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Security has always been paramount in shipping. The industry continuously seeks new ways to improve cargo transportation, from protecting goods against theft and damage to combating piracy and ensuring safe conditions for the crew.

In the modern era of digitalization, cybersecurity has become a crucial aspect of shipping. Specifically, the industry is actively discussing the transition to electronic documentation. The implementation of digital versions of transport documents (electronic bills of lading, or eBL) can significantly reduce costs and make the cargo transportation process much more transparent and secure.

What is an electronic bill of lading, and why is it necessary?

A bill of lading is one of the most important documents in maritime shipping, essentially serving as a transport waybill for sea cargo. It confirms that the cargo is indeed on board and is being transported to the destination.

Additionally, the bill of lading is a legal contract between the shipper and the shipping company. It specifies the terms of the shipment, such as the route, delivery times, and the cost of services. This document regulates the relationship between the parties and ensures that obligations are fulfilled on both sides.

Moreover, the bill of lading functions as a document that certifies ownership of the cargo. In other words, whoever possesses the bill of lading is entitled to claim the goods at the destination. This is a crucial aspect because it allows the cargo owner to maintain control over the goods during transportation.

An electronic bill of lading (eBL) is the modern version of the traditional paper document. One of the key advantages of an eBL is that its digital format simplifies the contract process and reduces the risk of the document being lost or damaged. Furthermore, creating such documents takes up to five minutes, compared to the longer time required for traditional paper documents.

Electronic bills of lading in global practice

The implementation of electronic documentation in shipping is being driven by the Digital Container Shipping Association (DCSA). Founded in 2019, DCSA is a non-profit organization dedicated to promoting the digitalization and standardization of the global container shipping industry. It comprises over 100 members, including shipping companies, ports, terminals, freight forwarders, cargo owners, and technology providers.

According to Serhii Osypov, a representative of the Ukrainian logistics company Abordage Logistics, the practice promoted by DCSA has already been observed in the industry for some time. In the liner container shipping sector, 95% of transport documents exist in electronic form. Currently, customs authorities in Ukraine and EU countries do not require “hard” copies of documents. However, there is always the option to issue a paper version if required by contract conditions.

Moreover, the digital bill of lading is highly cybersecure, as it is built on a public blockchain network. Information about the eBL owner is stored on millions of devices, making it nearly impossible to hack the document. Each such bill of lading is unique, partly due to the use of NFTs (non-fungible tokens) by some companies.

The only potential cyberattack on secure eBLs is the so-called 51% attack, where attackers gain control of the majority of the network’s computing power, allowing them to manipulate transactions. However, such an attack is extremely costly and complex to execute.

Obstacles to implementation

Despite global digitalization, the shipping industry is currently not ready for a complete transition to paperless documentation. Market players face several challenges. From a technical perspective, obstacles include incompatibility between different systems and the lack of unified standards for electronic documents. This complicates the exchange of documents among various market participants.

Regulatory obstacles are also evident, involving diverse national laws and international norms that do not always accommodate electronic documents or require their legal recognition. However, the example set by Ukraine’s Ministry of Digital Transformation shows that a swift electronic transition is possible with the right motivation. Therefore, the fate of electronic bills of lading largely depends on state interest.

A few years ago, DCSA announced plans to transition 50% of industry documentation to electronic forms by 2025, with full adaptation by 2030. However, as of 2023, market adaptation was only at 3-4%, and it has since increased to 4-5%. The transition is happening, but not as quickly as anticipated, said Mykhailo Lepekha, a representative of eTEU, a company implementing electronic documentation in shipping.

Global forwarders primarily need eBLs as they spend significant amounts on courier services like DHL or FedEx. In Europe, courier services cost around $60, while eBL prices start at $10. Despite forwarders’ interest, negotiations with shipping lines often take a long time and are complex.

Challenges include distrust of new technologies among some market participants, the absence of necessary regulatory frameworks, and the complexity of technical implementation. This includes the use of bank letters of credit and documentary collections, which typically require the original bill of lading. Some agreements still mandate an original paper bill of lading between the seller and buyer, creating barriers to the full adaptation of eBLs since having an electronic bill of lading does not eliminate the need for the “usual format” of the document.

Paper versions are most typically required for order bills of lading and bearer bills of lading. These types of documents stipulate that the ship’s cargo must be delivered to the person who presents the bill of lading. Any person holding it can deliver the cargo to the buyer. The difference between these documents is that, unlike an order bill of lading, a bearer bill of lading does not specify the recipient’s name. These documents are more commonly used for delivering goods whose prices depend on exchanges (grain, oil, metals) or when cargo is sold from one company to another during transit. Order bills of lading and bearer bills of lading are also used when parties want to maintain anonymity. Here, eBLs ensure transparency and reduce the risks of “gray” exports. In this context, paper documentation becomes a matter of habit. For example, with documentation like bank letters of credit, banks are generally not very flexible in these matters. Therefore, electronic bills of lading are unlikely to be adopted soon in such scenarios, suggests Dmytro Kazanin, director and owner of TEUS.

Prospects for eBL development in Ukraine

The aforementioned company developing software for digitizing documentation in shipping, eTEU, showcased a significant reduction in document processing time during the launch of a pilot project in Ukraine. While processing a paper bill of lading takes eight days, the electronic platform reduces this to just one minute.

There are other examples of attempts to transition to eBL in Ukraine. Some large port operators and shipping companies (e.g., in Odesa and Chornomorsk) have conducted pilot projects with electronic bills of lading in collaboration with international partners. One such company, WaveBL, organized a presentation of eBL for Ukrainian clients a few years ago in partnership with the shipping company ZIM.

However, the issue of fully transitioning to eBL in Ukraine persists. The question remains whether Ukrainian shipping companies face additional challenges or advantages regarding electronic documentation compared to international companies. For international container companies, launching electronic documentation is likely not a problem due to their capabilities and market adaptation speed. The key factor is having a demand from the market and its participants. Interestingly, compared to many other European countries, Ukraine is advancing more rapidly in terms of electronic documentation.

The transition to electronic bills of lading in shipping is inevitable, albeit a slow process. Factors aiding the electronic transition in Ukraine include improvements in digital infrastructure, support from government bodies, and the desire to reduce paper bureaucracy and avoid the loss or damage to documentation. However, Ukrainian shipping companies may also face additional challenges such as insufficient digitalization of national infrastructure, lack of unified standards, and the need to comply with international requirements. At the same time, the advantages include reduced costs of paper documentation, faster and more efficient document processing, and the ability to integrate with international supply chains.

Pavlo Lynnyk, CEO of the logistics company GOL, states that the forecasts for full digitalization of documentation in shipping in the next 5–10 years are positive. It is expected that most Ukrainian shipping companies will transition to electronic documents thanks to the development of blockchain technology and enhanced cybersecurity.

Moreover, international organizations like the International Maritime Organization (IMO) are actively working on creating unified standards and recommendations to facilitate a faster transition to eBL. However, the key condition for this remains active support from the government and industry associations.

The logistics industry’s potential

In 2023, 68 countries increased their investments in infrastructure development. According to a World Bank study, private capital investment in infrastructure (PCI) amounted to $86 billion in 2023, which is $0.5 billion more than the average annual volume over the previous five years. The number of infrastructure projects in the world is growing dynamically. While in 2022 investors financed 260 projects, in 2023 it was already 322. In Europe and Central Asia, the infrastructure portfolio more than doubled over the year to 35 projects. Despite the predominance of investments in the renewable energy segment in global PPI, spending on port infrastructure development also doubled in 2023.

Nevertheless, representatives of the Ukrainian transport and logistics sector are optimistic despite the war. According to the results of the Infrastructure Index 2023 industry survey conducted by the European Business Association in cooperation with Arzinger and Sayenko Kharenko, 84% of companies are ready to resume shipping after the de-blockade of Ukrainian ports. Most of the surveyed companies intend to do so as soon as possible. At the same time, 66% of industry representatives consider the development of highways connecting Ukraine with the European Union to be the most relevant area for investment in logistics. In addition, 70% of transport and logistics companies are convinced of the need to develop a network of strategic transport hubs in the western regions of Ukraine. It is worth noting that 85% of the industry’s companies in Ukraine have either not stopped operating at all or have fully resumed operations.

Ukrainian logistics has generally adapted to the new realities and is successfully operating under martial law. The industry is recovering and integrating into the European and global transport and logistics network. Domestic agro-industrial holdings, trading and manufacturing companies, and developers are making a significant contribution to the development of Ukrainian logistics. Despite the difficult circumstances, new transshipment complexes are being built in Ukraine, and warehouse hubs and vehicle fleets are being modernized. Moreover, some companies are creating their own flotillas, investing billions of hryvnias in development, and, therefore, need to establish effective public-private partnerships and expect further European integration reforms. This can create the conditions for the Ukrainian logistics industry to attract foreign investment and reach a new level of development.

Logistics industry in Ukraine. Perspectives of development.

During communication with specialists of domestic logistics companies and local structures of international companies in Ukraine, one gets the feeling that the industry is optimistic about the prospects for development in the medium term. It is unlikely that this impression was formed due to the deliberate silence of companies on the negative aspects of their activities. Nor can it be spoiled by the change in the position of several international players in the Ukrainian market to a less public one. Of course, sometimes you hear comments like: “As long as there is something to carry for at least the current year, and then, perhaps, the fog will somehow clear.” However, there are very few such assessments, and more optimistic statements prevail. The most interesting thing is that the optimism of commentators is confirmed when analyzing the official statistical information available in the context of war.

Logisticians’ allies also add to the confidence in the industry’s positive prospects. Let us mention just a few recent examples. The agro-industrial holding PJSC Myronivsky Hliboproduct is buying a well-known logistics company. Another agricultural holding, Kernel, is creating its own flotilla to transport goods by water. The Novus chain of stores opened a powerful logistics center to further develop its retail business. And this is not a complete list. The achievements of transport and logistics companies and their encouraging assessments of the development of key segments of Ukrainian logistics are presented in our review.

The first part of the study is devoted to a general analysis of the state of affairs in the logistics market. The experts’ assessments are complemented by an analysis of industry statistics, which leads to the conclusion that the industry is resilient in the face of war. We also identified the trends currently prevailing in the transport and logistics sector of Ukraine.

The second part shows the dynamics of market processes and presents the results of the analysis of five key trends in logistics. Special attention is paid to the prospects for container transportation in Ukraine. After all, the level of containerization in the world is ten times higher than in Ukraine, and the country has a lot to strive for. For example, according to the World Bank, suppliers transport 35% of cargo in containers by volume and 60% by commercial value. This is a good benchmark for national carriers.

The third part of the report briefly describes the new challenges that logistics market participants will have to overcome in 2024. Almost two-thirds of business representatives have already publicly recognized the negative impact on the industry of the critical labor shortage and large-scale power outages. Preparing for an even worse situation, companies are investigating how to solve problems.

The situation in Ukrainian logistics: the overall view

Ukrainian logistics companies are recovering from the sharp drop in transportation volumes in the first months of the full-scale invasion. This is evidenced, among other things, by the positive dynamics of freight volumes over the past two years. According to the State Statistics Service, in March-December 2023, 282.4 million tons of cargo were transported by all modes of transport, while in the same period in 2022, only 231.1 million tons were transported. So we have a 22% overall growth. Monthly growth ranged from 17% to 30%. Of course, the volume of transportation remained significantly lower than the pre-war level, but the positive dynamics of indicators remained.

In 2024, the positive “cargo” trend continued. This is clearly demonstrated by the performance of the main segment of freight transportation: the railways, which traditionally accounts for about half of the total volume of freight transportation in Ukraine. According to JSC Ukrzaliznytsia, in the first five months of this year, rail freight traffic increased by 30% compared to the previous year. This significant growth is primarily driven by servicing the needs of exporters. The growth here is up to 57%. In January-May 2024, 75.4 million tons of cargo were transported by rail, of which 38 million tons were destined for export. The railroad is already transporting two-thirds of the pre-war level of cargo.

At the same time, experts emphasize the growing importance of land transportation. Logistics companies attach a special role to road transportation, and some even call it the key in the transport complex. Experts also note the high dynamics of road transportation in Ukraine. “Road transport is currently developing the fastest,” says Mykhailo Lymar, CEO of Meest China. Transporters also draw attention to the high ability of road transportation to adapt to circumstances. For example, in response to the blockade of the Polish borders, carriers sent trucks with goods across the borders of other countries or switched to using smaller trucks that were allowed to pass through during the border blockade*.

Despite the prospects of the “big water”, the Danube route plays an important role. It was in particular demand from early 2022 to mid-autumn 2023. According to the CTS estimates, in 2023, operators transshipped almost 52% of all sea cargo through the Danube ports. Then the demand for transportation capacity on this route slightly decreased due to the resumption of transportation through the Ukrainian Black Sea corridor. “However, we are currently maintaining a stable demand for a total flow of 250-300 thousand tons per month using all local capacities of the ports of Reni, Ismail and Orlivka,” GOL, an Odesa-based company, said.

By the way, the commodity structure of cargo transportation is also stabilizing. The share of commercial cargo is growing in the structure of transportation, gradually replacing humanitarian aid. The volume of grain cargo transportation by sea is increasing. Agricultural and metallurgical products traditionally occupy key positions in exports, while fuels and lubricants and engineering products are the main imports. Food cargo is mainly represented by grains and oil seeds, vegetable oil, sugar, etc. There is also a stable demand for logistics companies’ services in the FMCG segment, with only a declining share of expensive goods in the overall turnover structure. Demand for military cargo transportation is also growing.

Among the key industry trends, experts highlight:

• the restoration of the country’s transport and logistics infrastructure;
• active development of logistics transshipment complexes;
• increased demand for consolidated cargo delivery and handling services;
• growth in fulfillment volumes;
• high demand for warehouse logistics;
• the restoration of container shipping;
• further automation and digitization of the industry.

Logistics companies also strive to integrate various logistics services – warehousing, transportation, and customs – into a single platform, enabling operators to manage supply chains more efficiently. There is a growing trend towards creating strategic partnerships and alliances between logistics providers, manufacturers, and retailers. According to DB Schenker, such partnerships optimize costs and improve service quality by pooling the resources and expertise of participants.

Industry representatives are developing solutions to address issues caused by labor shortages and the worsening energy situation. Some companies have already started actively involving women in transportation roles, and measures to improve logistics energy efficiency are being implemented.

New challenges in Ukrainian logistics

The year 2024 has brought an increase in workforce shortages and a lack of energy resources for domestic logistics. Due to the mobilization of Ukrainians, there is a growing labor shortage in the industry. “The situation with personnel is getting more complicated, their cost is rising, and finding a specialist is becoming increasingly difficult,” notes Meest China CEO Mykhailo Lymar.

Today, the issue of staffing is extremely pressing. According to representatives of GOL, in just one week – from May 13 to 17 – 22 drivers hired by the company for transportation fled (yes, fled) from their jobs. The following week – from May 20 to 24 – another 15 drivers did the same. The reason is clear: drivers are afraid to go on routes because they are detained, checked, and often mobilized directly during their trips. Industry participants believe this trend is very alarming as the number of drivers continues to dwindle. GOL CEO Pavlo Lynnyk and the company’s Commercial Director Volodymyr Guz call for urgent action to address this issue.

“Booking drivers hasn’t been a ‘cure-all.’ There have already been cases where even booked drivers were taken off their routes for re-checking. This, at the very least, leads to lost time in cargo delivery. So, there are many misunderstandings in this matter, and the reasons for them need to be eliminated,” say GOL executives.

The expected resumption of regular container traffic to the ports of Greater Odesa has encountered difficulties that went beyond the maritime industry last month. First, the first call of the Turkish container carrier Akkon was disrupted, then the postponement of a voyage of the global leader in container transportation, the Swiss MSC Mediterranean Shipping Co, became scandalous, and the partners of the feeder service of the Ukrainian company Iteris also had problems.

The reason for this was the joint measures taken by a number of government agencies to conduct additional inspections of export agricultural cargo in containers, which significantly slowed down customs clearance and the transportation process itself. The problem demonstrates the lack of full coordination between the government and business, which is often lacking in our realities. Therefore, the most urgent task is to find opportunities to combine the interests of economic protection of the state during the war and to ensure proper conditions that will facilitate the return of international container lines to the ports of Greater Odesa. The elite of the global container business is currently testing this capability of our country. The conclusions, as we can see, are partly disappointing.

How did the mass media response illuminate the problem?

A few weeks before the launch of the MSC service, the Ukrainian industry community was already actively discussing the difficulties encountered in clearing export containers at the ports of Greater Odesa. Businesses were surprised by additional cargo inspections that effectively blocked the transportation process. It was not clear how long these procedures would take. The accumulation of containers at the terminals grew along with the indignation of market participants.

At the same time, entrepreneurs noted that containers with similar export cargo passed through other border crossing points according to the standard procedure – additional checks were carried out only in the ports of Greater Odesa.

According to Global Ocean Link (GOL), a logistics company, only a fifth of the approximately 700 export containers were cleared through customs during the preparation of the first MSC call. It became clear that the ship was simply not getting enough cargo, so the first voyage was canceled.

In the end, the Association of International Freight Forwarders of Ukraine (AMFU), which unites more than 150 leading freight forwarding companies, spoke up. “The reason was unreasonable cargo inspections and delayed customs clearance of export containers with agricultural products for an indefinite period, which blocked the cargo for an indefinite period and made it more expensive due to additional storage and demurrage costs (compensation for losses for vessel demurrage – Mind), which can reach $2000-3000,” AMEU said last week.

The association called on the authorities “to help solve this problem and prevent negative consequences for Ukrainian logistics and the economy.” This release made quite a splash in the national media. The very next day, industry leaders, including representatives of container lines, met with the head of Odesa Customs, Yuriy Cherdintsev.

After the meeting, the head of the customs office publicly assured that he would help solve the problem within the customs authority. And the head office of the State Customs Service tried to explain the reasons for additional inspections of export containers: “The concern of business representatives, and therefore the delay in submitting containers for customs clearance, is caused mainly by the fact that regulatory and law enforcement agencies are working on the facts of illegal export of agricultural products and cases of arrest of containers with such products.”

How will additional control measures affect container shipping?

In fact, the problem became the subject of public statements by some government agencies only when it rose above the “media waterline.” And when the focus of attention became the global business giant MSC, headquartered in Geneva.

Unfortunately, the first serious failure occurred a little earlier. In early June, the Turkish container line Akkon took the risk of bringing the container ship Elbe to the Black Sea seaport as part of the resumption of its service to Ukraine’s deepwater ports. Due to additional cargo checks and delays in procedures, the call was disrupted and the ship left the port empty. However, this scandal did not receive any media coverage at the time. Nor were there any public explanations from the relevant government agencies.

Similar problems were also reported by shippers in the Black Sea fishing port, which receives the Iteris Feeders service (Chornomorsk – Constanta), whose key partner is another container giant, the Danish Maersk. As a result of these complications, the service’s vessels were underloaded.

Why are additional checks of export containers made?

“The reasons declared by the state authorities for strengthening export cargo inspections are to ensure financial discipline, accounting and reporting, fulfillment of obligations to the budget by foreign economic entities, economic security, overcoming shadow mechanisms, de-shadowing and de-offshoring of the economy,” Konstantin Moryakov, attorney at law at ANK Law Firm, explains to Mind.

The relevant list was published by the Odesa Military Administration (OMA) and the State Tax Service of Ukraine in August 2023. The list is part of the development of the procedure for cooperation between Odesa Customs, the Main Department of the State Tax Service in Odesa region, and the Territorial Department of the BES in Odesa region. In matters of compliance with financial discipline by business entities in the field of foreign economic activity under martial law. In addition, an open memorandum of cooperation was announced between the Odesa Regional Office, state authorities, local governments and business entities, which is open to all interested parties.

“The said procedure, developed based on the joint order of the DIA and the military command dated 18.08.2023 No. 19, launched joint measures by the said state bodies regarding risky export operations of products from Ukraine, in particular agricultural products, verification of the legality of their origin, as well as imposing additional responsibilities on freight forwarders, port operators and other business entities involved in this process to submit documents, information, etc.”, explains Moryakov.

“It is interesting that the said procedure of interaction also involves the Main Department of the State Tax Service in Odesa region, which, among other things, now appears to be engaged in analyzing and verifying the source of origin of agricultural products, providing so-called analytical certificates with its conclusions, which generally falls within the competence of the customs, according to the Customs Code of Ukraine,” the lawyer adds.

How is the additional regulation realized in reality?

“We often hear from our clients that, under the guise of the above reasons, all export containers are subject to a continuous inspection, customs declarations are not issued (even after the inspection), cargo loading orders are not approved, cargo is seized, searches and seizures are carried out, etc.,” says Moryakov.

Thus, on the one hand, the state encourages foreign business to work in Ukraine, assuring it of favorable conditions. On the other hand, the state complicates the conditions by creating additional regulation, using exclusive powers during martial law, increasing the number of state bodies involved in inspections, etc.

“Foreign shipowners are also becoming hostages of the situation, as they make a difficult decision to resume ship calls to Ukrainian ports and are faced with the fact that due to lengthy inspections of export containers and, often, seizures of the cargo contained in them, they are forced to leave the port underloaded or even empty, as a result of which they suffer losses and reconsider their decisions to operate in Ukrainian waters,” the lawyer notes. “Frankly speaking, we hear from our clients about pressure on them, which in some cases is accompanied by signs of corruption, forcing them to take measures to protect their rights and interests,” emphasizes Moryakov.

What can solve the problem?

According to the lawyer, despite the “traditional” delayed reaction of government agencies, the meeting between industry representatives and the management of the Odesa Customs proved that a dialogue between the state and business is possible, and even more so, necessary.

“Perhaps, if such a meeting or a meeting, for example, at the Odesa Customs, between business and government representatives had taken place before or after the agreement on the procedure for interaction and new requirements based on a frank dialogue and the search for the optimal format of cooperation, this scandal could have been avoided,” the lawyer said.

“I believe that it is necessary to draw conclusions from the current situation and move forward by implementing modern practices of high-quality dialogue between the state and business to prevent negative consequences for the state in the future, to maintain a balance of interests for the sake of the common goal – the growth of the Ukrainian economy,” Moryakov summarized.

How did MSC react to the Ukrainian problems?

These complications forced the world’s largest container carrier to respond appropriately to changing circumstances. After the first voyage was canceled, the company has postponed the date several times. At the time of publication, the first call was scheduled for July 7.

During the period of uncertainty, the carrier even changed the vessel to operate the service twice. However, the latest update of the schedule again features MSC Levante F.

Obviously, the final decision on the main parameters of the service will be made by MSC only after the situation in Odesa has actually improved. Therefore, the updated call date has effectively become a new deadline for testing our country’s capacity to operate. The preparations for the rescheduled voyage are finally going well: the second call of the Turkish Akkon container ship Elbe to the Black Sea port took place last week, with the vessel delivering containers to Constanta.

How does the rescheduling of the MSC impact the market?

“The biggest problem is the reputational risk, which can greatly affect the market,” GOL Commercial Director Volodymyr Guz told Mind. ”The first direct call of the largest global container line to the ports of Greater Odesa was supposed to take place – it was a landmark event. Unfortunately, our state authorities did not take this fact into account – due to bureaucratic procedures, Ukraine does not look good abroad.”

At the same time, Guz is convinced that MSC will resume ship calls to Odesa. “There will definitely be a second call, but if this happens again, we will face serious issues with the possibility of resuming container shipping to the ports of Greater Odesa. This story has a negative impact on the plans of other container lines to return to Ukraine,” adds GOL’s commercial director.

In addition, the detention of containers did cause material losses to shippers. Additional costs may force market participants to refrain from using Ukrainian deepwater ports for now. “Why work directly through the difficult situation in the ports of Greater Odesa when there are alternatives, such as Constanta and Gdansk? These destinations are now equivalent or even better in economic terms than Greater Odesa. So why bear the additional risks of calling at Odesa, considering delivery times and other factors, and not receive any financial benefit? These are the questions that service users may ask themselves,” Guz reflects. “Yes, the resumption of ship calls to Greater Odesa is good news, but if the economy is not considered, no one will use the services regularly,” he added.

“ Thus, it is difficult to overestimate the resumption of regular container traffic to the ports of Greater Odesa by global players. In addition to a direct increase in exports and the gradual stabilization of our maritime container market. The return of ship calls will give confidence to the maritime and port industries, allow us to keep logistics and infrastructure costs within the country, etc.

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