Many different business partners play a role in a single international trade transaction. Most of these companies operate in separate information systems containing their own versions of the truth.
And while many organizations depend on B2B interfaces and email communication to exchange important documents, they often rely on paper-based forms that require stamps, signatures, and express courier services to “proof the truth.”
In today’s hyper-fast digital age, the manual process of shipping and handling papers has substantially slowed things and proven costly.
Yet for ocean shipping, there are legal requirements and trade regulations in place – including the Hamburg Rules, Hague-Visby Rules, and Rotterdam Rules – that mandate a paper-based bill of lading (B/L).
With ongoing discussions about the interpretation of the Rotterdam Rules, UNCITRAL Model Law on Electronic Transferable Records, and Trade Facilitation Agreement of the WTO, however, a paperless ocean shipping process is potentially on the horizon.
But does the technology exist to render legally required paper documents obsolete?
B/L goes digital with the help of blockchain
Blockchain technology is designed to create a unique digital representation of a value or an asset and facilitate a tamper-proof digital transfer of ownership of the asset.
A B/L issued by the ocean carrier and used in international trade as a title of goods is one such asset.
The issuer of the B/L confirms that the goods have been received, loaded onboard a particular vessel, and will be released at a specific destination to the holder of the document(s).
The B/L also serves as proof of ownership of the goods.
The holder of the original(s) is the freight owner and the only organization permitted to pick up the container from the port of discharge. The ownership of freight can change while the vessel is in transit, however, through commodity trading. But since the freight can’t be handed over physically, companies would need to exchange a negotiable B/L instead.
From this aspect, blockchain technology is a perfect solution to digitally represent a unique B/L, as it can facilitate the digital transfer of ownership quickly, safely, securely, and cost-effectively.
Blockchain: Solving one business challenge after another
B/L isn’t only important in the transfer of ownership. In trade financing, a B/L is required to prove documentation and receive a timely payment, according to the letter of credit. In pharma, chemical, and food documentation, a B/L illustrates provenance. For port terminal operators, a B/L is a prerequisite to releasing containers.
The different blockchain use cases around B/L can present myriad challenges for companies today. But rather than building a single, large, one-size-fits-all blockchain, your enterprise must create smaller, more focused use cases. Only then will you and your partners be able to take advantage of the various relevant pieces to gain the unique perspective you need.
Learn more about blockchain and how it can help your enterprise.