Digital Bill of Lading The Future of Trade in Block Chain Ocean

In today’s Global Digital Village our Passport is accepted across the Countries and data is stored digital in immigration check. VISA and Master Cards are truly digital for payments. Then why not the Global Trade be truly digital ?

Letter of Credit:

In Global trade, Letter of Credit as a Financial Instrument is required if the Seller and Buyer do not have a trust relationship. When the goods are shipped using at least two different transportation modes, LC will require a standard document ‘ Bill of Lading’ to acknowledge receipt of Cargo.

Paper Bill of Lading are the only mode of choice today, causing all the involved parties difficulties, costs, and discrepancies.

Lets sail through few nautical miles, on how the Trade industry benefit from Going Digital especially in the future world of Block Chain.

Digital Bill of Lading:

An Digital bill of lading or e-Bill of lading is the legal and functional equivalent of a paper bill of lading. It should digitize the core aspects of Physical BL, namely its legal acceptance as a receipt, as evidence of or containing the contract of carriage and as a document of title. It should follow Global Best Practices- like how SWIFT message is standard across countries.

There are 6 main functionalities, a Digital version of the bill of lading needs to replicate –1)the identification, 2)signature, 3)correct address, 4)port/airport, 5)content and 6)trade terms and presentation of documents.

Please refer to below link for the Rules of Electronic Bill of Lading

http://comitemaritime.org/Rules-for-Electronic-Bills-of-Lading/0,2728,12832,00.html

Block Chain in Trade Finance

Distributed ledger technology, popularly known as blockchain, came into the picture in early 2014 and banks are now beginning to catch onto and further investigate the trend. Blockchain is revolutionising the exchange of value in a similar way to how the internet revolutionised the exchange of information and communication.

Blockchain technology could revolutionise trade – making it cheaper, quicker and simpler for businesses to trade internationally.

There are two aspects of this technology:

1)     The promise of new opportunities and

2)     Scope for cost savings.

The Block Chain technology offers a potential medium to exchange financial and non-financial data without intermediaries, and the tamper-proof nature of the blocks eliminates the possibility of fraud. This technology could also address operational risk through transparency, thus significantly helping banks reduce their operational costs when executing controls.

Why this is important for trade finance

Some of the key challenges facing the trade finance sector, which can be solved by Block Chain Technology.

For example:

Transparency

Feature to build transparency and consensus will help mitigate the risk of documentary fraud and thereby reduce the cost of transaction reconciliation between and within banks.

Traceability

The traceability associated with blockchain could potentially provide assurance and authenticity of products in the supply chain.

Data Privacy

The challenge of data privacy among counterparties to trade transactions could be overcome by utilizing tokenisation as a form of cryptography, whereby parties are only allowed to access permissioned information.

Smart Contracts

Smart contracts offer the possibility of self-executing contracts triggered by the efficient exchange of digital data, potentially revolutionising the long-serving Letter of Credit.

Internet of Things

Internet of things (IOT) which is still in the early stages of application to trade finance could be used to move physical assets while they are simultaneously tracked and purchased.