Since the invention of the container, sea freight has gradually taken over global transport volume. ‘Slowbalization’ backed by nationalism and trade-wars has put brakes on globalization, but global volume is expected to reverse this trend in the next two years. In 2017, 753 million twenty-foot equivalent units (TEUs) of containers were handled in ports worldwide and estimated that figure would even quadruple by 2050.
For all traded goods, freight documents such as Bill of lading or commonly known as B/L, are available in the analogous form. It’s not only B/L and transportation documents, but obligations range from the keeping of ship certificates to ship diaries and include FAL Form 1, 2, 3, 4, and many more.
B/L is the most important document as it secures the obligation to deliver the goods to the place of destination and to deliver them to the consignee. B/L serves as a basis for the letter of credit transaction between banks of the buyer and seller, and the use of the paper-supported document in the 21st century represents an anachronism. Due to its physical nature and parties working in silo's document review is very time consuming, which in the worst case takes longer than the actual transport. According to industry estimates, the transport-related documentation obligation alone accounts for 5-10% of the total cost of transportation.
Can digitization relieve the burden of paper-based sea freight documentation on the transport player? The answer is definite. Yes. Digitization is a common goal for the maritime economy and indispensable to remain at the forefront of economic development.
Electronic Bill of Lading is the future! Using electronic B/L, trading is enormously accelerated and ultimately made more cost-efficient. Particularly against the background of a still-ongoing crisis in shipping companies and dependent on further cost-saving. Besides, governmental institutions, such as customer or import authorizes, can also be included a digital ecosystem that makes the process seamless.
The Bill of lading Electronic Registry (BOLERO) is the pioneer of this digitization effort. The BOLERO standard could not assert itself because there was a lack of trust in the integration and reliability of the central server architecture, the trading of BOLERO Bills of lading was only possible between participants in the network and the rulebook used did not offer necessary legal security. Under technical scrutiny, we found that a Blockchain-based solution seems to be the perfect solution to overcome paper-based B/L.
The term "Blockchain technology" typically refers to a distributed ledger maintained by millions of computers worldwide with standard rules of engagement. It's a transparent, trustless, publicly accessible ledger that allows us to create a digital representation of value and transfer the ownership using military-grade encryption technology. All transactions are verified by anonymous computers that are part of the network, therefore, making it a Digital Democracy. Since it is a shared and immutable ledger, the information in it is open for anyone and everyone to see. Hence, anything that is built on the Blockchain is by its very nature transparent, and everyone involved is accountable for their actions.
‘Distributed’ means it is not centrally controlled by a bank, corporation, or government. Bitcoin is the most significant known implementation of Blockchain Technology and not limited to cryptocurrency. As such, it has gained a lot of attention in a variety of industries, including digitization of documents, assets, bonds, and other digital processes. B/L is a fascinating implementation because, with distributed control of the papers on Blockchain, there would also be no need for time-consuming document verification in the frame of letter of credit business (UCP 600). The problem of delivery without submission of B/L can be solved by leveraging Blockchain technology. The handling of the electronic B/L should be entrusted with internationally operating, non-commercial organization. Under the umbrella of this independent organization, the private sector players in the international sea freight business become involved, as well as international organizations (e.g., IMO), and national and supranational authorities to ensure market acceptance through the maritime domain.