Clients are always on the lookout for commercial advice that helps to manage modern trends and current challenges. In the transportation and logistics industry this includes the opportunities created by new technologies as well as the global demand for sustainability. In response, law firms need to reassess their offering and provide comprehensive assistance to clients along the supply chain.
New technologies have enabled businesses to integrate new processes across the supply chain. The goal, unsurprisingly, is to increase efficiency and unlock potential as processes become more advanced and customer demand more complex.
Over the last few years, blockchain has undoubtedly become the talk of the town. In the shipping business, digital ledger technology seems to promise to overhaul the large volumes of documents typically accompanying transactions, such as charterparties, bills of lading and letters of credit. A prime example is ‘TradeLens’, a blockchain platform developed by IBM and Maersk in early 2018, which brings together all parties in the supply chain, from beneficial cargo owners and freight forwarders to inland transportation providers, ports and terminals, ocean carriers, customs and other government authorities, on to a single, secure data-sharing and collaboration platform. The platform introduces digitalised documents and permissioned sharing, which allows participants to move away from traditional workflows within a single organisation to automated processes across multiple organisations. In January 2020, the International Group of P&I Clubs approved blockchain-based supply chain startup Wave’s e-bill of lading system, the second blockchain system to be approved by the Group and the first to be entirely decentralised. The Group’s approval means that liabilities arising from the carriage of cargo under Wave’s system would now be covered by Member Clubs. Before 2010, Member Clubs covered liabilities in respect of carriage of cargo under electronic systems only to the extent that such liabilities would have arisen under paper bills. As of February 2010, Member Clubs cover all liabilities arising under electronic systems that have been approved by the Group.
As with all things new, blockchain is exciting, but its potential is still largely unexplored. It could be too soon to say that we have seen the capability and scalability to justify long-term investment. Moreover, being an ecosystem, blockchain requires the joint collaboration of users to fulfil its purpose, at the risk of being unable to operate if certain participants withdraw. Also, at this time, the technology remains highly unregulated territory, with all the opportunities and risks that come with it. Industry players should, therefore, tread carefully and seek specialist advice and guidance when forming their strategies.
Long gone are the days when the industry’s environmental footprint was only for the activists to lose sleep over. For an industry that features as one of the largest polluters in the world, sustainability is now one of the key pillars that drive strategy.
Players are actively seeking to minimise the environmental damage caused by transportation and resource-intensive processes such as procurement, warehousing, distribution and order fulfilment. Sustainability is driving research and investments: on 10 February, container line CMA CGM announced it was joining forces with Energy Observer, a former racing boat now powered by hydrogen, to develop the technology for the large-scale use of hydrogen generated by solar, tidal and wind power as a zero-emission ship fuel source. The demand for sustainability also increases the need for transparency through greater digitalisation, as, for instance, an increased transparency in loading capacities avoids ballast or inefficient voyages.
Environmental regulation is constantly resetting the scene for industry participants. As of 1 January 2020, under MARPOL Annex VI the limit for sulphur in fuel oil used on board vessels operating outside designated emission control areas is reduced from 3.50 per cent m/m to 0.50 per cent m/m. In addition, the Ballast Water Management Convention, which entered into force in the autumn of 2017, requires vessels to develop a ballast water management plan and, if necessary, install new equipment to remove or render harmless aquatic organisms and pathogens from ballast water before it is released into a new location. All ships must meet the D2 standard regarding the maximum amount of viable organisms allowed to be discharged by 8 September 2024.
Reed Smith provides advice and support to clients along the supply chain. See the below infographic for an illustration of the services provided or contact Gemma Ellis for more information.