
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