Digital documents in shipping: prospects of e-bill of lading in Ukraine

The issue of safety has always occupied the most important place in shipping. The industry is constantly looking for new ways to improve cargo transportation — from protecting cargo from theft and damage to combating piracy and creating a safe environment for the crew.

In the modern era of digitalization, cyber security has become an important direction for shipping. In particular, the industry is actively discussing the transition to electronic document management. The implementation of digital versions of transport documents (electronic bills of lading, or eBL) can significantly reduce costs and make the process of transporting goods much more transparent and safer.
USM spoke with experts to learn more about the challenges facing this direction in the industry.

What is an electronic bill of lading and why is it needed?

The bill of lading is one of the most important documents in the field of sea transportation, which can be considered a bill of lading for sea cargo. It confirms that the cargo is really on board and being transported to its destination.
A bill of lading is also a legal contract between the shipper and the shipping company. It specifies the conditions of transportation, such as the route, delivery times and cost of services. This document regulates the relationship between the parties and ensures the fulfillment of obligations on both sides.
At most, the bill of lading serves as a document confirming ownership of the cargo. That is, the one who has the bill of lading has the right to pick up the goods at the destination. This is an important aspect as it allows the cargo owner to have control over the goods during transportation.
In this case, the electronic bill of lading (eBL) is a modern version of the traditional paper document. One of the key benefits of eBL is that the digital format simplifies the process of concluding contracts and reduces the risk of document loss or damage. In addition, the processing of such documents takes up to five minutes, unlike traditional paper ones.

Electronic bills of lading in global practice

In particular, the Digital Container Transport Association (DCSA) is engaged in the implementation of electronic document management in shipping. It is a non-profit organization founded in 2019 to promote digitalization and standardization of the global container industry. DCSA brings together more than 100 members, including shipping companies, ports, terminals, freight forwarders, cargo owners and technology providers.
And this kind of practice implemented by the DCSA has been observed in the industry for a long time, says Serhiy Osypov, a representative of the Ukrainian logistics company Abordage Logistics.
In particular, in the field of linear container transportation, 95% of transport documents exist in electronic form. Currently, the customs authorities of Ukraine and EU countries do not require “hard” forms of documents. However, it is always possible to issue a paper version if the terms of the contract require it.
In addition, the digital bill of lading is the most cyber-secure, since it is built on a public blockchain network. Information about the owner of the eBL is stored on millions of devices, which makes it almost impossible to hack the document. And each such bill of lading is unique, in particular due to the use of NFTs (non-fungible tokens) by some companies.
The only way of cyberattack on protected eBL is the so-called 51% attack. This is when attackers gain control of most of the network’s computing power, allowing them to manipulate transactions. However, such an attack is extremely expensive and difficult.

Obstacles for the implementation

However, despite global digitization, the shipping industry is not yet ready for a full transition to paperless documentation. Market players face difficulties in this area. On the technical side, incompatibility between different systems and the lack of unified standards for electronic documents can be an obstacle. And this complicates their exchange between different market participants.

There are also noticeable regulatory obstacles, which include various national laws and international norms that do not always provide for the use of electronic documents or require their legal recognition. However, the example of the work of the Ukrainian Ministry of Digitization shows that, if desired, it is quite possible to make a quick electronic transition. Therefore, to a large extent, the fate of electronic bills of lading depends on the interest of the state.

Also, a few years ago, the aforementioned DCSA announced plans to transfer 50% of the document management industry to electronic documents by 2025 — with full adaptation by 2030. However, according to the data of 2023, the adaptation of the market was only 3-4%, and now it has reached 4-5%. The transition is happening, but it is not as fast as expected, Mykhailo Lepekha, a representative of eTEU, a company that implements electronic documentation in shipping, told USM.

First of all, eBL is needed by global freight forwarders, because they spend more money on courier services such as DHL or Fedex. For comparison, in Europe, courier services cost somewhere from $60; if we talk about eBL, then the price starts from $10. However, often despite the interest of freight forwarders, negotiations with shipping lines are long and difficult.

Among the obstacles are mistrust of new technologies on the part of some market participants, the absence of necessary regulatory acts and the complexity of technical implementation.

This includes the use of bank letters of credit — collection — which usually require an original bill of lading.

Yes, some deals still require the original paper bill of lading between the seller and the buyer. This actually creates barriers for the full adaptation of eBL, because the presence of an electronic bill of lading does not relieve the need to print the “usual format” of the document.

Most often, they require a paper version of the order bills of lading and bearer bills of lading. This type of document means that the ship’s cargo must be transferred to the person presenting the bill of lading. Moreover, any person who owns it can transfer the cargo to the buyer. The difference between these documents is due to the fact that, unlike the bill of lading, the name of the recipient is not indicated in the bearer bill of lading.

Such documents are more often used when delivering goods that depend on exchange prices (grain, oil, metals), or if the cargo is sold from one company to another during transportation. Also, warrant bills of lading and bearer bills of lading are used in situations where it is important for the parties to remain anonymous. Here, eBLs provide transparency and reduce the risks of “grey” exports.

In this context, paper-based document management becomes rather a matter of habit. If we talk, for example, about such documentation as bank letters of credit, then banks, in principle, are not very flexible in these matters. Therefore, most likely, there will be an electronic bill of lading soon, suggests the director and owner of the TEUS company Dmytro Kazanin.

Prospects for the development of eBL in Ukraine

The above-mentioned company, which develops software for the digitization of document flow in shipping, eTEU, demonstrated a significant difference in document processing time during the launch of a pilot project in Ukraine. Yes, the process of issuing a paper bill of lading takes eight days, on the electronic platform – only one minute.

There are other examples of attempts to switch to eBL in Ukraine. Some large port operators and shipping companies (for example, in Odesa and Chornomorsk) conducted pilot projects with electronic bills of lading together with international partners. One such company is WaveBL, which a few years ago in partnership with the shipping company ZIM organized an eBL presentation for Ukrainian customers.

However, the problem of a full transition to eBL in Ukraine remains. The question of whether Ukrainian shipping companies experience additional challenges or advantages in the context of electronic document flow, compared to international ones, does not lose its relevance.

It will hardly be a problem for international container companies to start electronic document management. Their capacities and speed of adaptation to market trends allow to do this. The key is that there should be a corresponding request from the market itself and all its participants. By the way, if you compare Ukraine and many other European countries in these matters, then, on the contrary, things are going faster in our country in matters of electronic document management, Dmytro Kazanin emphasizes.

The transition to electronic bills of lading in shipping is inevitable, albeit a slow process. The factors contributing to the electronic transition in Ukraine include the improvement of the digital infrastructure, support from government agencies and the desire to reduce paper bureaucracy, avoid banal loss and damage of documentation.

However, Ukrainian shipping companies may face additional challenges. This includes the insufficient digitization of the national infrastructure, the lack of unified standards and the need to meet international requirements.

At the same time, the advantages are the reduction of costs for paper document circulation, the speed and efficiency of document processing, as well as the possibility of integration with international supply chains.

According to Pavlo Linnyk, CEO of the GOL logistics company, the forecasts for the complete digitization of document flow in shipping for the next 5-10 years are positive. It is expected that thanks to the development of blockchain technologies and the improvement of cyber security, the majority of Ukrainian shipping companies will switch to electronic documents.

In addition, international organizations such as the International Maritime Organization (IMO) are actively working to create common standards and recommendations that will facilitate a faster transition to eBL. However, the key condition for this is active support from the government and industry associations.