Sea freight travels legally secure without paper

Sea freight travels legally secure without paper

With HAPTIK, DB Schenker AG and ZRI have developed a blockchain solution that completely digitizes the handling of ocean freight traffic.
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Freight documents, customs documents, import and export permits – in international sea freight transport, there is basically still a centuries-old documentation obligation for the movement of goods. This does not necessarily make trading easier. Especially since the rules differ from country to country and many documents still go from hand to hand in paper form. Up to 30 people, authorities and organisations are involved in the handling of a transport of goods from Africa to Europe. More than 200 interaction and communication steps are necessary to bring the goods from A to B in accordance with the rules.

“The most important document for freight transport is still the so-called bill of lading,” explains Dieter Sellner, responsible for Global IT Land and Digital Solutions (GUILDS) at Schenker. This paper – in English “Bill of Lading” – fulfills several functions: it proves that a good has been taken over by the carrier and certifies the obligation to deliver it to the recipient at a certain place.

The most important document in sea freight transport is the bill of lading, says Dieter Sellner, responsible for Global IT Land and Digital Solutions (GUILDS) at DB Schenker AG.
Photo: DB Schenker AG

“So far, the bill of lading has been passed through the hands of the parties involved in paper form so that they can check the documents,” says Dr. David Saive, research associate at the Center for Information Society Law (ZRI) at the University of Oldenburg. The time and cost involved is immense. In addition, the system is prone to errors. Media breaks offer a lot of scope to enter and pass on data incorrectly. Digitization of these processes has so far failed due to the many different legal regulations and the lack of standardization. The only innovation of the past decades has been the introduction of color printers.

That is about to change. The logistics company DB Schenker AG has started a project together with the (ZRI) to display the bill of lading completely digitally. The project “Tradability of physical goods through digital tokens in consortium networks” (HAPTICS) started in January 2019 and was completed at the end of March 2022. Also involved were the department VLBA (Very Large Business Applications) of the Faculty of Business Informatics and OFFIS, the Institute of Computer Science, both located at the University of Oldenburg.

The project was funded by the Federal Ministry for Economic Affairs and Climate Protection (BMWK) with a total of 1.4 million euros. Due to the great response in science and practice, the BMWK has decided to support the HAPTIK project with the EXIST research transfer and about one million euros of further funding. The aim is to enter the market as soon as possible.

David Saive, research associate at the Center for Information Society Law (ZRI) at the University of Oldenburg, described HAPTIK as unique because the solution is the first to be able to electronically display freight documents in a legally compliant manner.

The HAPTICS solution is technically based on a blockchain. “In fact, it is unique in the world because it is the only one that can electronically display freight documents in a legally compliant manner,” the project participants explain. So far, it has only been possible to electronically map the document and proof function of the bill of lading. Legal uncertainties persisted. A legally secured digital version equivalent to the paper version has not yet been launched on the market.

With HAPTIK, the project partners involved have consistently thought the digitization idea through to the end. Traditional methods for digitization would often not exploit all the advantages. In many cases, digital documents were still followed by analog workflows. But this also preserved the disadvantages of the analog world.

From the very beginning, the HAPTIK project pursued the approach of having a blockchain solution developed by lawyers. This enabled the bill of lading to be 100 percent digitized in a legally secure manner. Paper and electronic documents in PDF form will be superfluous – there is only one blockchain token with the corresponding data. All parties involved in the transport of goods – shippers and consignees, logisticians and financial service providers, customs and port authorities – can enter their information into the corresponding blockchain.

HAPTIK offers an independent platform for this, the project managers describe their approach. The principle is based on the fact that HAPTICS cannot exercise any access and control over the data stored in the blockchain. Only the service of storing data in the system is offered.

The data is stored there in a legally secure and unchangeable manner. All processes remain transparent and comprehensible. Falsifying documents is practically no longer possible in a blockchain. The stored content cannot be manipulated, even if different users access it. “Digital bills of lading can be created, transferred and checked for accuracy within seconds at the click of a mouse,” says Saive, ZRI expert on legal issues of blockchain technology.

The advantages of such a system are obvious. While customs declarations can take four to five days in the above-mentioned example of a goods transport from Africa to Europe, a blockchain-based customs process can theoretically be completed within a few hours.

The use of electronic bills of lading has been prohibited in Germany since 2013 in accordance with § 516 para. 2 HGB is permissible. The prerequisite for this is that the electronic recording used can represent all the functions that the paper-based predecessor fulfills. Experts call this functional equivalence. The law does not prescribe which technical solution will be used for this. Germany is one of the few countries that allows the use of electronic bills of lading.

The foundation stone for more efficient, simpler and, above all, safe trading and transport processes has thus been laid. The aim now is to give the system worldwide recognition. In principle, this should not be a problem from the point of view of the project managers. The first steps are already being prepared. A Minimum Viable Product (MVP) is to be created on the basis of HAPTICS. The practical implementation is accompanied by DB Schenker.

*Martin Bayer: Special field of business software: Business Intelligence, Big Data, CRM, ECM and ERP; supervision of news and title sections in the print edition of COMPUTERWOCHE.

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