Computers are fast becoming a primary means of executing and conducting international commercial transactions. International businesses are currently utilizing a scheme referred to as “electronic data interchange. ” (EDI) EDI is obviously an expeditious means of conducting business and it is expected that the carriage of goods by sea will benefit from this scheme, especially the introduction of an electronic bill of lading. However, there are number of technicalities and legal issues that have barred the complete implementation of EDI. The primary obstacle has been the legal requirement for paper documents.
The primary emphasis in terms of the legality of the bill of lading has always been on the authenticity of the captain’s signature. Considering the ease by which these signatures can be forged, the difficulty with cross-checking them for comparison, and the changing character of the bill of lading , it is surprising that international law would insist upon the continued use of the traditional bill of lading in favour of the electronic bill of lading. Even so, the introduction of the electronic bill of lading requires a new legal culture for regulating the continued and increase use of the new bill of lading.
The traditional rules applicable to the paper form of the bill of lading will not be sufficient to regulate the digital or electronic bill of lading. This research will explain this rationale by exploring both forms of the bill of lading. The purpose of this research paper is to explore the significance of the bill of lading in international commercial transactions and to demonstrate that the implementation of the electronic bill of lading is far more preferable to and foolproof than the traditional bill of lading.
Moreover, the electronic bill of lading will only help to facilitate the completion of EDI goals and objectives toward more expeditious international commercial activities I. Introduction In recent times technological advances in computer science have opened up methods by which commercial transaction can be executed with greater efficiency. The introduction of the EDI during the 70s is a major part of these innovative computer advances and its facilitation of expeditious commercial transactions. EDI permits the substitution of paper documentation in commercial transactions with a more expeditious mode of evidence.
Attention to the bill of lading and the growth toward a more expedient means of executing commercial transactions are particularly important since a vast majority of international goods are transported by sea. In Australia, between 1999 and 2000 more than 500 million tonnes of international goods were transported by sea compared to just 700,000 tonnes via air. The increased utilization of EDI necessarily requires harmonious procedures to secure that these transactions are consistent and reliable both commercially and legally.
In this regard, the Rules for Electronic Bills of Lading, drafted by the Comite Maritime International (CMI) attempts to bring some uniformity with respect to EDI transference of the negotiable bill of lading. The United Nations Commission on International Trade Law (UNCITRAL) also implemented a Model Law on Legal Aspects of Electronic Data Interchange and Related Means of Communication in 1996 which is designed to legalize electronic messaging. Major economic powers are taking similar action to recognize and indorse the legality of electronic transactions.
These legislatives incentives are a manifestation of the growing significance of EDI and by extension the electronic bill of lading. There is an increasing use of computers and electronics in general in commercial transactions. Major economic powers are taking similar action to recognize and indorse the legality of electronic transactions. For instance the US has implemented the Uniform Computer Information Transaction Act 1999 and the EU has implemented the EU Directive on E-Commerce. These legislatives incentives are a manifestation of the growing significance of EDI and by extension the electronic bill of lading.
There is an increasing use of computers and electronics in general in commercial transactions. Obviously, traditional regulatory frameworks which primarily focus on paper documentation are inadequate to regulate these new forms of electronic commercial transactions. In order to facilitate the smooth execution of EDI, new rules are necessary. In this regard, the electronic bill of lading is not only a necessary part of the EDI success, it is pivotal to its smooth operation. Unless, however, new rules for the electronic bill of lading is necessary since these new devices are not confined to paper documentation.
This research paper will illustrate the distinction between the traditional bill of lading and electronic bill of lading and will likewise explain why a distinct set of rules are necessary. Tied to this argument is the belief that the electronic bill of lading is entirely necessary for facilitating the effective use of the EDI system of commercial transactions. II. The Traditional Bill of Lading a. The Task and Functions of the Bill of Lading The bill of lading itself is evidence of proprietary interest in goods shipped via sea.
The traditional bill of lading is a paper document whereas electronic bills of lading are electronic in nature, typically generated by virtue of facsimile or other methods of electronic origin. Be that as it may, the traditional bill of lading is delivered to the shipper once the carrier has receipt of the goods either at the point of loading or on board the ship. “Through bills of ladings” are typically delivered by “freight forwarders” at the commencement of the voyage. In this regard the bill of lading is a receipt evidencing delivery of the goods and the contract for carriage of the goods.
As a document evidencing title, the original bill of lading under the concept of the traditional bill of lading, is dispatched by the shipper to purchaser to enable the purchaser to claim the shipped goods once they arrive at their final destination. The bill of lading itself is significant in this regard because it is typically a negotiable instrument conferring upon the purchaser the right to either “sell or pledge” the bill of lading prior to or after the goods have reached their final destination.
International and domestic laws typically limit the manner in which bills of ladings can exonerate carriers’ liabilities. Likewise these provisos function to contain the risks that buyers or other interested parties face. b. Development and Evolution of the Bill of Lading In its infancy, the bill of lading was no more than an addendum attached to the charter party and the contract regulating the carriage of goods via sea. It was simply designed to function as a receipt for cargo dispatched to the shipowner, charterer or vessel’s master by the shipper.
It also offered a synopsis of the contract regulating the carriage of the cargo. Ultimately, an original bill was necessary to make a claim as the legal holder of the bill of lading. In other words, the original bill of lading was a prerequisite for “right to claim delivery of the goods. ” By the middle of the 19th century the bill of lading, as a document that essentially evidenced the description of the goods, price and insurance against risks in carriage could demand payment upon its delivery.
This development is a manifestation that the traditional bill of lading evolved from a mere addendum to an actual document of title and in most cases arrived ahead of the goods shipped. In any case, the power to command payment upon delivery of the bill of lading as a document of title is demonstrative of the significant role the bill of lading plays in the maritime commerce. During the middle of the 19th century the wealth and importance of the bill of lading took on more meaning. For instance European laws recognized the ability to transfer or assign a bill of lading by either delivery or endorsement by a sanctioning system.
In either case, the assignment or transfer conferred upon the assignee or transferee all rights and liabilities of the transferor or assignor, subject always to third party claims. The bill of lading is therefore a commanding document in that it confers the right to claim delivery of the goods as well as delegates control of the goods while in transit or while held for transit and delivery. During the middle of the 19th century the wealth and importance of the bill of lading took on more meaning.
For instance European laws recognized the ability to transfer or assign a bill of lading by either delivery or endorsement by a sanctioning system. In either case, the assignment or transfer conferred upon the assignee or transferee all rights and liabilities of the transferor or assignor, subject always to third party claims. What followed from these developments was a set of “abstract rights to protect” all persons with a proprietary interest in the cargo under the bill of lading, for instance, pledges, purchasers or mortgagees.
These claims were good against all previous and current owners or those in possession of the goods under the bill of lading or the bill or itself. These claims were also good against the shipper. Having evolved into an “abstract document”, the bill of lading conferred upon a holder in good faith “mercantile title to the goods”, although the legal owner of the bill of lading had a superior right over the transferor to take possession of the goods. As an abstract document, the bill of lading became a negotiable instrument during the second half of the 19th century.
These developments gave way to the development of different classes of bills of lading which would determine its relative value, at least from a bank’s perspective. For instance, the most valuable bill of lading was one that could be resold and likewise permitted timely and inexpensive possession of goods in a marketable condition. It therefore followed that a “clean” bill of lading, one that revealed no flaws in the goods or its packaging had more value than a “foul” or “unclean” or “claused” bill of lading which reflected some flaws in the goods or packaging. Other terms emerged that would denote the value placed on the bill of lading.
These terms included “shipped, or placed on board” which were favoured over bills of lading that noted that the goods were delivered to be shipped. Other qualifying terms were attached to the seaworthiness of the vessel and by extension the carrier’s strict liability for carriage of the goods. The significance of the bill of lading and its merchantable quality and value together with the significance attached to seaworthiness are captured by international law under the Hague Rules. The US Harter Act is said to influence the Hague Rules and the English law indorsed the Hague Rules by virtue of the Carriage of Goods by Sea Act.
Each of these provisions illustrate that the voyage itself creates risks and shared responsibility for those risks between shippers and carriers. This reality required the standardization of the bill of lading, an objective of the Hague Rules. In this regard, the Hague Rules required that the bill of lading reflect notations that made it possible to identify the cargo, the quantity of packages or weight and the condition the goods were in upon delivery and loading. Other changes followed in the Hague Visby Rules which were aimed at regulated bills of ladings and other title deeds.
Still the Hague Visby Rules would be amended by the United Nations’ UNCITRAL with the result that the Hamburg Rules would amend the Hague Visby Rules. Eventually the Hague Visby Rules were indorsed by the Brussels Protocol in 1924 which were aimed at regulated bills of ladings and other title deeds. The Hague Visby Rules would strengthen the significance of the bill of lading. While the Hague Rules stated that the bill of lading was only “prima facie evidence of the receipt by the carrier of goods” as described in the bill, the Visby rules went on to state that evidence:
“to the contrary shall not be admissible when the bill of lading has been transferred to a third party acting in good faith. ” The Hamburg Rules development speaks to the relative growing importance of the bill of lading. As it is, the shipment of goods, the quality of those goods prior to shipment and the condition in which they ultimately arrive are significant to the negotiable value of the bill of lading. It therefore follows that uniformity of rules regarding liability of shippers and carriers and the rights of consignees, transferees and purchasers are all tied to the integrity of the goods in transit.
The bill of lading provides evidence of the condition the goods are in and should be in once they arrive at their final destination. It has emerged as a document capable of transfer as a negotiable instrument or a bill of exchange. In simplified terms, the history and evolution of the bill of lading culminated in a shipping document that functions as a receipt for the cargo, a contract for its transport and a title deed. The bill of sale functions to trace the chain of custody and responsibility of the goods to which they apply. In this regard it serves to identify not only the goods, but the carrier, receive and the shipper.