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Abstract<\/span><\/strong><\/span><\/p>\n The world\u2019s shipping industry is undergoing a paradigm shift towards digitalization. The international shipping industry\u2019s adoption of artificial intelligence, blockchain technology, and automation has exponentially increased in the past few years. This results from the industry\u2019s need for cost and time efficiency at every level of the supply chain in an ever-competitive environment. It is believed that this transition into a digital maritime industry would allow operations to be streamlined, information and documentation to be seamlessly exchanged, and the industry to become sustainable and environmentally friendly. A crucial part of this shift has been digitalizing transaction documents, including the Bill of Lading. Thus, this Blog Post analyzes India\u2019s adoption of electronic Bills of Lading and its integration into the country\u2019s maritime industry.<\/span><\/p>\n <\/strong><\/p>\n Introduction: What is a Bill of Lading?<\/strong><\/span><\/p>\n A Bill of Lading (\u201cB\/L\u201d<\/strong>) is one of the most important documents used by the shipping industry. According to the<\/span>B\/L Report by the Secretariat of the United Nations Conference on Trade and Development<\/a> (\u201cUNCTAD\u201d<\/strong>), a B\/L may be described as either a receipt acknowledging the shipment of goods on a particular vessel, a memorandum of terms and conditions of the contract of carriage, or a document of title of goods, enabling a consignee to take delivery of the said goods.\u00a0<\/span><\/span><\/p>\n Although India has enacted the<\/span>Indian Bills of Lading Act, 1856<\/a> (\u201cthe Act\u201d<\/strong>), the Act does not define what a B\/L is. In<\/span>Shipping Corporation of India Ltd. v. C.L. Jain Woollen Mills<\/em><\/strong><\/a>, the Supreme Court stated that \u201cThe Bill of Lading is a well-known mercantile document of title, which is transferred in the business world by endorsement passing to the endorsee, the title of the goods covered by such Bill of Lading.\u201d <\/em>In<\/span>British India Steam Navigation Co. Ltd. v. Shanmughavilas Cashew Industries<\/em><\/strong><\/a>, the Apex Court also recognized that \u201cA bill of lading is intended to provide for the rights and liabilities of the parties arising out of the contract of affreightment \u2026 The bill of lading is a negotiable instrument in the sense of carrying with it the right to demand and have possession of the goods described in it. It also carried with it the rights and liabilities under the contract, where the property in the goods also is transferred<\/em>.\u201d Thus, Indian Courts have not only defined what B\/Ls are but have also recognized them as important mercantile documents having multifold purposes.<\/span>\u00a0<\/span><\/span><\/p>\n Traditional B\/Ls consist of paper documentation, duly endorsed by the shipper, and usually signed in sets of three originals. The requirement for a B\/L to be original when changing hands in a transaction is of utmost importance as it is considered a legal document, often used as security by banks financing the concerned transaction.<\/span><\/p>\n <\/strong><\/p>\n India\u2019s Adoption of Electronic Bills of Lading<\/strong><\/span><\/p>\n With the paradigm shift towards digitalization of the shipping industry and the advent of the COVID-19 pandemic, the Indian Ministry of Shipping initiated, inter alia,<\/em> the development, and adoption of Electronic B\/Ls (\u201ce-B\/Ls\u201d<\/strong>) for use in India\u2019s maritime industry. These e-B\/Ls are said to form a part of India\u2019s Electronic Port Community System (\u201ce-PCS\u201d<\/strong>)<\/span>to be operated by<\/a> 19 ports, including major ports, connecting approximately 16,000 stakeholders.\u00a0<\/span><\/span><\/p>\n The e-PCS was implemented to improve the ease at which business transactions could be conducted in the country\u2019s maritime sector. The system aims to, amongst other things, centralize the exchange of trade-centric documents and information seamlessly through a singular electronic platform. The e-PCS provides easy access to major maritime authorities, for instance, the Indian Customs, for clearance of requisite documents and brings together various stakeholders in the industry. The Ministry of Shipping in 2018<\/span>directed<\/a> that all maritime trade-related documents and information in the country be mandatorily exchanged electronically via e-PCS. Therefore from 2018 onwards, all maritime stakeholders, including all major and non-major port authorities, Indian Customs, Port Health Organization, Bunk Suppliers, Shipping Agents, and Terminal Operators,<\/span>have been directed<\/a> to register themselves with e-PCS and use the same for transmission of information and documents.<\/span>Resultantly<\/a>, India\u2019s ranking on the Ease of Doing Business Index improved to 77 in 2018 and continued to improve to 62 in 2019.<\/span>\u00a0<\/span><\/span><\/p>\n One of the documents to be exchanged via the e-PCS is e-B\/Ls. The system<\/span> aims at facilitating<\/a> the transfer and the processing of e-B\/Ls. The system intends to use existing service providers such as BOLERO\u2019s cloud-based encryption platform and CargoX\u2019s blockchain platform. It is an<\/span>added benefit<\/a> that these platforms have been recognized and accepted by the International Group of Protection & Indemnity Clubs. As it stands, Indian courts have yet to entertain a claim brought on an e-B\/L. However, the recognition of e-B\/Ls created and exchanged using the platforms mentioned above by the International Group of Protection & Indemnity (\u201cP&I\u201d<\/strong>) Clubs would, on the face of it, mean that claimants covered by such clubs could potentially stand indemnified.<\/span>\u00a0<\/span><\/span><\/p>\n In essence, these platforms would enable the creation, exchange, and storage of original e-B\/Ls while ensuring their confidentiality, audibility, and traceability through secure blockchain technology. Since the originality of B\/Ls is vital for facilitating sea trade, these platforms must maintain the sanctity of the original B\/Ls.<\/span>\u00a0<\/span><\/p>\n The introduction of e-B\/Ls to the Indian shipping industry comes at a time of need. At present, traditional paper-based B\/Ls are widely used. However, these paper B\/Ls come with their shortfalls. Paper B\/Ls attract substantial administrative costs.<\/span>According to Digital Container Shipping Association (\u201cDCSA\u201d<\/strong>)\u2019s research<\/a>, the costs associated with processing paper-based B\/Ls are three times as much as the processing of e-B\/Ls. Traditional B\/Ls are relatively inconvenient and impractical as they are passed around many hands.<\/span>According to Maersk and IBM<\/a>, a shipment of goods could involve an exchange of B\/Ls between nearly 30 people, including around 200 interactions. A consequence that flows from this is the need for letters of indemnity to be issued by P&I clubs in favor of the shipowners to indemnify them against the delivery of goods without a B\/L. This is an added cost to the overall transaction. Moreover, like any other paper instrument, traditional B\/Ls are more susceptible to fraud and forgery.<\/span><\/span><\/p>\n <\/strong><\/p>\n Improved Port Efficiency in India<\/strong><\/span><\/p>\n The limitations mentioned above of paper-based B\/Ls are no strangers to the Indian Shipping industry. As is the case with all paper-based documentation, processing thereof being entirely manual, transactions involving paper-based B\/Ls are laborious and time-consuming. For instance, traditional B\/Ls would transfer many hands from shippers to their agents and on to concerned authorities such as customs, etc. During this time, the cargo would often remain on board vessels, and vessels, in turn, would lay idle for long periods at a port awaiting clearance of the cargo on board.<\/span>India\u2019s average turnaround time at major ports<\/a> is 26.5 hours, approximately more than a day on average. One of the consequences of this is that vessels often face the risk of incurring demurrage, i.e., a cost payable by charterers of a vessel for the delay in the sailing-out of a vessel from a particular port, often calculated per day. The Supreme Court had an opportunity to deal with a case on similar facts in<\/span>Shaw Wallace and Company Limited v. Nepal Food Corporation<\/em><\/strong><\/a>. In this case, the shipper\u2019s failure to timely provides security for the cargo resulted in delayed issuance of the B\/L, which caused the vessel to incur demurrage charges. The Supreme Court held that a carrier or his agents has a statutory duty to issue B\/Ls without delay, and the failure to do so would render a party responsible for issuing a B\/L in breach of its statutory duty cast under the Carriage of Goods by Sea Act, 1925. Such a person would also be deemed to have negligently performed his legal duty in the common law. The creation of traditional B\/L is a long-drawn process. The B\/Ls are usually procured by the shipper, who fills in the relevant information. These are then physically handed over to the Master of the ship, who checks the same and signs on behalf of the ship, or an agent signs on behalf of the Master. This is then subsequently delivered to the shipper, who must deliver the original B\/Ls to the cargo owner receiving the cargo or his agents. In short, traditional B\/Ls pass many hands, and the likelihood of delay in timely issuing such B\/L is quite high, especially in places laden with red tape. Therefore, with the use of traditional B\/Ls, there is an increasing risk of issuers of B\/Ls breaching their statutory duty and\/or negligently performing their legal duty under common law.<\/span>\u00a0<\/span><\/span><\/p>\n Likewise, a port at which cargo is stored awaiting its collection by cargo owners is entitled to recover demurrage charges either from the consignor or consignee or their agents as held in<\/span>M\/S. Rasiklal Kantilal & Co v. Board of Trust of Port of Bombay<\/em><\/strong><\/a>. Thus, cargo owners, shippers, or their agents face the risk of paying demurrage to ports at which such cargo is being temporarily stored, pending the cumbersome procedure to process the B\/Ls under which the cargo is being transported. E-B\/Ls can play a huge part in avoiding delays and dire consequences in ensuring the timely delivery of cargo to their owners.<\/span>\u00a0<\/span><\/p>\n The Indian e-PCS proposes to permit the creation and sharing of e-B\/Ls. The e-PCS has e-B\/Ls service providers such as CargoX and BOLERO integrated into its system through the P-CaSo services marketplace. What this would mean for various stakeholders of the country\u2019s shipping industry is that they can now easily access, create, and transact with e-B\/Ls under one roof, allowing Indian Ports to benefit from the aforesaid multifold advantages. As a result, Indian Ports would have adopted a more streamlined approach for processing shipping-related documents, including B\/Ls, increasing port efficiency.<\/span>\u00a0<\/span><\/span><\/p>\n The introduction of e-B\/Ls at Indian ports would substantially cut the amount spent for processing documentation and ensure cargo is delivered to owners promptly, reducing the risk of vessels or ports incurring demurrage and being forced to initiate taxing litigation to recover the same. This could also contribute to reduced turnaround time and de-congesting ports.<\/span>\u00a0<\/span><\/p>\n The e-PCS facilitates the instantaneous transfer of e-B\/Ls on a common platform, limiting human error, reducing administration time and costs, and providing a viable solution to India\u2019s problem of the snail-paced process of handling paper-intensive documents for export-import of cargo. Accessibility to a common platform would do away with the need for B\/Ls to \u201cchange numerous hands\u201d. This, in turn, would allow for the timely issuance and exchange of B\/Ls, avoiding any potential breaches of statutory law and consequences associated with this.<\/span><\/p>\n <\/strong><\/p>\n Shortcomings in the Present Electronic Bills of Lading System<\/strong><\/span>\u00a0<\/span><\/p>\n E-B\/Ls are expected to overcome the various issues and limitations of traditional B\/Ls, facilitating efficient cross-border transactions in the shipping industry. However, an impediment to the present e-B\/Ls adoption is that there is no standard for the creation, processing, and transfer of the same.\u00a0<\/span><\/p>\n At present, e-B\/Ls primarily work on a \u201cclub\u201d system. India, too, has adopted a club-based e-B\/Ls system viz BOLERO. The e-PCS also functions on similar lines, i.e., it requires users to register with the platform before using it. These club systems are based on advance contractual agreements between the concerned parties and all other parties having access to the software being used. In other words, only those parties registered with a particular platform or \u201cclub\u201d that provides e-B\/Ls services would be entitled to transact using the e-B\/Ls available on the said platform. A natural consequence is that non-contractual parties have no access to the system and thus, cannot exchange electronic documents with contractual parties. As a result, paper B\/Ls would nonetheless be required to be utilized, negating the very purpose of the e-B\/Ls system. Thus, platforms like BOLERO adopted in India would nonetheless require various parties to register with the system and warrant the use of paper-based B\/Ls if the parties are not registered with the said platform.\u00a0<\/span><\/p>\n Another issue with the present system for e-B\/Ls is the reluctance of banks to finance transactions centering e-B\/Ls. As aforesaid, B\/Ls are often used as security by banks financing a transaction. Unquestionably, banks would insist that a B\/L being used as security has legal recognition and is supported by a legal framework that allows enforceability thereof. This is more so in the case of international trade. It is understandable why banks prefer to hold documents as security that are recognized and accepted internationally, i.e., standardized documents. Thus, due to a lack of standard and legal recognition, banks have become increasingly hesitant to use e-B\/Ls as security. Indeed, this defeats the purpose of using e-B\/Ls.<\/span><\/p>\n <\/strong><\/p>\n Standardized Electronic Bills of Lading<\/strong><\/span>\u00a0<\/span><\/p>\n A viable solution to the conundrum mentioned above appears to come from<\/span>BIMCO\u2019s recent announcement<\/a> that it is in the process of developing a standard for e-B\/Ls in the liquid and dry bulk sector of the shipping industry. BIMCO is a non-governmental organization and arguably the largest international shipping association in the world. BIMCO is renowned for its standard form charter party agreements and standard clauses, which shipowners and charterers adopt across the globe. Thus, BIMCO\u2019s endeavor to produce a standard e-B\/L would bring about some uniformity in the adoption and utility of e-B\/Ls worldwide.\u00a0<\/span><\/span><\/p>\n For instance, DCSA<\/span>has proposed standards<\/a> that shippers and carriers could follow to create and share uniform B\/Ls, whether physical or electronic (albeit with necessary changes unique to e-documentation). These standards<\/span>allow<\/a> carriers and shippers to create, share and amend standard B\/Ls to be used across numerous transactions of the same nature. These standards<\/span>provide<\/a> for the use of generalized terms (along with their definitions) across all B\/Ls created and issued, set, predefined data fields, including those that are mandatory or optional, a user interface designed for ease of accessibility, and possibly boilerplate clauses as seen in traditional, standard form contracts, for instance, governing law and dispute resolution clauses. DCSA<\/span>has said<\/a> that its standards are \u201c\u2026technology agnostic, open source and readily accessible<\/em>\u201d and that itstrives<\/a> to develop \u201c\u2026open source standards for necessary legal terms and conditions, as well as definitions and terminology to facilitate communication among customers, container carriers, regulators, financial institutions and other industry stakeholders.<\/em>\u201d\u00a0<\/span><\/span><\/p>\n The introduction of such a standard for e-B\/Ls has many benefits. First and foremost, it will bring about much-needed uniformity in the industry. This, in turn, will provide banks with a sense of comfort, encouraging them to recognize e-B\/Ls as security. Moreover, it will ensure that the terms and conditions adopted in the e-B\/Ls will be clearly defined, promoting easy comprehension and unambiguous communication amongst the parties concerned. Unlike the club system where a user is required to register itself with a particular club, any party wishing to utilize a standard e-B\/L must only implement and abide by the set standards.\u00a0<\/span><\/p>\n The BIMCO standardized e-B\/Ls<\/span>are proposed to be in tune<\/a> with the<\/span>UN\/CEFACT Multi-Modal Reference Data Model<\/a>, DCSA, and other Future International Trade (FIT) Alliance members. As a result, it can be expected that a standard for e-B\/Ls will bring about seamless interoperability between various sectors in the industry along with cost and time-efficient end-to-end container shipping documentation.\u00a0<\/span><\/span><\/p>\n Although, at this juncture, it is not clear what BIMCO\u2019s standards for e-B\/Ls are, and considering BIMCO\u2019s position to introduce a revolutionary standard for e-B\/Ls, it is hoped that it will adopt the use of Distributed Ledger Technology, i.e., the technology on which Blockchains are created. This technology is relatively more robust and offers potential solutions for eliminating the risk of a disastrous attack that could potentially compromise the integrity and uniqueness of an e-B\/L. India\u2019s Cargo X platform adopted by the e-PCS uses similar technology. The said technology would also help overcome the issues presently subsisting with the club system, i.e., parties transacting with e-B\/Ls would not be required to register themselves with a particular \u201cclub.\u201d In doing so, a more comprehensive range of stakeholders will be able to benefit from the use of e-B\/Ls.<\/span><\/p>\n <\/strong><\/p>\n Conclusion: India\u2019s Way Forward<\/strong><\/span>\u00a0<\/span><\/p>\n Since India is now acquainted with e-B\/Ls and already has an established platform for the use thereof, it is hoped that soon, India, too, could adopt BIMCO\u2019s standards for e-B\/Ls. This would help overcome the present issues with the club-based system and the reluctance of banks to finance transactions that use e-B\/Ls that are unique to these clubs.\u00a0<\/span><\/p>\n Though the advantages of a standardized e-B\/L are multifold, in the absence of a legislation recognizing the use of e-B\/Ls, members of the maritime industry may not be able to benefit from the same fully.\u00a0<\/span><\/p>\n Currently, Indian legislation does not appear to contemplate the use of e-B\/Ls nor does it expressly recognize e-B\/Ls. While India has a statute governing B\/Ls, i.e., the Act, the said statute does not mention the form in which a B\/L is to be transacted with. The Act merely lays down the rights of the holder of a B\/L. Thus, it can be argued that where a B\/L meets all essential requirements to consider it valid such as being duly endorsed and being an original copy, it can be reasonably inferred that even e-B\/Ls will be covered under the Act. Although the Act does not appear to cause any impediments to the use of e-B\/Ls, electronic documentation brings with it its own set of challenges. Against this backdrop, it is hoped that the Indian government adopts relevant legislation in consonance with the<\/span>UNCITRAL Model Law on Electronic Transferable Records<\/a> to ensure better governance and enforcement of e-B\/Ls.\u00a0<\/span><\/span><\/p>\n