Electronic bills of lading necessary but not sufficient
The Digital Container Shipping Association (DCSA), a nonprofit formed in 2019, has been at the forefront of helping the ocean vessel sector pivot from paper to digital documents and improve the scheduling of containerized shipments. Of course, 2020 saw a lot of pivoting due to the COVID-19 pandemic and the surge in e-commerce-related imports. The DCSA has suggested standards for carriers, ports and terminal operators to adopt. But will they — and if so when?
Data must be generated and shared among all the stakeholders. There is also the issue of acceptance. This is especially important when it comes to legal contracts. A common format for an electronic bill of lading (eBOL) — i.e., the contract of carriage — needs to be accepted by regulators since, for example, customs officials will need to examine them during pre-arrival container screenings and during physical inspections at ports of entry. Banks need to be involved since bills of lading form part of the process by which importers and exporters transact using letters of credit and documentary collection. Insurance companies will also need access should damage claims arise. An eBOL must, therefore, be in a format that ensures interoperability across multiple user interfaces.
Given that the container liners are global businesses covering many jurisdictions, the DCSA is smart to leverage an eBOL format suggested by the United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT). Still, a uniform eBOL should not be the goal but rather a first step. After all, contracts are established between two unique parties, and each is entitled to negotiate over language and content, whether it be in paper or electronic format.
Underlying the move to paperless transactions is the tension between establishing more formal service contracts and the vagaries of the spot market. Typically, trans-Pacific service contracts run from May 1 through April 30 and contain minimum quantity commitments in order to assist both parties in establishing the freight rate. This tension between fixed and variable rates serves to highlight differences among modes of transport. For instance, the International Air Transport Association (IATA) established an electronic air waybill (eAWB) in 2010, and it has become the default format for the contract of carriage used by its membership. The IATA’s multilateral agreement formalized the eAWB on Jan. 1, 2019. The DCSA is trying to follow a similar path.
Are consignors and container liners any more likely to cooperate in a digital setting compared to a paper one? Will the liners share data among themselves and with motor carriers? Will port congestion, especially at the ports of Los Angeles and Long Beach, see any relief? Since the DCSA’s membership represents about 80% of the container shipping industry on a TEU-basis, it certainly speaks with a loud voice. The nine members are CMA-CGM, Evergreen, Hapag-Lloyd, HMM, Maersk, MSC, ONE, Yang Ming and ZIM.
If the DCSA’s standards are put into widespread practice, the hope is that there will be more visibility and certainty in container shipping. Vessels can optimize on speed (i.e., maintain a steadier pace) in order to lower fuel burn and its concomitant pollution. Steadier speeds lead to more reliable arrival times, which further assists ports and terminals when allocating equipment and workers to handle the off-loading of containers, the drayage process and intermodal transfer inland to final destinations.
The peak season that just wrapped up was certainly unique. No one knows for sure how this year’s peak will unfold. Consignors may wish to negotiate for higher minimum quantity commitments in order to lock in space, whereas carriers, knowing that capacity will be tight, may wish to keep more space available for the spot market. Digitization is certainly overdue in the ocean vessel sector, but contracting, pricing and capacity utilization are also dependent on conveyances, support infrastructure and the psychology of profit-seeking.