A review of CargoX’s Blockchain based Smart Bill of Lading and how it works..

CargoX Smart Bill of Lading based on Blockchain – how it works..

 

Smart Computers, Smart Phones, Smart Cars and now Smart Bill of lading..!!!!

Shipping documentation in its current form has been around for many decades and has been working quite well..

There are several factors that are involved in the preparation, checking, transmission, hand over, payment and many of the intrinsic activities involved in the process of a bill of lading..

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When I first heard of the Smart Bill of Lading and Blockchain, I was bit unconvinced as to how technology will replace all of the above as there are several products trying to break into the shipping and freight industry in the name of innovation, digitisaion, IoT, SaaS etc..

So when CargoX asked me to have a look at how the blockchain based bill of lading system actually works, I proceeded to have a look at the presentation with a tad bit of skepticism.

But before I share my experience, impression and opinion, let’s take a quick look at what is a bill of lading, what is a blockchain and how these together may fit it in the process of a shipment..

 

Bill of Lading

As part of global trade, currently more than 130 million containers with an estimated value of more than $4 trillion are traded around the world..

There are several things that link the parties involved in this global trade..

But nothing links the parties involved in this global trade like a piece of paper.. Yes a piece of paper called a Bill of Lading..

 

What is a bill of lading..??

Bill of Lading (abbreviated to B/L) is one of the MOST important documents in the whole shipping and freight chain..

It comes in various types and forms and is one of the most commonly used documents in the shipping and freight chain..

A bill of lading has 3 basic purposes or roles..

  1. Evidence of contract of carriage
  2. Receipt of Goods
  3. Document of title to the goods

This is the one document that

  • Is issued by the shipping line to the shipper in exchange for freight
  • Is issued by the shipping line as acknowledgement of the receipt of the goods from the shipper
  • Is required by the shipper to get his money from the consignee
  • Is required by the bank in exchange for releasing the cost of goods to the shipper
  • Is required by the bank in order to ensure they get the money from the consignee
  • Is required by the consignee to get release of the cargo at destination
  • Is required by the shipping line in order to ensure they release the goods to the correct party

Of course there are several permutations/combinations involved in the transaction of a bill of lading, especially when an original bill of lading is involved, but these are the main transactions..

The main message here is that bill of lading = money and/or goods..

Now imagine this..

 

You have just lost the original bill of lading…………!!!!!!!!!! Yikes….

 

Well this is a familiar cry from many a shipper or consignee.. This has happened before, may be happening right now to someone as you are reading this article and will happen in the future..

But this cry could become obsolete quite soon, if CargoX has its way, thanks to the blockchain based system developed by CargoX which is based on eliminating the risks posed by an original paper based bill of lading..

CargoX is an independent supplier of public-blockchain-based solutions for logistics looking to transport the global supply chain industry into the 21st century..

As a first step to achieving this goal, they have worked on replacing the traditional paper-based Bill of Lading with a fast, safe, and reliable digital equivalent, namely the CargoX Smart B/L..

CargoX has leveraged the security and decentralised operation of the blockchain and smart contracts to develop this exciting new product for the supply chain industry..

Let me put it in perspective as to how this new product will work..

But before that, here’s an introduction to Blockchain the fancy word you have heard being bandied about for so long..

My very simplified explanation of a blockchain is

A Blockchain is a ledger that uses cryptography, the internet and naturally computers to create, share, transfer, track and secure assets and transactions (represented/organised as blocks) belonging to everyone to fulfil a certain function..

Unless the previous transaction is completed in the chain and shared forward with a timestamp, the next transaction cannot happen..

A very generic and basic pictorial of the Blockchain is as below..

 

The simplified process of shipping and issuance of manual bill of lading documentation is :

  1. Shipper receives the order from the consignee
  2. Shipper books cargo with the carrier (either shipping line or NVOCC)
  3. Shipper packs the container and delivers to the carrier
  4. Shipper sends their bill of lading instructions to the carrier
  5. Carrier issues their bill of lading to the shipper as per their bill of lading instructions
  6. Shipper sends the original bill of lading by courier to the consignee
  7. Consignee receives the original bill of lading from the shipper
  8. Consignee surrenders the original bill of lading to the carrier at destination
  9. Carrier releases the goods to the consignee

The CargoX platform currently is designed to handle points 4-9 on behalf of the carrier (the entity issuing the bill of lading), shipper, consignee and the delivery agent of the carrier..

 

INTRODUCTION TO THE SMART BILL OF LADING

The CargoX platform accepts and supports all standard blockchain-authentication mechanisms..

smart bill of lading and the blockchain

 

CargoX recommends the use of hardware wallets like Ledger Nano S or Trezor, as they provide full support for these products..

 

REGISTRATION

Each user who wishes to transact with the CargoX B/L has to be obviously be registered in the CargoX system..

As this platform deals with legal and financial documents, there are some mandatory information such as the company details, billing information, proof of incorporation document of the company etc..

During registration, Carriers who issue bills of lading have to give a declaration that they are allowed to issue bills of lading in this regard and will remain solely responsible for compliance with all national and international regulations..

Once these information has been verified, then you will be able to access your CargoX account..

 

IDENTIFICATION

The CargoX platform is based on the Ethereum blockchain technology and therefore once you register your company will receive an Ethereum address which is kind of your fingerprint in the platform..

smart bill of lading and the blockchain

 

CREATION

As the issuer of the bill of lading instructions from the customer, you can create a new Smart B/L document..

This can be done either by inputting all the necessary B/L information into the CargoX dApp, or by uploading a scan of the actual paper B/L where available..

To complete the Smart B/L the issuer needs all the necessary data usually found on Bill of Lading document, such as shipper, consignee, notify party, cargo description, weights etc..

smart bill of lading and the blockchain

 

SIGNING OF THE BILL OF LADING

In the traditional version of the bill of lading, it is physically signed by a signatory authorised to sign the same..

In this case, after a Smart B/L is created, the issuer can still edit and change it (or delete it) before signing it and issuing it.. At this stage, the bill of lading is only visible to the issuer’s office and it will stay like this till the draft bill of lading is double checked and confirmed as correct and final..

Once this bill of lading is signed, there can be no further editing and the bill of lading appears within seconds on the blockchain visible to the parties who are part of this particular transaction..

smart bill of lading and the blockchain

 

TRANSFER OF BILL OF LADING

The general chain followed for transfer of the bill of lading is

Issuer (Carrier) ⇒ Shipper (Seller) ⇒ Consignee (Buyer) ⇒ Delivery Agent (Agent of the Carrier)

Once the freight and all charges relating to the carriage has been paid to the carrier, they will press the button to transfer the bill of lading (fulfilling the role of RECEIPT OF GOODS) to the shipper..

smart bill of lading and the blockchain

 

Once the document has been issued, the shipper has control of the document in the blockchain..

While others in the chain have the capability to view (this also can be controlled by access), only the shipper has the capability to send it further..

The shipper will wait for the payment of the goods before she transfers the bill of lading (fulfilling the role of the DOCUMENT OF TITLE to the goods) to the consignee..

smart bill of lading and the blockchain

 

At this stage, the control of the bill of lading moves from shipper to the consignee who is the only one who has control of this document in the blockchain..

Once the consignee is ready to take release of the goods, they will transfer the document to the delivery agent (remember the agent of the carrier) at the destination..

As you know now, they are also a part of this blockchain.. So now the control moves from the consignee to the delivery agent..

smart bill of lading and the blockchain

 

RELEASE OF GOODS

The delivery agent now has the control of the bill and cargo

smart bill of lading and the blockchain

The delivery agent will check that there are no reasons to withhold release of the container..

The agent will also check if the relevant customs, port, any regulatory authority documentation etc has been completed by the consignee..

The agent then authorises the release of the goods to the verified consignee..

 

Remember in the traditional form of bill of lading transactions, for the release of cargo at destination and to safeguard the release of goods, there are several endorsements required on a bill of lading..

The CargoX platform cuts all those requirements and simplifies the release while keeping it safe and secure..

That is it, your bill of lading has been transferred from carrier to delivery agent safe, sound, secure and most importantly so easily.. 😊

Here is a summary of the workflow between the different parties in the CargoX Smart B/L solution..

 

Currently, the CargoX platform provides the following core functionalities:

smart bill of lading and the blockchain

For the issuer (Carrier):

  • Creating a draft of B/L documents (inviting other parties to CargoX via email or ETH address/obtaining permission from parties already on CargoX to use their details)
  • Signing of draft B/L document and issuing B/L on the blockchain
  • Transfer of B/L documents to shipper
  • Listing and retrieval of issued B/L documents, along with their owners and process status
  • Proof of ownership tool (TBD)
  • Annexation of B/L documents (TBD)
  • Request for Dispute/Issue Resolution (TBD)

 

For the shipper and consignee:

  • Listing and retrieval of owned B/L documents, along with their owners and process status
  • Transfer of B/L documents to other parties.
  • Annexation of B/L documents (TBD)
  • Arranging payment guarantees (TBD – L/C stage)

 

Whoa, whoa, hold up, there are some questions on payment..

 

1) Who pays for all this fancy stuff described above..??

Well, Registration on the CargoX platform and use of CargoX Smart B/L dApp and API is free and open to all participants..

However, permission to create a Smart B/L is given only to entities that are authorised to issue a bill of lading in the real world (remember the declaration at registration) – Carriers (including shipping lines, VOCC, NVOCC or Freight Forwarder)..

These are companies that are CargoX’s customers, and only they pay to CargoX.. Companies that do not issue B/Ls (shippers, consignees and release agents)..

 

2) How do they pay it..??

Although this is a Blockchain based activity, to make it easier for customers, CargoX offers their services in the same secure and familiar environment of fiat currency (fancy word for normal paper currency)..

No complications, no small print, no conditions, no options, and no “scary crypto stuff”, customers will still receive a USD or EUR invoice..

 

3) How much does it cost..??

The cost of issuing a Smart B/L is considerably less than their current costs of issuing/transporting (paper) B/L.. You can contact the CargoX team to find out more..

As a reference, the first live CargoX Smart Bill of Lading™ processed for the container that was loaded from Shanghai to Koper cost only USD.15/-, approximately 15% of the estimated usual price for a paper document to be transferred through courier services across the globe..

The platform also allows you to set your own pricing policy and charge your users (shippers, consignees, and release agents) for the use of these advanced Smart B/L features..

 

Conclusion

This presentation has managed to convinced me about the usefulness of this platform and I feel a bit more optimistic about its potential and its future..

Of course as with any new innovation, product, service there will always be teething issues, but as it stands, the pros seem to be far outweighing the cons of the project and I for one certainly look forward to seeing how this all pans out in the future..

Having read the above, I would like you to share your thoughts on the same and if you can incorporate this platform and its benefits into your daily business..??

Let’s take a quick poll..

I think the blockchain based Smart Bill of Lading

View Results

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10 thoughts on “A review of CargoX’s Blockchain based Smart Bill of Lading and how it works..”

  1. Dear Hariesh, Thanks for your inputs on Blockchain Technology and how it works. I will be interested to know the process flow of information to other statutory bodies and how does connect to Customs and Port in meeting the mandatory requirements of cargo manifest especially the ’24hrs Advance Manifest’

    • Hi Premkumar, blockchain and its application in shipping is a “work in progress”.. Various entities are using blockchain in various ways and eventually it will all come together.. Right now the areas in which it has been successfully tested is with bill of lading and letter of credit..

      Banks are on it, ports are trying to get in on it and others are testing it.. The model has been designed and now everyone is trying to replicate it and customise it to see what works best.. Interesting times ahead.. 🙂

    • Thank you very much, Hariesh! This was one of the challenges that the shipping industry took head on and succeeded, so surely we will do it with Blockchain too! Will look forward to further updates on the matter.

  2. thank you for sharing this information,
    what about the terms and conditions writen on the front and back side of the paper BL as every carrier has it own terms and conditions of carriage on it BLs.
    thank you.

    • Hi BEE, the terms and conditions on the bill as per the Issuer stays the same.. No change to those.. So whoever issues the bill of lading, their terms and conditions still apply and is visible in the document itself.. 🙂

  3. Great, Good innovation thanks for the idea

    I hope this concept will going to shake the market and say good Bye to paper related BL and transaction

    and will make the process easier too

    Cargo x new product introduced to the market as well as product like courier services can be obsoleted from the market ha….

    Explanation is pretty smart

    Thanks

  4. Looking at future Global need it’s might be useful in eliminating courier charges …Still have questions like what if counter party requested last minute changes in BL ? & How a shipper will come to know cargo has been cleared or not ? …

    • Chetan, thanks for the questions..

      what if counter party requested last minute changes in BL ?

      Depends on what kind of last minute changes.. Usually last minute change is mostly related to the delivery agent.. Consignee can send Smart B/L to any delivery agent once BL is in his possession, or to a predefined delivery agent with a note that has new instructions..

      If there are any changes needed to the main BL document, only the issuer can amend this.. If this is the case, B/L must be returned to issuer (which takes 15 seconds and 1 click), who can then destroy this BL, and issue a new one with correct info.. This is behavior that mimics the real world..

      How a shipper will come to know cargo has been cleared or not?

      All parties involved in a BL see the status of the BL and know who has the BL currently in possession.. Once cargo is released this is also visible to all involved parties, and such BL stays in archive available to them for the next 10 years..

      In terms of your question itself, you should think about CargoX Smart Bill of Lading as a faster, safer and cheaper digital/blockchain-based substitution of express courier services such as Fedex and UPS..

      B/L transfers have nothing to do with customs clearance (in most countries customs require only a copy of BL and original INVOICE and certificate of origin or similar).. And just like with a paper bill of lading, clearance status cannot be ascertained from the B/L.. Other than with some select Incoterms or unless there are clearance issues due to documents issued by the shipper, the shipper doesn’t get involved with customs clearances once cargo has reached destination..

      Trust this assists or if anything unclear, please do elaborate..

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