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Digitalisation in container shipping
Jerome de Ricqles
Port Community Systems have become an essential tool for the exchange of information in the container shipping sector. Their role in the management of key data means, however, that particular attention needs to be paid to their governance.
Over the last 20 years, the world's major cargo ports have installed constantly improving data processing systems, generally referred to as Port Community Systems (PCSs). Their role is to speed up and smooth the flow of goods through ports at a time when container volumes are growing strongly.
These systems, which are based on technology developed by the leading IT groups, operate as mega data bases which aggregate the information they receive from the different protagonists in the port operating chain in real time.
The four key players in this shared network system are:
The shipper's cargo representative, who, in 99% of cases, is the forwarder;
The shipping company with which the cargo reservation has been made;
The shipping company's cargo handler;
The customs service.
Each of these parties needs to carry out a certain number of actions within a given time to ensure that the relevant cargo is loaded on to the relevant ship in the agreed time frame. The operation needs, of course, to be carried out under conditions of total quality with regard to the physical integrity of the merchandise but also in terms of documentation and security.
Universal approval
Port Community Systems have quickly gained wide acceptance because they avoid the need for numerous manual operations and the errors which come with them. They also provide greater transparency and contribute massively to the faster passage of goods through the ports. They offer the additional benefit of enabling ports to constitute much more reliable statistical data bases, notably by enabling them to identify transhipment containers, thanks to their ability to capture data in real time.
Without getting into over-complex technical considerations, which are not the object of this article, the common factor in all these systems is that they rely on the numbers marked on the containers involved in any particular shipment. Remember that a container number comprises four letters which identify the shipping company concerned or the owner or lessor of the container, and then seven numbers. The seventh number, which is known as the check digit, represents a combination of the six preceding letters and is intended to avoid any registration error.
Inadequate governance
The key challenge facing digitalisation and blockchain processes now is how to take things further. In this era of demand for big data and ways of controlling it, the great volume and quality of the data held by the PCSs is of interest to major international operators…as well as to a certain number of predators.
This raises the question of the governance of PCSs, which, today, is clearly the weak link in the system. Until now, the role of the state in the great majority of countries has been limited to the physical and documentary verification of goods for customs and statistical purposes. States are not always aware of the volume of data held in the PCSs or their potentially porous nature. Yet, there is a clear economic intelligence risk which concerns both the public and private sectors.
It would be particularly easy at present to identify a particular data flow with a view to capturing the information or putting pressure on certain operators with a view to gaining control over it. The information war and the way it is dealt with are a key part of modern economic warfare, which is why states are showing increasing interest in PCSs, often through specialised IT companies or companies under state control. China is clear about its intentions as is demonstrated by Alibaba's involvement in a blockchain project involving bills of lading which is being carried out by the International Port Community System Association (IPCSA[1]). In another example, data on containers going through the port of Piraeus are now handled by a platform set up in 2019 by the Hellenic Port Community System. This platform is run and majority owned by China's Cosco group, which took control of the Greek port in 2016. Voices are starting to be raised in Greece, however, claiming that the platform effectively creates a a monopoly over port services. One can imagine that similar situations could also arise in other ports.
Shipping companies ready to act
Until now, the shipping companies have generally been only marginally involved in the digitalisation process. Bills of lading are not integrated into PCSs. Ocean trade platform Inttra has tried in the past to create a standard electronic format for bills of lading but without success. The shipping companies made it clear that they were determined to keep full control of the transport contracts they sign with their clients, rejecting legal arguments to the effect that the bill of lading is intrinsically a cargo document.
Clearly, the shipping companies must keep confidential information about the goods they transport and, particularly, about the parties for which they are carrying them. But business confidentiality is not incompatible with the exchange of information and standardisation, as has been seen in the air freight sector. The shipping companies are aware of the operational gains they can achieve through digitalisation and have started to change position on the subject on condition that they are able to obtain guarantees regarding the security of information exchange processes. There have been a number of initiatives in recent months. Individual companies have set about creating digital platforms offering access to their own services. Leaders of the sector also joined forces in April 2019 to set up the Digital Container Shipping Association in Amsterdam. The association's aim is to work on standardisation and interoperability issues, which currently represent a real brake on the wider use of digitalisation in container shipping. The first stage, which is eagerly awaited by the profession, involves the shipping companies finding a common electronic format for bills of lading. This will open the way subsequently for wider-ranging digitalisation sharing.
Picture credit: @ Anne Kerriou
[1] On July 1st, the International Port Community Systems Association (IPCSA) launched the Network of Trusted Networks (NoTN) a new, secure port-to-port and cross-border data exchange solution. The concept is being trialled in a two-year project covering up to 70 ports, ten airports and multiple inland terminals, with 14 IPCSA members from across the world taking part in the initial phase.
Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
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