Functions Of Bill Of Lading In International Trade And The Potential Of Electronic Essay.

Definition and Types of Bill of Lading

Question:

Discuss about the Model Law on International Commercial Arbitration.

International Trade has often been a driving force to social, political, economic stability. Bill of trading is a written contractual evidence of delivery of commodities and carriage transited by sea in exchange of particular shipment. Generally, a shipper transports the commodities to a carrier while the agent or carrier of the shipper issues bill of lading. Bill of Lading is said to be an imperative document that records that certain commodities have been loaded on board a ship. However, with the advancement in technology, the emergence of electronic bill of lading marks the setting of electronic communication in the international trade within the maritime industry. The paper aims at discussing four essential functions performed by the paper Bill of trading and evaluate the ability of the electronic bill of lading to perform similar functions, in the context of their importance to international trade (Law, 2016).

In Basinco Motors Ltd v WoermannLine & Anor [2009], a bill of lading has been defined as a written document that is signed on behalf of the owner of the ship in which the commodities are loaded as an acknowledgement of the commodities and taking the commodities to deliver them until the end of the journey. Such responsibility is subjected to the conditions, which shall be stipulated in the Bill of Lading. Thus, this document shall be signified as a written contract between people who are expressly parties to such document.

There are three types of Bill of Lading, which are as follows:

• Straight and Negotiable Bill of Lading- this type of Bill of lading becomes negotiable instrument when the same is provided to the carrier and is passed directly like cash.
• Clause Bill of lading and Clean Bill of Lading- A clause bill refers to bad condition of commodities being carried. A clean Bill of lading states that the commodities are in a good condition and are in order.
• Shipped and Received for Shipment Bills- a dispatched bill of lading is one that specifies that commodities have been actually dispatched on board and the received for shipment Bill denotes that the carrier has received commodities into his custody before its shipment.

The owner of a ship or his representative issues the Bill of Lading. According to Article 15 of the Hamburg Rules, after the commodities are loaded in the vessel, the ship owner shall issue a document, which must include the quantity, quality of the commodities, visible state of the commodities, name of the shipper, port of discharge, signature of the carrier or person on its behalf. It must also include the place of issuance of the Bill, increased limits of liability and the date or period of delivery of the commodities at the port of discharge.

The Bill of Lading plays four important functions in the context of international law. It plays four essential functions that are enumerated as below:

In Ogwuru v Co-op bank of E/N Ltd (1994), the court held that the Bill of Lading serves as a receipt for commodities. The Bill of lading acts as an important document that provides evidence of the fact that commodities have been conveyed and have been dispatched on the date stated in the bill. As a receipt of the commodities, Bill of Lading satisfies three separate essential qualities such as:

• leading marks in the commodities;
• determines whether the commodities are in perceptible good condition and order;
• the volume and quantity of the commodities;

Functions of the Paper Bill of Lading in International Law

The statement provided by the owner of the ship is evidence of the quality and quantity of the commodities. If the commodities are found to be inconsistent with the statement made by the ship owner, then the party is required to establish that the commodities were not in a bad condition. If the same is established, the carrier shall be liable for misrepresentation. In case of such disputes relating to the condition or quantity of commodities, bill of lading shall become a prima facie proof that the commodities were shipped under conditions stipulated in the Bill of lading. The Bill of lading, which states that the commodities are in good condition it is known as clean bill of lading and a bill that states the commodities are in bad condition and is not in order, the Bill is a claused bill of lading under the Carriage of Commodities by Sea Act 1971.

The documentary credit includes letter of credit transactions where the bank of the purchaser provides a letter of credit that affects the payment of the commodities purchased. The requirements of Bill of lading to be used as a document of credit have been stipulated under Article 20 UCP 600. The UCP does not explicitly distinguish between a non-negotiable Bill of lading and a negotiable Bill of lading. Banks usually require complete set of bills of lading in case more than one bill has been issued and it shall reject any tender that is less than the complete set of Bills. Further, a bank usually accepts a ‘clean bill of lading’ along with the other conditions stipulated under Article 20 of the UCP to give effect to the documentary form of credit in favor of the purchaser.

A ‘document of title’ is kwon as a deed that permits the holder of the document to handle the commodities like the owner of the commodities. The bill of lading can be said to obtain the actual delivery of the commodities at the designated ports (Ahmadi, Elsan & Noshadi, 2017). A lawful holder of a bill of lading is said to have constructive ownership of the commodities. In fact, during transition of the commodities, the owner of the commodities can trade the commodities to another person by just conveying the bill of lading as consideration. Therefore, a legitimate holder can easily transfer the commodities by delivering the documents to a third person. However, a Straight Bill of Lading cannot be stated as a document of title.

The Potential of Electronic Bill of Lading

The Bill of Lading acts as the only binding contract entered between the carrier and the receiver of the commodities, which implies that the terms not incorporated in the Bill, shall be excluded (Aikens, Lord & Bools, 2015). This is because the buyer has only the notice of the terms stipulated in the Bills of lading and terms used outside the Bills shall amount to breach of contract law principles as was held in Leduc & Co v Ward [1888].

The question whether electronic Bill of lading is capable of performing the purpose of the Paper Bill of lading has been subjected to several debates. Majority of the jurisdictions rely on bill of ladings that are in writing instead of its electronic form. Further, legal uncertainties may arise with respect to the evidentiary value, validity, storage of data messages and incorporation of terms and conditions in the contract of carriage.

However, despite such arguments against using of electronic Bill of lading, traders are using the electronic means to carry out the international transactions on the ground that paper Bills ate insecure, expensive ad complicate to use, which often cause unnecessary delay. In regards to the ability of electronic Bills to perform the functions of paper bills, it can be stated that acting as an evidence of carriage and receipt of shipped commodities does not pose any problem. The document of title function can be achieved by providing a framework through which secured transaction laws should provide sufficient rules that enable merchants and banks to accept the document title. Thus, the creation of security interest in an electronic document of title shall make it capable to function like paper Bill of ladings (Gaskell, 2016).

In regards to the transferability of electronic Bill of lading, it can be performed to remove the legal impediments with respect to the endorsement and physical delivery of the paper Bill of lading under Article 16(f) of Model Law. According to Article 17, the data used in electronic bill is equivalent to the paper requirement of the traditional Bill of lading. Further, Article 8(1) and 8(4) ensures that the data messages satisfies the originality, integrity, reliability requirement of the data provided the information remain unaltered and complete.

Furthermore, as per Article [3(3)] of Hague-Visby and Article [14(1)], which requires the carrier to issue a bill of lading on demand of the shipper and Article [3(3) (a) (b)] and Article [3(6)] of the Hague-Visby requires the bill and certain notices to be in writing. The electronic bill of lading may perform this function as well due to the provision in Article [1(8)] of Hamburg Rules, which includes telex, telegram, and electronic signature on the bill of lading, thus, giving recognition to the electronic Bill of lading.

Conclusion

The electronic form of Bill of lading can achieve the functions of the traditional Bill of Lading if the policy initiatives and legislative measures of states computerize port facilities and amend the domestic laws to incorporate the electronic form of  bill of lading. Electronic bill of lading shall succeed in performing the function of negotiability that is performed by the traditional form of bill of lading and will become the business custom in terms of time, acceptance and amount of data usage. Thus, the electronic bill can be said to be able to perform similar functions of paper bill of trading but with distinct procedural characteristics.

References

1985 - UNCITRAL Model Law on International Commercial Arbitration

Ahmadi, M. R. A., Elsan, M., & Noshadi, I. (2017). Comparative Study of Bill of Lading Function as Title Document. J. Pol. & L., 10, 188.

Aikens, R., Lord, R., & Bools, M. (2015). Bills of lading. CRC Press.

Basinco Motors Ltd v WoermannLine & Anor [2009] 13 NWLR (Pt. 1157) 149 at 186

Carriage of Commodities by Sea Act 1971.

Gaskell, N. (2016, January). Overview of Electronic Bill of Lading–Advantages & Challenges. In Electronisation of Transferable Documents or Instruments Used in International Trade.

Law, U. M. L. U. M. (2016). on International Commercial Arbitration (1985), with amendments as adopted in 2006 Status,(Çevrimiçi).

Leduc & Co v Ward [1888] 20 QBD 475

Ogwuru v Co-op bank of E/N Ltd (1994) 8. NWLR (Pt. 365) 685 at 687

Protocol (SDR PROTOCOL) Amending The International Convention for the Unification of certain rules of law relating to Bills of Lading of 25 august 1924 (the hague rules), as amended by the protocol of 23 february 1968 (visby rules)

Uniform Customs and Practice for Documentary Credits [UCP] 600

United Nations Convention on the Carriage of Commodities by Sea, 1978 (Hamburg Rules)