Jeremy A. Herschaft and Matthew J. Thomas
February 6, 2020, marked an important milestone for the implementation of blockchain technology in the container shipping sector, as the Federal Maritime Commission (“FMC”) completed its review of an agreement among five major carriers to collaborate on a new blockchain platform called “TradeLens,” which aims to modernize the international logistics arena. Blockchain itself has already received considerable attention in other commercial areas (particularly digital currencies), and we have previously penned various articles on the basic structure of the technology, including Heads or Tails? Making Sense of Crypto-Tokens Issued by Emerging Blockchain Companies (Mainbrace, April 2019). The purpose of this article will specifically focus on the TradeLens concept, which leverages the shipping industry’s unique antitrust exemption to create standardized blockchain tools for a number of major carriers.
The TradeLens Concept
TradeLens was launched on August 9, 2018, through a joint collaboration between Maersk GTD and IBM. The TradeLens model seeks to apply distributed ledger technology to the global logistics industry and is described as an effort to “reduce the cost of global shipping, improve visibility across supply chains and eliminate inefficiencies stemming from paper-based processes. In short, to bring global supply chains into a more connected and digitized state—for everyone.”1 Shippers, freight forwarders, ports, terminals, ocean carriers, intermodal operators, government authorities, and customs brokers are the intended users of the electronic platform.
The program itself is structured to function as an open, neutral electronic platform that “digitizes” the global supply chain “through innovations like a shared ledger, smart contracts, encrypted transactions, continuous audit history and transaction endorsement.”2 By streamlining and digitizing the connections between the parties in the global supply chain ecosystem, TradeLens ultimately hopes to expedite decision-making and lower “the administrative frictions in trade.”3
It is no easy task to bring together all of the key parties listed above. However, major stakeholders in the logistics industry have taken keen notice of TradeLens over the past year, and Maersk and IBM report that the concept is currently supported around the world by more than 100 diverse organizations, such as carriers MSC, Maersk, CMA CGM, ONE, and Hapag Lloyd; cargo owners, such as Procter & Gamble; global port operators, such as APM Terminals; and numerous global Customs authorities.4 Notably, U.S. rail carrier CSX joined the program in November 2019. As of the publication of this article, the TradeLens website reports that the program is “already handling more than 700 million events and 6 million documents a year.”5 These players—and numbers—clearly demonstrate that the market is paying considerable attention to the opportunities that blockchain technology can provide to the international logistics industry.
The TradeLens Agreement Filing with the FMC
The TradeLens concept took a major step in clearing U.S. regulatory hurdles on December 23, 2019, when CMA CGM, Hapag-Lloyd, Maersk A/S, MSC, and Ocean Network Express filed The TradeLens Agreement with the FMC. By way of background, the FMC is an independent federal agency responsible for regulating shipping lines, marine terminal operators, and intermediaries to ensure competition and to otherwise protect the public from unfair and deceptive trade practices, in accordance with the Shipping Act of 1984. Among other things, the Shipping Act requires that carriers entering into cooperative working agreements file those agreements with the FMC. Generally, such agreements go into effect after a 45-day waiting period, although the review can be extended if the FMC seeks additional information. Once the review period concludes and the agreement takes effect, the participants enjoy antitrust immunity for matters covered by the agreement.
With this regulatory framework in mind, the TradeLens Agreement’s stated purpose is to “authorize the parties to cooperate with respect to the provision of data to a blockchain-enabled, global trade digitized solution that will enable shippers, authorities, and other stakeholders to exchange information on supply chain events and documents….” Notably, the TradeLens Agreement expressly states that it is not designed to authorize the parties to discuss or agree upon their respective vessel capacities, the terms and conditions of their respective ocean transportation services, or the rates that are charged between the parties and their respective customers. Instead, the thrust of the TradeLens Agreement appears to be directed to the terms and conditions of the provision of data on the TradeLens platform, the input of products and services related to the platform, and the marketing of same, as well as the use of transportation-related documents on the platform itself.
The TradeLens Agreement is not the only new forum on file at the FMC for carriers to explore and harmonize new technologies to facilitate intermodal logistics and trade, however. The Digital Container Shipping Association Agreement authorizes the parties to form a nonprofit corporate entity through which they can discuss, exchange information, and agree on the development, establishment, standardization, and harmonization of terminology, guidelines, and standards for information technology used in the movement of containers. That broader forum includes the TradeLens parties as well as Hyundai Merchant Marine, ZIM Integrated Shipping Services, and Yang Ming Marine Transport Corp.
The adoption of the TradeLens Agreement is significant, in that it represents a considerable step in attempting to advance blockchain technology in the maritime logistics realm. It will be interesting to see how cooperation and coordination in the area of blockchain adoption and other digital technologies will change the logistics environment, whether similar types of agreements may be submitted to the FMC going forward, and whether new legal issues will arise out of this accelerating effort to modernize the supply-chain arena.