The ultra-high importance of the Bill of Lading
What is the Bill of Lading (B/L), and why is it the most important document in the cargo shipping industry?
Bill of Lading (B/L) a legally binding document issued between the shipper of goods and the carrier, where type, quantity, weight, volume and the destination of the goods are detailed.
It acknowledges the receipt of shipment.
If lost or stolen, it can wreak havoc in the whole supply chain.
That is why blockchaining it could be the single most important upgrade of this document since its beginnings in Roman times, when merchants started to record cargo aboard the ship in the ship’s log.
Why is it so important?
At any given moment, there are over 50,000 merchant ships trading internationally, with more than 20 million containers travelling across the oceans. 10 billion tonnes. Anyone in possession of the document can claim the goods at the designated release agent or carrier at the destination! The Bill of Lading value is equal to the value of the cargo inside a container — on average, this is around USD 60,000!
It is no more comfortable if the Bill of Lading gets lost or stolen, or if It is destroyed. A new bill can generally only be obtained if the original is found — otherwise, the shipper needs to provide a bank guarantee as per B/L issuing party request, and the amount can be as high as 300% of the cargo value and involve a duration of up to 5–10 years, dependent on the B/L issuing party.
So, it is of the utmost importance that the Bills of Lading, when signed, remain safe and that they are transported in a secure manner at all times. And this can be rather expensive! But not as much as in the case when the B/L gets lost — not only is the bureaucracy expensive and complicated, but the merchandise needs to remain at the docks in a warehouse, awaiting the resolution (gathering storage, demurrage costs), and this can even lead to unstable supply, which, in turn, can endanger your business altogether.
Different types of B/L exist. An original Bill of Lading is produced and provided to the shipper, who will either send it to the importer, or hold it until payment has been made.
An On-board Bill of Lading is provided when the merchandise is physically loaded onto a ship or plane. A Received-for-shipment Bill of Lading denotes that the cargo has been received, but not necessarily loaded onto a vessel yet (usually shipped by a freight forwarder) — a bill of this type can also be converted at time of loading. A straight bill denotes the Bill of Lading when payment has been made in advance of shipment. An Order Bill of Lading is the one used when merchandise is shipped prior to payment.
If the shipper agrees, a lesser document can be issued — it is called “sea waybill”, which enables electronic data interchange between parties. But to be able to use letters of credit or documentary collection transactions, the title to the goods must be retained until the transaction is completed: that is why the Bill of Lading remains the most vital document within international trade.
Number of bills
There is no restriction on the number of Bills of Lading that can be issued, but the number must be stated on the bill. Three bills are standard — one for the shipper, one for the consignee and one for the banker, broker or third party. The number can be increased, but the parties should bear in mind that each bill can heighten the risk of fraud, theft or unauthorised release of the goods.
Also, the number of billa rises when the shipments are not provided by one shipper, but by many. There can be 22 containers listed on a single shipment’s B/L, but if there are different shipments in one container, each needs a separate B/L. A shipment, in this case, can basically be defined per commercial invoice with which the B/L is paired.
Where does CargoX’s solution fit in?
Users of CargoX Smart Contract based B/L enjoy all the benefits offered by the blockchain. They will be able to transfer cargo ownership rights in a safe and transparent way, in mere seconds instead of weeks. 100x faster, 10x cheaper and several magnitudes safer than ever before.
More information, including Whitepaper and One-pager Executive Summary are available at https://cargox.io
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