Electronic alternatives to traditional transport documents have not yet cleared the obstacles that need to be removed before they can replace negotiable bills of lading (B/Ls) as the staple fare in international trade according to a survey by the United Nations Conference on Trade and Development (UNCTAD).

The Use of Transport Documents in International Trade found that parties to international trade could clearly see cost and time saving benefits in electronic alternatives, but the lack of a secure electronic environment and internationally accepted rules and procedures are amongst several reasons why the time has not yet come for these alternatives.

Negotiable bills

The survey was instigated because experts questioned whether negotiable B/Ls should be so widely used, particularly when there is no intention to transfer ownership of the goods while in transit.

Calls by the international community for the increased use of non-negotiable transport documents such as sea waybills and electronic alternatives, however, have so far failed to persuade the vast majority of parties in international trade away from the negotiable B/L according to the survey.

Reasons for use

An overwhelming 88 per cent of respondents said they still use negotiable B/Ls to a greater or lesser extent. Of those, 70 per cent said they mainly or exclusively use negotiable bills of lading for more than 50 per cent and up to 100 per cent of transactions. Nearly one in five respondents said they use or issue only negotiable bills of lading.

Despite the generally widespread use of electronic means of communications, electronic alternatives to traditional transport documents do not currently appear to play a significant role in commercial practice. Just 22 per cent of respondents said they currently use any electronic alternatives, while around one in three said they are actively considering the use of electronic alternatives.

Document of title

Of the main substantive reasons cited by respondents for the continued relevance of the negotiable bill of lading, the document of title function of the document stands out.

"Primary reason for negotiable documents is security under documentary credits and/or re-sale of goods in transit;" one of the respondents said.

Obstacles

One of the major obstacles to electronic trade identified by respondents in the survey is that the legal framework is not sufficiently clear or is otherwise inadequate.

Another problem is that none of the new electronic alternatives presented so far had managed to ensure that use of electronic records or data messages enjoys the same legal recognition as the use of paper documents.

More research needed

The survey of banks, shippers` associations and a large number of transport providers concluded that efforts at the international level towards the creation of an appropriate enabling legal framework to facilitate electronic trading systems should be pursued as a matter of priority and with some urgency.

Some of the respondents, however, pointed to reasons why letters of credit (L/Cs) and other traditional instruments will endure.

Future L/C usage

"For a number of years to come, payment in the international trade between the industrialised and the less developed countries, as well as between the less developed countries themselves, will be accomplished by means of documentary L/Cs," one respondent said.

"In order to pre-finance the trade deal (e.g. establish a L/C not covered with funds by the orderer) banks often require goods to be consigned to their order as security. Therefore, as long as the "non-covered" L/Cs remain an important financial instrument in international trade, the negotiable B/L will remain indispensable (except where the B/L can be replaced by other negotiable transport or forwarding documents providing the same degree of security)," the respondent added.

The views in this article are those of the author and not necessarily those of ICC or the other partners in DC-PRO.