Enhancing Efficiency and Transparency in Electronic Bills of Lading (eBL)
In the last twelve months we’ve seen momentum build towards realising the global opportunity to transform trade and trade finance to a paperless model.
We’ve discussed the UK Electronic Trade Documents Bill in detail in our blog and podcast. Enacted in 2023, the International Chamber of Commerce estimates that “digitalising trade documents could generate £25 billion in new economic growth by 2024, and free up £224 billion in efficiency savings”. This bill highlights the significant impact on both the economy and private industry when stakeholders from industry, regulation, and technology collaborate to enhance efficiency, reduce environmental impact, and prevent fraud.
This initiative now directly impacts the shipping sector.
Electronic Bill of Lading (eBL)
In the world of global trade, shipping plays a pivotal role in connecting local and global economies and facilitating the movement of goods. An Electronic Bill of Lading (eBL) is a digital version of the traditional paper bill of lading – a key document in international trade and shipping. The bill of lading serves multiple purposes: it acts as a receipt for shipped goods, a document of title, and a contract between the shipper and carrier. eBLs offer significant efficiencies over paper based system, such as reducing fraud and complying with international regulations.
For eBLs to be trusted and enforceable, they must be able to be unequivocally associated with an assured organisation identity. This is where the Legal Entity Identifier (LEI) comes into play.
The LEI: A Brief Overview
The LEI is a unique ISO-standardised 20-character alphanumeric code that identifies legal entities. Created by the G20 and Financial Stability Board (FSB), and managed by the Global Legal Entity Identifier Foundation (GLEIF), the LEI system provides a standardised and globally recognised method for identifying organizations, thus simplifying trade processes across industries. The LEI is an open databank and allows anyone to verify that an organisation is who it claims to be.
In the context of shipping, the LEI’s integration into eBLs is a game-changer, offering a multitude of benefits:
Enhancing Transparency in Shipping
Transparency in shipping is crucial for verifying the identity of parties involved in the transportation and handling of goods. The traditional paper-based bills of lading often lack the capability to provide real-time verification and tracking, leading to inefficiencies and potential fraud. The adoption of eBLS, particularly when combined with LEIs, addresses these issues by providing a secure, tamper-proof method of documentation.
WaveBL Partnership with GLEIF: notable news in this area is the recent partnership announced between GLEIF and WaveBL, a blockchain-based platform for digitising trade documents. By integrating LEIs and the verifiable LEI (vLEI) into eBLs, WaveBL plans to ensure that the identities of shippers, consignees, and other legal entities are accurately verified. This integration enhances the trust and transparency within the network, as each party’s identity is uniquely and consistently verified through the LEI system
WaveBL CEO Noam Rosenfeld commented in the joint WaveBL GLEIF press release: “The integration of the LEIs into our platform represents a monumental step towards achieving a seamless digital trade environment. By ensuring the accuracy of digital identities, we are enhancing trust and transparency within our network and setting the stage for global interoperability. However, enabling automatic verification of digital credentials is a prerequisite in this regard. Currently, WaveBL handles verification processes on a platform level. As WaveBL is in search of a globally accepted standard, we have found that, the introduction of vLEIs could radically streamline this process by providing a trusted automated and universally accepted solution for verifying companies’ digital identities worldwide.”
Streamlining Regulatory Compliance
Shipping companies and other stakeholders in the supply chain are required to comply with various international regulations, such as maritime regulations and national customs requirements. The complexity of these regulations often necessitates rigorous documentation and reporting, which can be cumbersome and prone to errors.
Regulatory Compliance Benefits: The integration of LEIs into eBLs simplifies compliance with these regulations by providing a consistent and verifiable identifier for each entity involved. For instance, the LEI system supports compliance with the International Financial Reporting Standards (IFRS) by ensuring accurate reporting of transactions and financial data. This not only reduces the administrative burden but also minimises the risk of non-compliance, which can lead to costly penalties.
Reducing Fraud and Enhancing Security
Fraud is a significant concern in global shipping, where counterfeit goods, identity theft, and false invoicing can lead to substantial financial losses. The LEI system helps mitigate these risks by providing a standardised mechanism for verifying the identities of entities involved in transactions.
Fraud Prevention: By using LEIs, shipping companies can ensure that all parties in the supply chain are legitimate and verified. This verification process is crucial in preventing fraudulent activities such as cargo theft or unauthorized changes to shipping documents. The vLEI, in particular, enhances security by enabling the automatic verification of digital identities, thus ensuring that all transactions are securely and accurately recorded on blockchain platforms like WaveBL.
Facilitating Global Interoperability
The global nature of shipping requires interoperability between various systems and jurisdictions. The LEI system, being a global standard, supports this need by providing a uniform method of entity identification. This is particularly important for electronic trade documents, which must be recognized and accepted across different legal systems.
Global Interoperability: The adoption of LEIs in eBLs facilitates smoother and faster cross-border transactions. It eliminates the need for multiple identifiers and complex verification processes, thus reducing delays and enhancing the efficiency of international trade. As noted by GLEIF, the LEI system’s role in fostering interoperability is critical for the seamless integration of various digital trade platforms, which is essential for the future of global trade
Conclusion
The integration of the LEI system into electronic bills of lading represents a significant advancement in the shipping industry. By enhancing transparency, ensuring regulatory compliance, reducing fraud, and facilitating global interoperability, LEIs offer a comprehensive solution to the challenges faced by modern supply chains. As the adoption of eBLs and LEIs continues to grow, the shipping industry stands to benefit from improved efficiency, security, and trust in global trade.
It’s exciting to see LEIs included in the progress being made at the technology level with WaveBL, and in the example of the UK, at the regulatory level with the Electronic Trade Documents Bill.
More info: LEIs in eBLs and shipping initiatives
About The Author: Steve Waite
Steve is the Chief Marketing Officer for Ubisecure and RapidLEI.
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