Baby steps path to blockchain usage in shipping

Amid all the hype in fintech applications for the shipping sphere, perhaps the most immediately applicable and translatable into practical usage is the electronic or smart bill of lading. This is something that CargoX has astutely put much effort into developing and now stands set to reap the benefits of.

“The focus of CargoX is laser-sharp - make the paper Bill of Lading a thing of the past, and put it on blockchain, to enable fast, cost-effective and safe transfer of ownership of this most precious document,” founder and ceo Stefan Kukman told Seatrade Maritime News.

The independent supplier of blockchain-based Smart Bill of Lading solutions this week demonstrated its production-ready solution CargoX Smart B/L on a test shipment from Shanghai to Koper and aims to have case studies published in the near future.

Noting that other blockchain-based solutions have mostly been used for other purposes such as data gathering and aggregation, validation, processing, and so on, Kukman claims he has not seen any direct competition with a blockchain-based Bill of Lading product that has been demonstrated to work live yet.

“Our solution and ecosystem can coexist with other solutions in the blockchain space, and integrations are always possible with existing ERP systems. This gives us a huge advantage, as there are no major IT-system overhauls needed,” he added.

Meanwhile, although Kukman agrees common logistics platforms will probably be built based on one of the public blockchain networks, the technology itself does not preclude multiple projects working well with each other.

“We believe blockchain itself, as a technology, is something we can address simply as “internet 3.0”. It is a common, public ledger that enables data transfer in a safe and publicly validated transactional environment. So, one logistics blockchain project can be completely different from another one. The public blockchain itself, if the Ethereum Network is used, for example, is in this case the common platform, on which various blockchain use-cases are defined and marketed,” Kukman said.

“We first started by building the Smart B/L solution to prove the value adding capability of the blockchain in the case of the document based processes, and we will build other products within our open ecosystem, according to our aggressive roadmap,” he added.

CargoX has previously announced that it is partnering with Swiss freight forwarder Fracht to use its Smart B/L product as well as with OceanX a sea freight network specialist.

Kukman claims that apart from these publicly announced deals, CargoX has many other trial partners and customers who do not want to be identified for business reasons.

“We are confident that our solution is ahead of the competition in this specific segment, and there is a lot of interest, so we are looking forward to bringing the Smart B/L to the logistics sector as a standard,” he added.

Read more: CargoX runs first successful electronic bill of lading shipment

Going forward, Kukman declined to disclose CargoX’s business projections, but “we stand firm in our confidence”, he reiterated.

Nevertheless, as with any new technology, reservations persist. Among issues raised are legal ones. For example according to law firm Fichte & Co, the international multi-jurisdictional nature of data processing in blockchains could raise questions on governing law and jurisdiction. 

“Without clear provisions on governing law and jurisdictional clauses in the smart contract, issues on conflict of laws may arise. In order to avoid such situations, it is imperative for a smart contract to contain such data,” Fichte & Co said in an article.

The firm also highlighted possible issues with how defective arbitration clauses due to coding error would be treated by the forum and whether they will go to court or stay in favour of arbitration. 

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“We have a strong sense of responsibility towards business, and we know the legal implications and possible disputes regarding the Smart B/L. We have invested heavily into verifying and validating our solution, and our legal efforts are directed by Patrick Vlačič, a top legal expert in the field of maritime, transport (air, rail and road) and insurance law to help us manage any legal questions,” Kukman said, adding that Vlačič was previously Slovenia’s Minister of Transportation.

Kukman also pointed out that CargoX has put a lot of emphasis on cybersecurity issues. “We are collaborating with top cybersecurity experts to verify and validate our systems and the information flow. All data in the CargoX Smart B/L solution is encrypted and extremely safely stored,” Kukman assured.

In the midst of the rapidly evolving trading environment, Kukman said the logistics platform recently launched by IBM and Maersk has been taken into consideration all along. “Our roadmap was planned with this in mind, and we already committed to providing two new products in the coming months, which will complement the Smart B/L and offer a wide array of business opportunities to those who are thinking ahead and who are planning to use blockchain in their IT-business strategy,” he said.

 

Read more: Maersk, IBM launch TradeLens blockchain platform with 94 signed up

“We have been working on the Smart B/L solution with a laser focus to provide this specific solution to solve one of the current biggest pain-points in the industry, and we have succeeded in providing the platform ahead of the giant duo,” Kukman added.

He reiterated that collaboration rather than competition should be the way forward. “We believe that we are all together building a great blockchain-based logistics ecosystem where coexistence is default and solution openness will be considered a standard feature.”

However Kukman pointed out that commercial realities cannot be ignored. Pointing to the fact that Maersk’s TradeLens has only attracted one other shipping line, he suggested this might be a sign the platform is not sufficiently neutral to attract the other lines. “Even though the platform is traded as an open platform, there is Maersk who is still involved, and the blockchain technology used is not of public nature. Private blockchains void all the benefits of using blockchain, and centralized solutions always add to business uncertainty,” Kukman noted.

“Besides, in such a fragmented global market of NVOCC and shipping lines, there is not much chance that lines would want to use a competitor’s platform,” he added.

Posted 28 August 2018

© Copyright 2019 Seatrade (UBM (UK) Ltd). Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Seatrade.

Vincent Wee

Asia Editor, Seatrade Maritime News

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