Digitalization and Maritime Transport Sector

Although many people view the freight industry as reactive rather than proactive in adopting technological innovations owing to its complexity and regulatory requirements, this opinion is wide of the mark. All types of new technologies, such as big data, cloud computing, and blockchain technology, bring enormous changes to the maritime industry, and the industry is actively adapting itself to these changes. Considering that the maritime industry is more than simply moving cargo from one place to another, these technologies are changing the faces of cargo handling, cargo control, custom clearance, and port inspection. The maritime transport sector is an organization-intensive branch and collaborations between different sub-sectors are

93 Fruth, Markus, and Frank Teuteberg, Digitization in maritime logistics—What is there and what is missing?, Cogent Business & Management 4.1 (2017).

of utmost importance, so control of the supply chain is increasingly based on connectivity in the flow of information rather than on direct ownership.⁹⁴ Imagining that data can be transmitted between ships and shores anytime in a massive value spurs the automation of existing processes and functions, decreasing downtime and avoiding unnecessary maintenance.

Thus, digitalization should be given first research priority in maritime transport sector.

The current conceptual models about unmanned vessels, big data platforms, and full automation are mostly based on information and communication technologies. To better understand the effects of these technologies on the maritime industry, first understanding the working principles thereof is necessary. The first subsection outlines the theory of information and communication technology (ICT). In addition to picturing the bright future of shipping, considering the restructuring of society resulting from these technologies is indispensable. The laws on maritime labor will not the same once unmanned vessels are extensively used. The second subsection examines the possible challenges in the maritime transport sector in relation to digitalization.

a) Maritime Transport Sector and Information and Communication Technology

ICT refers to the integration of telecommunications (telephone lines and wireless signals), computers, middleware, and the data systems that support, store and transmit information between systems.⁹⁵ Many scholars believe that ICT has been entwined with major changes in society since the invention of electrical telegraphy in the 1830s.⁹⁶ Through ICT, the entire shipping process can be integrated, allowing information to flow freely between all participants.

One good example of ICT application is the use of electronic data exchange (EDI) technology.

This technology is inspired by the 1948 Berlin airlift, in which vast quantities of data and information about the transported goods need to be processed. EDI provides a technical basis for automated commercial “conversations” between two entities. By establishing a uniform

94 Evangelista, Pietro, The role of ICT in the logistics integration process of shipping lines, Pomorski zbornik 40.1 (2002), on pp.61–78, on p. 65.

95 Murray, James, Cloud network architecture and ICT-Modern Network Architecture, Retrieved from TechTarget Expert Community: http://itknowledgeexchange. techtarget. com/modern-network-architecture/cloud-network-architecture-and-ict (2011), available at https://itknowledgeexchange.techtarget.com/modern-network-architecture/cloud-network-architecture-and-ict/.

96 For historical studies, see Braudel (1981), Castells (1996), Innis (1950, 1951), Freeman and Soete (1997), Marvin (1988), and Mattelart (1996/2000).

standard, the message sent by the originator can be processed automatically by the recipient’s computer. For example, when a customer sends a purchase order to the vendor, the purchase order will be automatically logged into the vendor’s system as a sales order. As soon as the sales order is agreed and merchandise is shipped, the vendor’s computer sends a shipment notification to the customer’s computer. Again, the customer’s computer automatically updates the purchase order, noting that the merchandise is in transit. The same process continues by exchanging other information about the transaction, and the entire process works autonomously.

By applying the EDI, substantial amount of labor and time is saved, and the occurrence of errors is minimized.

Today, the public controlling sectors also use EDI as a means to improve productivity. The United Nations Center for Trade Facilitation and Electronic Business (UN/CEFACT) has suggested to establish “a system that allows traders to lodge information with a single body to fulfill all import- or export-related regulatory requirements,” indicating that all the data and documents related to the release and clearance of an international trade only need to be submitted once on a system named “Single Window System.”⁹⁷ This one-stop service has been realized in logistics hubs like Singapore and Hong Kong. The platform “TradeNet” provided by the Singapore Customs connects 35 governmental controlling authorities and spares traders from multiple submissions, long waiting times, and high processing expenses.

EDI represents merely one of the possibilities of ICT. Other technologies can achieve more than expedite and simplify the information flow. Whether these technologies are internet or blockchain technology does not matter as they have the same essence of minimizing manual operation and replacing it with automation. In addition to the dissemination of the ICT, the maritime industry can provide real-time information on the status of the cargo, accurate time of ship arrival, and even remote control over the vessels from on-shore in a foreseeable future.

In the meantime, the road to full digitalization has many hurdles. The prominent issues include the absence of a uniform rule, the anxiety about cybersecurity, and the fear of artificial

97 UN/CEFACT. The single window concept. Technical Report ECE/TRADE/324, International Trade Procedures Working Group (IT-PWG/TBG15) of UN/CEFACT, 2009. available at

http://unpan1.un.org/intradoc/groups/public/documents/UNECE/UNPAN019892.pdf.

intelligence (AI), which are detailed in the next part.

b) Challenges

Digitalization in the maritime transport sector offers a wealth of opportunities, but challenges exist as well. The challenges come mainly from establishing a uniform set of rules and a secure cyber environment. In this sense, a uniform set of rules means not only a uniform commercial standard but also a uniform legal framework. These two purposes illuminate each other and should be carried out in the same pace. Using EDI communication as an example the document standard is the foundation of EDI because it sets out the precise syntax for the compilation of EDI messages and a vocabulary of already developed messages. Thus, only two systems conforming to the same standard can enjoy the benefits of EDI. The best approach is for all participants to accept one standard; otherwise, companies must constantly invest in their IT systems to make them compatible with the formats of their business partners. However, owing to the development model of EDI, the individual business first set out rules with their trading partners. These rules then evolved naturally into standards within their particular industries. At the time, endeavors were made to reach a unified standard. Various standards already exist in different branches and regions, and the diffusion of such standard becomes difficult because persuading the business to abandon the use of their ongoing EDI standards is inevitable. Altering the standard on a national level is even more difficult. Although the EDIFACT, which is a standard developed by the International Standards Organization, has been agreed to become the international standard, the actual implementation of EDIFACT within the US is moving at a snail’s pace. The de-facto standard of choice for US-based EDI operations remains the ASC X12 standard set out by the American National Standards institute.

The case of EDI is only the tip of the iceberg. The co-existence of multiple standards prevails in many other aspects of digitalization, making the establishment of a uniform legal framework a challenge to all participants.

Another issue concerning the potential users of digital technologies is security. This problem encompasses confidentiality, authentication, and integrity of the data, but data storage and non-repudiation are also generating anxieties. These anxieties do not solely come from

technological imperfections. Technological advancements in the past decades actually enable electronic communication technologies to provide high-level security procedures for the legal transactions executed by electronic means. However, these technologies are not enough to convince the users to apply them on a massive scale. This embarrassing situation is associated with the lack of confidence from the stakeholders and various legal uncertainties on the road to digitalization. Confidence can only be built through fruitful mercantile practices, but these practices cannot interact smoothly with incomplete and poorly harmonized regulatory regimes.

At present, whether an electronic record can be recognized as an adequate replacement for a paper document depends on the standards that vary from one jurisdiction to another. These accompanying legal uncertainties have, undoubtedly, discouraged users and, thus, represent the key obstacle toward achieving common use of electronic records.