A NEW FACE FOR THE SHIPPING INDUSTRY: TECH MAKEOVER?
POSTED BY LAUREN ON 29TH OCTOBER 2018
The back-bone of world trade is about to receive a makeover. The historically vital but risky processing of shipping has witnessed a series of fraud scandals over the past few years centred around the shipping of metals. It is no secret that the current shipping process is lengthy and fractionalised and it is no secret that a little innovation could go a long way to improve efficiency and security.
After outlining the current issues in shipping, we are interested in the possibilities for using distributed ledger technology to digitise and create better accountability. The innovations do not need to end with the processing of cargo, and we note interest in how distributed ledger technology could not only decrease shipping accidents but could aid suppliers of maritime services to reduce the risk of fraud and to roll out updates.
Current issues in shipping
The rough and ready, and somewhat backwards mechanisms currently invoked to keep the maritime industry afloat belie the integral part that shipping still plays in the modern age. Currently, no single party can access all aspects of the supply chain, preventing forward planning, contingencies and accountability amongst the parties involved.
Incidents such as the Qingdao warehouse fraud case highlighted the ease with which fraudulent processing of shipments can occur. The lack of access to all aspects of the supply chain equally exacerbates issues with cargo theft.
Fraud and theft instances are increasing in value at a loss to the industry, as the overall costs of shipping are inflated by the reliance on multiple brokers as intermediaries. Distributed Ledger technology can alleviate the need for intermediaries and cut down the costs incurred through the current fractionalised nature of the industry (see article by worldview.stratfor.com).
If distributed ledger technology is to provide a solution to the lack of integration in the shipping process, the technology will need to recognise specific maritime norms and features.
The technology has been piloted with great success ( see information-age.com article) yet it has not been established whether industry quirks can be built into the new systems. Whilst the technology can handle digitising the processing of cargo, can it deal with hitches in transactions and practical problems arising during transportation?
Ledger developers would need to be aware that certain issues in the shipping process are currently resolved through an industry-specific etiquette. In a sealed and self-executing digitisation of the shipping process, the ability for such issues to be resolved through the traditional means may be lost. This may not be a hindrance if there is an equally beneficial replacement for the current systems of resolution but these will need to be developed with the input of those in the industry – not just ‘techies’.
Not just shipping; the forces and maritime suppliers
Tracking the movements of vessels and securing trade routes currently requires enormous human input. It is also not fail-safe. Distributed Ledger technology could allow GPS data for vessels to be displayed on a ledger and visible to those concerned with complete security.
There are doubts
Doubts are being expressed by some onlookers regarding the speed with which the technology will be used in this sector and whether it will satisfy its potential (See article by joc.com).
Maybe the takeaway is not to expect the technology to always reach 100 per cent of its potential in every area in which it is adopted but instead to see this as a dramatic leap in innovation that is spreading across a multitude of sectors. In one of our upcoming posts we will discuss how innovation is never permanent – distributed ledger as we know it is just a stepping stone, not the complete answer to efficiency.
Interested by this post? Comment below to discuss the ideas above further with the paralegals at tlamParalegals and the wider community. Debate is the spark of innovation.