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Bill of Lading and its Obstacles to Digitization

Bill of Lading and its Obstacles to Digitization

11. December 2020
Bill of Lading

The transport of goods involves a great deal of documentation. In addition to the customs declaration, there are several documents that need to be provided. As a multifunctional document, the bill of lading is one of the most important documents in sea freight. It is issued by the carrier and regulates the legal relationship between the carrier, the shipper and the consignee of the goods.  It also fulfils a variety of other functions. We have compiled a simplified list of these below.  

The functions of the bill of lading

With the bill of lading, the carrier first confirms receipt of the goods and at the same time promises to transport and deliver them. Furthermore, the consignee later needs the document to take delivery of the goods. In contrast to the sea waybill, which deems solely as a proof of contract for carriage and as a receipt for the freight, the bill of lading also functions as security for the consignee. Therefore, the goods can still be traded during transport. This does not mean, however, that goods intended for the consignee can simply be resold on board without protection. Here, the distinction between the straight bill of lading and the order bill of lading is important. The order bill of lading is transferred by means of a written transfer note (endorsement), thus allowing the sale of goods on board. Whereas, with a straight bill of lading, only the registered consignee is entitled to receive the goods. Transfer to a third party is only possible here by means of a declaration of assignment (cession).

The bill of lading also transfers responsibility for the condition of goods. Therefore, it is strongly adviced to document all defects in the goods and packaging during handover.  

The obstacles to an electronic bill of lading

For years, digitalization has been making its way into all industrial sectors, logistical processes included.  Digitizing the bill of lading brings many advantages from saving paper to reducing the processing time. In addition, pilot projects such as the AEOLIX (Architecture for European Logistics Information Exchange) project, which was initiated by the European Union in 2016, have been running for years with focus on digitizing freight documents. Today the AEOLIX project is part of the new EU project FENIX network, which received funding for 2019-2021 as part of the CEF Transport program. Its main goal is to support the development, validation and deployment of digital information systems. Some service providers have even started providing the bill of lading in electronic form. However, the question remains, why has the electronic bill of lading not yet caught on more extensively? This is mainly due to legal reasons, as goods securities generally involve groups such as banks and insurance companies. Acceptance of electronic forms at their end is indispensable. In addition, questions about security and data protection have not yet been fully clarified in many countries.

Nevertheless, it is expected that transport companies will be able to use electronic freight documents throughout the EU from 2025. Until then, the EU Commission plans to formalize the technical standards for the transmission and processing of data sets, as well as data protection regulations.

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