International Journal

on Marine Navigation

and Safety of Sea Transportation

Volume 6

Number 4

December 2012

1 DEFINITIONS

− "Contract of Carriage" - means any agreement to

carry goods wholly or partly by sea.

− "EDI" means Electronic Data Interchange, i.e. the

interchange of trade data effected by teletrans-

mission.

− "UN/EDIFACT" - means the United Nations

Rules for Electronic Data Interchange for Admin-

istration, Commerce and Transport.

− "Transmission" - means one or more messages

electronically sent together as one unit of dispatch

which includes heading and terminating data.

− "Confirmation" - means a Transmission which

advises that the content of a Transmission appears

to be complete and correct, without prejudice to

any subsequent consideration or action that the

content may warrant.

− "Private Key" - means any technically appropri-

ate form, such as a combination of numbers

and/or letters, which the parties may agree for se-

The Advantage of Activating the Role of the

EDI-Bill of Lading And its Role to Achieve

Possible Fullest

A. Elentably

Maritime Economics, King Abdul-Aziz University, Kingdom of Saudi Arabia

ABSTRACT: With a steady increase in maritime traffic of foreign trade of the world, and the continuing

trend to maximize returns for investors and states alike, the time factor in the flow of goods linchpin of

achieving those savings, and then highlight the absolute importance of handling freight bill, a title of goods of

various types, and to achieve electronic exchange of invoice is on the top priorities for the departments of

marine ports to achieve those savings, since the bill of lading for goods as a title to the goods traded

electronically requires a thorough understanding of certain aspects which are complementary to each other,

such as: Rules of procedure When not in conflict with these Rules, the Uniform Rules of Conduct for

interchange of Trade Data by Teletransmission, 1987 (UNCID) shall govern the conduct between the parties.

.beside that the Form and content of the receipt message and its meaning The carrier, upon receiving the

goods from the shipper, shall give notice of the receipt of the goods to the shipper by a message at the

electronic address specified by the shipper. In addition This receipt message shall include different

information such as: the name of the shipper; the description of the goods, with any representations and

reservations, in the same tenor as would be required if a paper bill of lading were issued; the date and place of

the receipt of the goods; and a reference to the carrier's terms and conditions of carriage; plus the Private Key

to be used in subsequent Transmissions, also the role of Terms and conditions of the Contract of Carriage ,

Right of Control and Transfer, the terms of Delivery, Option to receive a paper document , Through those

tangles and measures to deal electronically bill of lading, highlights the importance of the element of time to

achieve the fullest possible use of electronic exchange of data bill of lading and the implications of this

exchange to achieve a standard rate of loading and unloading and to reduce waiting times for ships in ports to

the marine and rates of performance standard berths port and optimize the use of journals and equipment

docks and achieve financial savings from shipping operations. These rules shall apply whenever the parties so

agree.

595

curing the authenticity and integrity of a Trans-

mission.

− "Holder" - means the party who is entitled to the

rights.

− "Electronic Monitoring System" - means the de-

vice by which a computer system can be exam-

ined for the transactions that it recorded, such as a

Trade Data Log or an Audit Trail.

− "Electronic Storage" - means any temporary, in-

termediate or permanent storage of electronic da-

ta including the primary and the back-up storage

of such data.

2 HOW CAN HANDLING OF PROCEDURE

When not in conflict with these Rules, the Uniform

Rules of Conduct for interchange of Trade Data by

Teletransmission, 1987 (UNCID) shall govern the

conduct between the parties. The EDI under these

Rules should conform with the relevant

UN/EDIFACT standards. However, the parties may

use any other method of trade data interchange

acceptable to all of the users. Unless otherwise

agreed, the document format for the Contract of

Carriage shall conform to the UN Layout Key or

compatible national standard for bills of lading. In

the event of a dispute arising between the parties as

to the data actually transmitted, an Electronic

Monitoring System may be used to verify the data

received. Data concerning other transactions not

related to the data in dispute are to be considered as

trade secrets and thus not available for examination.

If such data are unavoidably revealed as part of the

examination of the Electronic Monitoring System,

they must be treated as confidential and not released

to any outside party or used for any other purpose.

Any transfer of rights to the goods shall be

considered to be private information, and shall not

be released to any outside party not connected to the

transport or clearance of the goods.

2.1 Form and content of the receipt message

1 The carrier, upon receiving the goods from the

shipper, shall give notice of the receipt of the

goods to the shipper by a message at the electron-

ic address specified by the shipper.

This receipt message shall include: the name of

the shipper; the description of the goods, with any

representations and reservations, in the same ten-

or as would be required if a paper bill of lading

were issued; the date and place of the receipt of

the goods; a reference to the carrier's terms and

conditions of carriage; and the Private Key to be

used in subsequent Transmissions. The shipper

must confirm this receipt message to the carrier,

upon which Confirmation the shipper shall be the

Holder.

2 Upon demand of the Holder, the receipt message

shall be updated with the date and place of ship-

ment as soon as the goods have been loaded on

board.

3 The information contained in paragraph (b) above

including the date and place of shipment if updat-

ed in accordance with paragraph (c) of this Rule,

shall have the same force and effect as if the re-

ceipt message were contained in a paper bill of

lading

2.2 Terms and conditions of the Contract of

Carriage

1 It is agreed and understood that whenever the car-

rier makes a reference to its terms and conditions

of carriage, these terms and conditions shall form

part of the Contract of Carriage.

2 Such terms and conditions must be readily avail-

able to the parties to the Contract of Carriage.

3 In the event of any conflict or inconsistency be-

tween such terms and conditions and these Rules,

these Rules shall prevail.

2.3 Applicable Law

The Contract of Carriage shall be subject to any

international convention or national law which

would have been compulsorily applicable if a paper

bill of lading had been issued.

3 THE SELECTION RIGHT OF CONTROL AND

TRANSFER

The Holder is the only party who may, as against the

carrier: claim delivery of the goods; nominate the

consignee or substitute a nominated consignee for

any other party, including itself; transfer the Right of

Control and Transfer to another party;

1 instruct the carrier on any other subject concern-

ing the goods, in accordance with the terms and

conditions of the Contract of Carriage, as if he

were the holder of a paper bill of lading. A trans-

fer of the Right of Control and Transfer shall be

effected: by notification of the current Holder to

the carrier of its intention to transfer its Right of

Control and Transfer to a proposed new Holder,

and confirmation by the carrier of such notifica-

tion message, whereupon the carrier shall trans-

mit the information as referred to (except for the

Private Key) to the proposed new Holder, where-

after the proposed new Holder shall advise the

carrier of its acceptance of the Right of Control

and Transfer, whereupon the carrier shall cancel

the current Private Key and issue a new Private

Key to the new Holder.

2 If the proposed new Holder advises the carrier

that it does not accept the Right of Control and

596

Transfer or fails to advise the carrier of such ac-

ceptance within a reasonable time, the proposed

transfer of the Right of Control and Transfer shall

not take place. The carrier shall notify the current

Holder accordingly and the current Private Key

shall retain its validity.

The transfer of the Right of Control and Transfer

in the manner described above shall have the

same effects as the transfer of such rights under a

paper bill of lading.

4 THE PRIVATE KEY

1 The Private Key is unique to each successive

Holder. It is not transferable by the Holder. The

carrier and the Holder shall each maintain the se-

curity of the Private Key.

2 The carrier shall only be obliged to send a Con-

firmation of an electronic message to the last

Holder to whom it issued a Private Key, when

such Holder secures the Transmission containing

such electronic message by the use of the Private

Key.

3 The Private Key must be separate and distinct

from any means used to identify the Contract of

Carriage, and any security password or identifica-

tion used to access the computer network.

5 DELIVERY

1 The carrier shall notify the Holder of the place

and date of intended delivery of the goods. Upon

such notification the Holder has a duty to nomi-

nate a consignee and to give adequate delivery in-

structions to the carrier with verification by the

Private Key. In the absence of such nomination,

the Holder will be deemed to be the consignee.

2 The carrier shall deliver the goods to the consign-

ee upon production of proper identification in ac-

cordance with the delivery instructions specified

in paragraph (a) above; such delivery shall auto-

matically cancel the Private Key.

3 The carrier shall be under no liability for misde-

livery if it can prove that it exercised reasonable

care to ascertain that the party who claimed to be

the consignee was in fact that party.

6 OPTION AVAILABLE TO RECEIVE A PAPER

DOCUMENT

1 The Holder has the option at any time prior to de-

livery of the goods to demand from the carrier a

paper bill of lading. Such document shall be made

available at a location to be determined by the

Holder, provided that no carrier shall be obliged

to make such document available at a place where

it has no facilities and in such instance the carrier

shall only be obliged to make the document

available at the facility nearest to the location de-

termined by the Holder. The carrier shall not be

responsible for delays in delivering the goods re-

sulting from the Holder exercising the above op-

tion.

2 The carrier has the option at any time prior to de-

livery of the goods to issue to the Holder a paper

bill of lading unless the exercise of such option

could result in undue delay or disrupts the deliv-

ery of the goods.

3 A bill of lading issue shall include:

the information set out in the receipt message re-

ferred to (except for the Private Key); and a

statement to the effect that the bill of lading has

been issued upon termination of the procedures

for EDI under the CMI Rules for Electronic Bills

of Lading.

The aforementioned bill of lading shall be issued

at the option of the Holder either to the order of

the Holder whose name for this purpose shall

then be inserted in the bill of lading or to bearer.

4 The issuance of a paper bill of lading shall cancel

the Private Key and terminate the procedures for

EDI under these Rules. Termination of these pro-

cedures by the Holder or the carrier will not re-

lieve any of the parties to the Contract of Carriage

of their rights, obligations or liabilities while per-

forming under the present Rules nor of their

rights, obligations or liabilities under the contract

of carriage.

5 The Holder may demand at any time the issuance

of a print-out of the receipt message (except for

the Private Key) marked as non-negotiable copy.

The issuance of such a print-out shall not cancel

the Private Key nor terminate the procedures for

EDI.

7 ELECTRONIC DATA IS EQUIVALENT TO

WRITING

The carrier and the shipper and all subsequent

parties utilizing these procedures agreed that any

national or local law, custom or practice requiring

the Contract of Carriage to be evidenced in writing

and signed, is satisfied by the transmitted and

confirmed electronic data residing on computer data

storage media displayable in human language on a

video screen or as printed out by a computer. In

agreeing to adopt these Rules, the parties shall be

taken to have agreed not to raise the defense that this

contract is not in writing.

7.1 INTRODUCTION

This paper aims to give some idea of the dynamics

involved in implementing electronic bills of

597

lading. The bill of lading is one of the compendium

of documents used in carriage of goods by sea. The

writer did therefore not attempt to isolate the bill of

lading, although the emphasis is clearly placed on

substituting the traditional (tangible) bill of lading

with EDI.

To understand the complexity of adapting

existing documentation to EDI, it is essential to

place the bill of lading into an EDI context. The

electronic transfer of documents is nothing new. It is

the statutory requirements and legal rights and

obligations associated with the transfer that is

currently stretching the boundaries of the law. Most

of the legislation dealing with carriage and shipping

documentation was drafted in an age where EDI was

clearly not envisaged. Consequently, uncertainty

exists regarding the legal recognition of electronic

documentation.

The role and function of the traditional bill of

lading is briefly examined followed by the

electronic evolution of the bill of lading.

The technical and legal obstacles to the

implementation of EDI are then reviewed. These

include the requirement that the document has to be

in writing, signature, negotiability and liability. The

admission of computer generated evidence is also

dealt with.

Parties wishing to enter the arena of electronic

documentation will have to draw up an interchange

agreement to regulate the various technical and

legal issues arising out of the electronic transfer of

documents. Various model interchange agreements

are examined. The interchange agreement will in

many ways be the backbone of the EDI operation.

Parties will have to consider the legal and technical

issues that might arise in the interchange agreement.

A properly drafted interchange agreement will go a

long way towards reducing some of the potential

problems associated with electronic transactions.

EDI model rules provide for the incorporation of

EDI into an acceptable legal framework. These rules

will be considered. The emphasis is placed on the

CMI Model Rules. The UNCITRAL Model Law on

Electronic Commerce will also be briefly examined.

This model law should provide a great impetus

towards EDI acceptance and full scale legal

recognition.

The paper then focuses on the attempt by various

bodies to implement electronic bills of lading. Two

prominent examples are given namely Bolero and

SeaDocs. Lastly, a brief introduction is given to the

impact of the Internet on EDI. This is an existing

development and deserves further discussion. In

conclusion, it is suggested that the traditional bill of

lading can be substituted by EDI.

7.2 THE ordinary BILL OF LADING

The use of the bill of lading is almost as old as

maritime trade itself. One of the earliest references

to the keeping of records for cargo shipped on board

is found in The Ordonnance Maritime of Trani of

1063. The original function of the bill of lading was

therefore to acknowledge that the goods have been

shipped. The use of the bill of lading became

widespread during the 16th century and continued to

develop as a respected document in international

trade. Growing trade eventually necessitated the

transfer of title in the goods before they arrived. It

therefore became necessary to endorse the bill of

lading to a third party in order to effect transfer of

the goods. The bill of lading became a negotiable

instrument. Mitchelhill reports that the first reported

case in which endorsement of the bill of lading is

mentioned dates from 1793.

The importance of the traditional bill of lading in

international trade is largely self-evident when

viewed against its functions. It is:

− Evidence of the contract of affreightment i.e. it

contains all the essential terms;

− Prima facie evidence of the receipt issued by the

carrier that the goods have been shipped or are

received for shipment; and

− A 'quasi negotiable' document which passes the

title in the goods.

International traders will almost always enter into

a contract of carriage before the bill of lading is

issued. The contract of carriage is then evidenced by

the bill of lading. It is only possible to exclude this

provision by express agreement.4 Furthermore, the

bill of lading will also normally contain the terms of

the contract of carriage.

Arguably, the most important function of the bill

of lading relates to its negotiability. The bill of

lading serves as negotiable commercial paper

thereby enabling the transfer of title of the goods

while they are in transit. Under English law, the bill

of lading is not a truly 'negotiable' instrument

because the indorse of the bill of lading can not

receive a better title than the original holder had.5

However, the bill of lading is a document of title and

the holder of the bill of lading is entitled to take

delivery of the goods. This is settled law and is

reflected in a 1912 House of Lords 6 decision where

it was held that:

delivery of the bill of lading when the goods are

at sea can be treated as delivery of the goods

themselves, this law being so old that I think it quite

unnecessary to refer authority for it.

The fact that the bill of lading is a document of

title presents one of the greatest obstacles to the

implementation of the electronic bill of lading. The

effect will be examined later in this paper.

598

The traditional bill of lading also has several

disadvantages in the modern shipping environment.

Containerization and modern vessels have resulted

in a speedier carriage of goods. The result is that the

goods arrive at the port of destination before the

relevant shipping documents. This causes delay and

erodes the advantage gained by the expedited

voyage. Considerable expenses are also incurred in

the issuing and processing of bills of lading.7

The issuing of fraudulent bills of lading has also

become a matter of international concern. Bills of

lading are customarily issued in sets of three,

consequently there is scope for the fraudulent use of

more than one original to sell cargo on the water.

These bills of lading are falsified in a number of

ways:8

− Altering the quantity and quality of goods

shipped in the bill of lading;

− in spite of the fact that an original bill of lading

has been issued, the consignor may fraudulently

sell the goods to other buyers during transit;

− the bill of lading can also be counterfeited in or-

der to obtain fraudulent delivery; and

− it is possible to forge the bill of lading in order to

obtain payment in a documentary credit.

There are various kinds of bills of lading. The

form of the bill of lading will depend on the required

function. Mitchelhill 9 lists the following types of

documents:

− Bill of lading issued with printed clauses for con-

ventional or through traffic on liner terms;

− Bills of lading issued for goods accepted under

'Combined Transport' conditions;

− 'Short form' or 'blank form' bills of lading;

− Bills of lading issued under a charter party; and

− Bills of lading issued by a freight forwarder.

Negotiable bills of lading are not always required.

The result is that there has been an increase in recent

years in substitutes for the traditional bill of lading.

One such example is the sea waybill. Unlike the bill

of lading, the sea waybill is not a document of title.

It is intended for use where there is no transfer of

goods envisaged. The sea waybill constitutes

evidence of the receipt of the goods by the carrier as

well as the contract of carriage. It is not necessary

for the consignee to produce the document in order

to obtain delivery of the goods. The consignee

would merely have to produce adequate

identification.10 This document is however not

without inherent risks. The buyer who has paid in

advance might find that the seller has changed the

identity of the consignee. It therefore does not offer

the same level of security that a traditional

negotiable bill of lading does.

7.3 THE ELECTRONIC PROGRESSION OF THE

BILL OF LADING

The traditional bill of lading has evolved over time

to reflect commercial realities. Maritime commerce

has been at the forefront of commercial development

since its inception. It is therefore not surprising that

the shipping industry has embraced the concept of

an electronic bill of lading. Attempts are now afoot

to replace the traditional, tangible bill of lading with

electronic data.

Containerization has been the catalyst in

introducing electronic data interchange to shipping

documentation.11 Shipping and cargo interests

started competing in an increasingly competitive

environment. Computers made it possible for

shipping documents to be processed quicker and

more effectively than the traditional paper based

documentation. It was therefore only a matter of

time before electronic documentation was

introduced in the shipping market. An EDI system

would enable the parties to reduce the volume of

documentation and the delay caused in transferring

the documents.

Yiannopoulos 12 provides a strikingly accurate

comment when he reflects on the development of the

electronic bill of lading. He suggests that:

The [electronic bill of lading] is not a mere

evolution in the form of bills of lading; it is the

creation of a new species of bills of lading.

The bill of lading is issued by or on behalf of the

carrier after the goods have been loaded on board.

The holder of the bill of lading is therefore entitled

in law to ownership of the goods. However, it can be

endorsed to a 3rd party who then becomes the legal

holder of the bill of lading and is entitled to take

delivery of the goods. It is this transferability of the

document that presents the real challenge to develop

an EDI system for negotiable bills of lading.13

Besides, that can even take advantage and to

achieve savings from the use of electronic data, and

ensure the achievement of those savings must be

adapted to many organizations and operational

organizations for the inclusion of a number of laws

and regulations should be binding for the

introduction of the application of electronic

exchange and work to ensure the rights of the Parties

to maritime transport, either the shipper or carrier, or

owners of the goods And produce a variety of laws

that are binding on the authorities of ports and

marine transport for the adoption of multi-electronic

bills of lading And work to reduce the number of

paper documents which used and also to reduce the

duration of the cargo handling operations, which

reflected positively on the parties to the process of

maritime transport and leads to increases in growing

the added value of Maritime Transport Sector

599

The impact of EDI on the traditional bill of lading

also has to be evaluated against the formal

requirements for a valid bill of lading. Most shipping

nations subscribe to the Hague-Visby rules. Most of

the international rules applicable to bills of lading

were codified in the Hague Convention. This

Convention was later amended by the Visby-

protocol and became known as the Hague-Visby

rules. No express provision is made in these rules

regarding the formalities of a bill of lading. The

Hague-Visby rules are applicable to any bill of

lading relating to the carriage of goods. These rules

are set out in the Schedule to the South African

COGSA and have force of law in South Africa.

Article III(3) reads:

After receiving the goods into his charge the

carrier or the master or agent of the carrier shall,

on demand of the shipper, issue to the shipper a bill

of lading...

The implication is therefore that a document has

to be issued. Will EDI satisfy this requirement?

There is no specific reference to the fact that these

documents have to be in writing or on paper. It is

furthermore important to inquire into the formalities

prescribed by each local forum. In Germany, for

example, a bill of lading without a hand-written

signature is null.14 Many other national laws and

domestic legislation requires the use of paper

documents. These requirements, which could present

a serious obstacle to the use of EDI, will be dealt

with later in this paper.

In addition to the legal obstacles involved in

implementing EDI, several other factors also have to

be taken into consideration. These include the

technical aspects involved in setting up an EDI

network. In order for EDI to be used effectively, it

has to provide a secure means of transmitting the

information. The trading partners will have to feel

confident that the electronic messages are private

and provide adequate protection against fraudulent

misuse.

It is clear that the implementation of the

electronic bill of lading holds many challenges. The

success of this new species of bills of lading will

depend on the work and effort of all the interested

parties. Ultimately however, a wide scale acceptance

will depend on practical results.

If the electronic bill of lading suits to the needs of

the modern shipping industry and amplifies the

functions of the traditional bill of lading, it will

secure its survival in the competitive shipping

environment.

7.4 EDI

The benefits of electronic commerce are widely

accepted. Electronic Document Interchange (EDI) in

particular has evoked considerable interest in recent

years. EDI has been developed to allow computers

to copy the relevant elements of data from a pre-

existing source within a subsequent message,

thereby eliminating re-keying and duplication of

activities.15

In order to understand the impact of EDI on

international trade and commercial transactions, it is

necessary to examine how EDI functions. A number

of important legal considerations also arise in the

process of facilitating electronic commerce. These

considerations have been alluded to above, and will

be discussed in more detail.

7.5 UNDERSTANDING EDI

A number of definitions has been formulated for

EDI. In essence, EDI is:

...the replacement of the paper documents relative

to an administrative, commercial, transport or other

business transaction, by an electronic message

structured to an agreed standard and passed from

one computer to another without manual

intervention.16

EDI, as a means of conducting business, is

gaining popularity and acceptance for a number of

reasons. These are:

− EDI increases the speed with which business is

conducted by eliminating the delay caused by

manual (paper-based) documentation. The trans-

fer of documentation is therefore speeded up. It

would eliminate the delay caused by cargo arriv-

ing at the port of destination before the actual

documentation required to take delivery arrives.

− Messages sent by EDI are also accurate since the

information is structured to an agreed format. The

result is that the message will be rejected if it

does not conform to this format. The electronic

information would furthermore be verifiable by

means of either a 'private key' or electronic signa-

ture.

− Digital encryption ensures that the message is au-

thentic. Fraud would therefore be reduced.

− All of these factors ensure that a company trading

via EDI would save time and money.

In spite of all these advantages, EDI is not as

extensively used as one would expect. One of the

reasons for this is the legal uncertainty surrounding

EDI. The capital expense involved has also inhibited

the development of EDI in some sectors. In spite of

this, EDI is poised to have a significant impact on

the way business is conducted in the immediate

future.

An EDI message consists of several parts. The

messages approved for EDI use also have to be

incorporated into a message framework. This would

then in effect provide "a language of alpha-numeric

600

codes around which the content of each EDI

message is constructed and a 'grammatical'

structure through which those codes can be

organised".This message can then be divided into

three concentric subparts:

− The first subpart is the message itself, e.g. the

electronic version of the bill of lading.

− The transaction set is then made up of segments.

− The segment is then made up of data elements.

The message framework and code list will then

translate these conventional terms into a computer

understandable unit. This implies that the EDI users

will not have to enter a complete new set of

data/information into the computer every time a new

transaction is conducted.

In order for EDI to function there has to be a

combination of technology and management

resources to ensure that the data is transmitted

correctly and accurately between the computer

systems of the various parties. Parties need to ensure

that the correct software is utilised to transmit the

internal data format to an acceptable EDI format. It

might also be required to make use of a third party

EDI network.

8 THE TRANSACTION OF VALUE-ADDED

NETWORKS (VAN)

Although it is possible for EDI users to link their

computer systems directly to each other, in practice

they would often make use of a Value-Added

Network service provider (VAN). These firms

specialize in technical assistance. VAN's would also

provide technical support and assist in data security

and the configuration of the required software.

Computer programmes and data systems are not

always compatible with each other. For example: the

carrier could use a computer system which cannot

process the information received by the computer

system of the shipper. In such a scenario, the carrier

and the shipper would make use of a VAN. The

biggest advantage of a Value Added Network

service provider is the fact that it can bridge the gap

between these two systems. In other words, the

VAN will match the various computer protocols and

provide the necessary software. This ensures that

data that has been created on one system can be

received on the other system.

Most of these networks operate on a generic

basis. The network will offer its services to any

party entering into an agreement with it. However, it

is also possible for networks to specialise and

provide their services only to a particular class of

users. It would therefore be possible for a network to

specialise in the movement of EDI information and

documentation exclusive to the shipping industry. In

practice however, it is likely that the parties will

have to make use of multiple networks because of

the vast amount of documentation involved

originating from the various sectors in an

international trade transaction. In some cases, an

additional network might be required to connect the

different parties to each other.

The choice of the Value Added Network is

crucial to the operation of the EDI transmission. The

VAN will control the communication between the

various parties and will hence be responsible for the

smooth operation of the electronic transfer of the

relevant documentation. If the VAN experiences

problems or shuts down completely, this will

directly affect the transfer of the electronic

documentation. Liability issues are also likely to

arise under these circumstances and these issues will

have to be regulated in an underlying user

agreement.

9 SOLVE OF TECHNICAL PROBLEMS

There are a number of technical problems associated

with EDI. One of these is the fact that electronic

documents have to be exchanged according to a

certain common standard. A standard data format

would therefore be required in order to ensure

compatibility between the various systems currently

in use. Furthermore, it is essential for the relevant

data documentation to conform to adequate security

standards. Opponents of EDI argue that the

electronic transmission of data is not secure enough

to provide a solid foundation for transmitting the bill

of lading on a computer. These are valid concerns

and will have to be addressed. However, it is

submitted that various techniques exist to secure the

data transmission and provide for the integrity of the

message. These techniques include encryption and

the use of Personal Identification Numbers.

Alleviating fears about real and perceived lack of

security will be a great challenge to the proponents

of EDI.

9.1 Useful STANDARDS

Electronic documents have to be exchanged in a

standard data format. The computer has to process

the data to enable the data to become information

that can be understood by the receiver. Document

content standards are used for this purpose. These

standards will then ensure that the order in which

data appears is fixed to a certain common standard.

Unfortunately, the search for a common standard

has resulted in two very different standards being

developed. In the United States of America the

ANSI X12 cross-industry standard (American

National Standards Institute Accredited Standards

601

Committee X.12) is widely in use while the United

Nations (in co-operation with the International

Standards Organization) has developed EDIFACT

(EDI for Administration, Commerce and Trade).

EDIFACT consists of:

a set of internationally agreed standards,

directories and guidelines for the electronic

interchange of structured data, and in particular

that relating to trade in goods and services, between

independent computerised information systems.

The EDIFACT language is made up of a

comprehensive coded data register. This register

basically covers all the words and printed forms

used in trade. Furthermore; it provides a common

syntax and format that will result in the production

of recognizable shipping documents. It would not

make a difference if the hardware and the software

used are not compatible. Human intervention will

therefore not be necessary to process the

information. This will enable the bulk of the

shipping documentation to be processed at a speedy

rate which in turn ensures efficiency and savings in

costs. A carrier could therefore send a computerized

bill of lading according to an agreed standard (e.g.

EDIFACT); the shipper’s computer will instantly

recognise the document as a bill of lading and

proceed to conduct computer operations on the

document.

The lack of a universally agreed standard should

not necessarily be seen as a bar to the growth of

international trade or the use of EDI. Some

commentators have suggested that a common

standard is not desirable in an industry where every

sector has its own unique way of communicating

and conducting business.

In order to ensure the full benefit of a universally

recognised standard, it is suggested that parties

should specify the standard to be used in the

interchange agreement. This would ensure that an

added degree of interchange security is obtained.

The technical problems relating to a common

'language' or agreed standard can therefore easily be

overcome by co-operation of the various sectors

involved in the exchange of information by EDI.

Other problems however remain, these are:

− Providing the necessary hardware and software

service. These services will have to be agreed up-

on in the interchange agreement.

− Providing adequate backup procedures for emer-

gencies. It is essential to establish the liabilities

involved in the event of a communications break-

down.

It is suggested that these technical problems can

easily be overcome by drafting a proper interchange

agreement to regulate the EDI operations of the

parties. However, the greatest area of concern for the

parties will be to provide for adequate security.

9.2 Requirement’s SECURITY

In order for traders to be comfortable with the use of

EDI, they will have to be satisfied that the system as

a whole and the message in particular, is secure.

Security weaknesses will also inhibit the legal

acceptance of EDI transactions. Various methods are

used to ensure that the electronic data is transmitted

on a secure basis. These methods include passwords,

encryption, PIN codes and electronic signatures.

Encryption will ensure that the data transmission is

kept confidential while authentication will provide

for data integrity.

9.3 The Method of Protecting the System

The data stored in the computer system is

susceptible to tampering. Access to the data will

therefore in most cases be restricted to authorised

users. The use of an access card is one way of

ensuring that only an authorised person uses the

system. It is almost impossible (and neither

financially viable) to provide a foolproof system.

The parties would therefore have to agree to the

level of security needed in order to minimize the risk

of fraud or tampering. The need for security has also

been recognized by UNCITRAL, stating that:

...it is cleat that the legal reliability of EDI

techniques requires that high standards be used to

determine legal certainty as to the identity of the

sender, its level of authorisation and the integrity of

the message.

It might also be useful for parties to have their

system audited by a security expert at various

intervals. The security expert should be independent

and must ensure that the required security measures

have been implemented. This would provide for an

added sense of security between the parties.

9.4 Protecting the Integrity of the Message

The message integrity can be assured by the process

of authentication, i.e. ensuring that the data sent has

not been tampered with. Encryption would seem to

provide the most security but it must be noted that

encryption techniques are prohibited by some

governments as reported in a recent Time magazine

article. Governments opposing the export of

encryption techniques fear that this technology

might be abused by criminals and terrorists. Parties

would normally agree to the use of encryption in the

interchange agreement. One example of a model

interchange agreement that provides for encryption

is UNCID. Article 9(b) deals with the possibility of

parties to agree to use encryption.

An interesting development concerning EDI

security has been the approval of a resolution by the

American Bar Association (ABA) dealing with

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legal-security issues involving electronic data

interchange and electronic commerce. According to

this resolution, the ABA has to:

− facilitate and promote the orderly development of

legal standards to encourage use of information in

electronic form, including appropriate legal and

professional education;

− encourage the use of appropriate and properly

implemented security techniques, procedures and

practices to assure the authenticity and integrity

of information in electronic form; and

− recognise that information in electronic form,

where appropriate, may be considered to satisfy

legal requirements regarding a writing or signa-

ture to the same extent as information on paper or

in other conventional forms when appropriate se-

curity techniques, practices, and procedures have

been adopted.

As has already been mentioned, cryptography

offers a viable means of providing security.

However, the costs of implementing these measures

are often quoted as an inhibitor. This problem was

addressed in a workshop (conducted by the National

Institute of Standards and Technology of

Gaithersburg, Maryland) on Security Procedures for

the Interchange of Electronic Commerce. The cost in

implementing cryptographic methods would include

software licensing, export filing process, overheads

and professional training of staff. It was argued that

a premature consideration of costs could eliminate

other viable options. The parties would therefore

have to evaluate their underlying requirements to

determine what level of security is required. Since a

bill of lading is a document of title and entitles the

holder to claim delivery of the goods, the level of

security needed would have to be substantially

higher than the security required for a normal

receipt.

Security services will have the added benefit of

providing services that are not possible to provide

with paper-based techniques. An example of such a

service is non-repudiation. This method ensures that

the originator of a document cannot deny the origin

of the document, thereby providing irrevocable

proof of authenticity.

Digital signatures are limited in some respects.

Parties making use of EDI or digital signatures will

often have to revert to a trusted third party to

provide security assurance. The third party will be

required to date-stamp, store and keep an audited

data log of the transaction. This would provide proof

of the time of origination and content of the

electronic document. Once again, the liability issues

arising from the use of a third party will have to be

worked out in the interchange agreement.

Proper message or data authentication will also

enhance the evidential value of the message. The

court will have to be sure that the message submitted

as evidence is authentic. Admissibility of EDI

evidence will be dealt with later.

10 LEGAL PROBLEMS

EDI has been the catalyst for a number of changes in

the scope and function of the law. Legal reform has

however not always kept pace with technological

development. The legal problems involved in

implementing EDI on a global basis become

apparent when viewed against the relevant statutory

requirements imposed by the various jurisdictions.

Bills of lading have to meet certain statutory and

formal requirements before they become legally

enforceable. These requirements will now be

examined.

11 CONCLUSION

It is difficult for parties to relinquish a document

which has served them well over the years. The bill

of lading is one of the most respected documents in

international trade. It has been held that:

A bill of lading is a document of dignity, and

courts should do everything in their power to

preserve its integrity in international law for there,

especially, confidence is of the essence.179

However, new technology has brought new

challenges and possibilities. Once the remaining

technical concerns regarding security and

authentication have been resolved, and legal

recognition assured, full scale implementation is

possible.

Substituting the traditional bill of lading with EDI

is still fraught with real (and perceived) problems.

Parties wishing to trade with EDI will have to be

aware of the potential pitfalls associated with

electronic trading. Pending legislative reform, the

parties will have to regulate many of the technical

and legal requirements in the underlying EDI

interchange agreement.

It is possible even take advantage and to achieve

savings from the use of electronic data, and ensure

the achievement of those savings must be adapted to

many organizations and operational organizations

for the inclusion of a number of laws and regulations

should be binding for the introduction of the

application of electronic exchange and work to

ensure the rights of the Parties to maritime transport,

either the shipper or carrier, or owners of the goods

And produce a variety of laws that are binding on

the authorities of ports and marine transport for the

adoption of multi-electronic bills of lading And

work to reduce the number of paper documents

603

which used and also to reduce the duration of the

cargo handling operations, which reflected

positively on the parties to the process of maritime

transport and leads to increases in growing the added

value of Maritime Transport Sector

The traditional bill of lading will still have its

place in the immediate future. The capital expenses

of setting up an EDI network might prove too costly

to afford these services to everybody. There is no

reason why the electronic bill of lading can't co-exist

with the paper bill of lading for the immediate

future. The real challenge lies in creating a system in

which both traders and the courts feel comfortable.

This will require a concerted global effort from all

the parties involved. This is certainly a difficult, but

by no means impossible, task. The proponents of

EDI will have to prove that the electronic bill of

lading can function in the real trading environment

and, ultimately, that it provides users with a

competitive edge.

The electronic bill of lading will undoubtedly

become a reality. There are simply too many

advantages attached to this form of trading to

dismiss the concept. In order for the electronic bill

of lading to replace the paper bill of lading, it would

essentially have to offer the same advantages and

level of security associated with the paper bill of

lading.

The functions of the negotiable paper bill of

lading can be duplicated, but the electronic bill of

lading would have to go one step further: it would

have to improve on the traditional bill of lading. The

advantages of the electronic bill of lading have been

discussed. It is suggested that these advantages will

prove sufficient to eventually replace the paper bill

of lading and take the bill of lading into the next

century.

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