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May 28 2018

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102 The Journal of Commerce | May 28 2018 www.joc.com Commentary JOC Top Importers and Exporters TRADING PLACES Peter Tirschwell THE MORE THAT blockchain becomes understood, the more conceptually, at least, it fits hand and glove with international logistics. And that is the issue: Conceptually, the idea of breaking down the documents, information, and commitments associated with international trade into a series of digital executions based on permissions and encryption would fix the major ineˆciencies the industry continues to live with daily. But actually transitioning the system from the largely paper-based process of today into a paradise of blockchain where things happen instantaneously and costs are driven down is proving to be quite a formidable task. Indeed, the main question around blockchain today is not whether the technology is conceptually a solution to major industry problems like ex - cessive and slow-moving documen- tation, or even whether it will work in practice. Despite news reports of bitcoin accounts falling victim to hackers, it is not hard to imagine that the technology can be made to work largely as advertised. The main questions are twofold but interconnected: Can the needed standards, down to minute levels of detail, be agreed upon so that parties know what they are getting into when they hit the buy or sell button and thus commit themselves to that decision for all human history? And as an extension of that, can all or most industry players come to agreement on a common platform that will allow the benefits to be shared industrywide? That latter idea of a common platform was delivered a sizable blow recently when the CEOs of two of the largest container carriers, Hapag-Lloyd and Ocean Network Express (ONE), insisted at the Global Liner Shipping Conference in Ham - burg this month that only a common platform would spread the benefits industrywide. The statements were an implicit rejection of the approach of Maersk and IBM to create such a platform under the auspices of a joint venture company they collectively own, and then try to bring others into their platform. "In and of itself, the Maersk- IBM platform could be good, but it would need the governance around it to ensure it was an industry platform and not just a Maersk-IBM platform. That is exactly the weak - ness you see with many of these initiatives. People will say, 'I have an industry platform and I am the one controlling it,' but that is a con- tradictory statement," Hapag-Lloyd CEO Rolf Habben Jansen said. Added ONE CEO Jeremy Nixon: "If you look back to Malcom McLean, if he had some dividend he charged, (con- tainer shipping) would not have taken o— like it did. It was his gift to us. We need that kind of approach in terms of blockchain," he said. "We need a col- laborative approach and avoid having 20 di—erent blockchains out there. We need to get to a situation where we can reach standardization very quickly, and work in a collaborative way to create a new trading system in the future, whether we are 3PLs, carriers, banks, customs authorities — something we can all use in a secure ecosystem." Such consortia are gaining trac - tion outside of shipping as industries seek to leverage blockchain. HSBC said what it described as the world's first trade finance transaction using a single blockchain platform was executed on a platform called Corda, a New York-based blockchain consor- tium whose members include more than 100 banks, regulators, and trade associations. In an entirely different market, the MediLedger Project aims to demonstrate compliance with the Drug Supply Chain Security Act (DSCSA), utilizing blockchain tech- nology to track and trace prescrip- tion medicines. IBM CEO Ginni Rometty hinted in March that the Maersk-IBM joint venture could be opened to outside investment, but there has been no subsequent news of anyone else buy- ing in. Even in the months since the joint venture was announced early this year, it has been hard to reconcile its rhetoric around neutrality and an open source approach to the technol- ogy with the need for Maersk, the largest carrier, to get its peers onto a platform that it owns and will pre- sumably profit from alongside IBM to the degree it's successful. The Maersk approach appears to be one of maximizing first-mover advantage: Get as many parties onto the platform as quickly as possible, and the head start will be so great that others will be forced to come on board rather than going their own way. And it might yet work, as there have been a number of small startup blockchain ventures and a handful of proof of concepts involving other carriers, but nothing as organized, fast-moving and well-resourced as the Maersk-IBM venture. And it is happening in an envi - ronment of hyperactivity around blockchain; the CoinDesk Consensus conference on bitcoin and the underly- ing blockchain technology in New York this month attracted 8,500 attendees, up from 2,700 last year. But with Maersk controlling less than 20 per- cent of global capacity, other carriers' buy-in will be essential for anything resembling an industrywide platform to come into existence. And that is what should happen. The lower costs, greater transpar- ency, and manifold eˆciencies that blockchain enables should accrue to everyone, with the field of competi- tion being around who can make best use of those advantages — not who does and doesn't get access to those advantages to begin with. That is the type of thinking needed to transition blockchain from concept to reality in this market. JOC email: peter.tirschwell@ihsmarkit.com twitter: @petertirschwell. Matters of detail and trust "We need to get to a situation where we can reach standardization very quickly."

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