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Electronic Bills of Lading: A Quiet Revolution

By Arthur B. Muir
November 05, 2004

Ever since the Medici family of Florence popularized the use of written documents to facilitate trade between city states and nations in the 15th century, letters of credit and their progeny, bills of lading, warehouse receipts and similar instruments of title, have consisted of written documents. Commercially effective and reasonably efficient for hundreds of years, letters of credit and documents of title in tangible form have become increasingly outmoded because of economic and temporal constraints. A recent article in The Wall Street Journal estimated that at least 5% of the cost of all international trade transactions was attributable solely to the cost of documentation [Gabriel Kahn, "Financing Goes Just-in-Time," The Wall Street Journal, June 4, 2004, Section A, p. 10]. With the growth of international trade and the relocation of manufacturing from industrialized nations to countries with cheaper labor costs, international shipments have increased dramatically as cost-conscious businesses search for increased efficiency. The historic standard of a 2-week turnaround for a written letter of credit for a secured bill of lading transaction and the cost of associated paperwork have created a need for a cheaper, faster system. Not surprisingly, merchants have found opportunities to use the Internet and other electronic arrangements to help solve this problem. This article will describe some of the alternative electronic bill of lading arrangements that have arisen since the 1990s for shipping goods internationally and the impetus that their spread provided to a Uniform Commercial Code working group that responded by overhauling and updating Article 7 to make it more reflective of modern trade practice.

Although a number of U.S. statutes deal with domestic shipping contracts and bills of lading, including the Bills of Lading Act [Federal Bills of Lading Act of 1916, 49 USCA 80113 (1997 and supp. 2004)], the most common set of rules that secured lending practitioners in the United States typically refer to in connection with bills of lading are those contained in Article 7 of the Uniform Commercial Code. International shipments, however, are governed by an extensive and well-developed set of rules that have existed for many years. Some like the Hague/Visby rules, which relate specifically to bills of lading, date back to 1924. [Rules (the Hague Rules) adopted by the International Law Association in September 1921 at a meeting in the Hague, Netherlands and adopted in 1924 as the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading as amended by the Protocol to Amend the International Convention for the Unification of Certain Rules of Law Relating to Bills of Lading 1968 (the Visby Amendments).]

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