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The Digital Ship

The internet has transformed many aspects of modern life, but one sector yet to digitize is shipping.

This is true despite the fact that maritime commerce is the lifeblood of international trade, ferrying raw materials and finished goods between producers and consumers around the globe. In fact, 90% of all trade measured by volume is transported on a ship. In Boston, we get our gasoline, heating oil, natural gas, road salt, new cars — and many other staples that our lives depend upon — by sea.

Shipping has historically been important to Massachusetts, known as the “Bay State,” where the company I lead, CargoMetrics Technologies, is based. Faneuil Hall, a city landmark, was a marketplace for seaborne imports and exports; Nantucket and New Bedford were once homeports to the world’s largest whaling fleets; the greatest clipper ships of the 19th century were built in East Boston; and Newburyport is the birthplace of the U.S. Coast Guard. The Boston Tea Party is a shipping story, and the USS Constitution, an anchor on our waterfront, is the last stop on the historic Freedom Trail.

But, as new glass high-rises fill up Boston’s seaport district, the city’s shipping sector has been replaced with a services industry of biotech, fintech, and many other kinds of technology drawing upon our extraordinary network of local universities. Boston punches above its weight, for example, in pharmaceutical and robotics research.

While we rightly celebrate marvelous innovations happening onshore, shipping has been metaphorically pushed offshore, and not just in Boston, but in other coastal cities too — out of sight and out of mind. This is causing some persistent problems to fester.

For starters, ships burn the dirtiest kind of bunker fuel, accounting for three percent of total CO2 emissions. If shipping were a country, it would be the eighth largest greenhouse gas emitter, roughly equivalent to Germany’s carbon footprint. Coming IMO 2020 international regulations requiring ships to consume lower sulfur fuel are meant to start curbing these emissions, but shipping has a long way to go in order to become carbon neutral. Shipping wrestles with other environmental problems as well, such as the manner in which old ships are scrapped. When carbon is ultimately priced for the cargoes themselves, trade patterns will evolve too.

Despite shipping being vital to economic networks, it is also still far from secure. In the wake of 9/11, Congress passed legislation requiring 100% of imported containers to be checked for weapons of mass destruction. Today, according to the Journal of Commerce, we scan 3-5% of them.

Convoluted offshore legal structures also let shady middlemen in the commodity markets prosper, and it’s their ships that evade sanctions and help keep despots in power. Tankers export Venezuelan and Iranian crude oil, often utilizing island storage facilities — the equivalent of the ocean’s dark alleys — to evade sanctions. North Korea runs an intricate network of mid-ocean “ship-to-ship” transfers which form an important link in the hermit state’s supply chain. And it’s by ship that the vast majority of the world’s cocaine, heroin, and fentanyl are moved.

Due to its innate international nature, shipping can be viewed as a case study in what happens when an industry lacks transparency — the Panama Papers on steroids so to speak. Obscure middlemen can influence the price of nearly every commodity. Look up the legacy of Marc Rich or the corruption probes ongoing in Brazil tied to Swiss trading houses to get a sense of the skullduggery.

Read full article on Marine Money here.