MSC Mediterranean Shipping Company, a global leader in container shipping and logistics, is officially introducing the electronic bill of lading (eBL) for its customers around the world, following a successful pilot phase, using a solution on an independent blockchain platform WAVE BL. The eBL enables shippers and other key supply chain stakeholders to receive and transmit the bill of lading document electronically, without any change or disruption to day-to-day business operations.
WAVE BL is a blockchain-based system that uses distributed ledger technology to ensure that all parties involved in a cargo shipment booking can issue, transfer, endorse and manage documents through a secure, decentralised network. Users can issue all originals, negotiable or non-negotiable, and exchange them via a direct, encrypted, peer-to-peer transmission. It’s also possible for users to amend documents. WAVE BL’s communication protocol is approved by the International Group of Protection & Indemnity Clubs, and meets the highest industry standards for security and privacy.
“MSC has chosen WAVE BL because it is the only solution that mirrors the traditional paper-based process that the shipping and cargo transportation industry is used to,” says André Simha, Global Chief Digital & Information Officer at MSC. “It provides a digital alternative to all the possibilities available with traditional print documents, just much faster and more secure.”
The WAVE BL platform can be used free of charge throughout 2021 for exporters, importers and traders. Users only pay for issuing the original documents, and they do not need to invest in any IT infrastructure or make operational changes in order to use the service. They can simply sign up via MSC’s website: www.msc.com/eBL.
The Australian Border Force (ABF) started a blockchain trial with Singapore Customs and the Singapore Infocomm Media Development Authority (IMDA) for the digitalization of cross-border trade processes. The tests will use both the ABF-developed Intergovernmental Ledger (IGL) and IMDA’a TradeTrust.While one of TradeTrust’s objectives is to enable interoperability, it wasn’t explicitly mentioned in the announcement.
ABF’s trial will initially test digital verification for electronic Certificates of Origin the blockchain platforms and gather feedback from participants on their experience, a document with information regarding the product’s destination and country of export. Typically customs departments rely on this to assess import duties. The trial’s outcomes will be shared in the National Blockchain Roadmap’s Discovery Report.
“In addition to our efforts internationally, this initiative will incorporate paperless trading and secure, digital exchange of trade information as part of the future architecture and design of an Australian Trade Single Window,” said Michael Outram, ABF Commissioner.
The Australian Chamber of Commerce and Industry, Australian Industry Group, and financial institutions in Singapore, such as ANZ will also be involved in the project.
The Australian government recently announced the Simplified Trade Agenda, which aims to reform and digitize trade compliance processes. The Department of Agriculture is already working with Singapore on paperless trading for agricultural trade. ABF’s trial is another step towards the Agenda’s end goal.
Meanwhile, the TradeTrust initiative was launched by Singapore’s government over two years ago with the purpose of strengthening Singapore’s competitiveness in international trading. Ultimately its goal is to enable interoperability for trade documentation. It has broad aims that include legal harmonization, developing standards as well as providing open-source software solutions.
Ten months ago, global organizations, including the International Chamber of Commerce (ICC), signed a cooperation agreement to develop the TradeTrust blockchain framework.
Building on the TradeLens network connectivity Youredi has provided since 2018, 3PLs, shippers and cargo owners can now use their software integration services to connect quickly and flexibly to the TradeLens platform. The Youredi Integration service, is an offering that integrates seamlessly and easily with a wide variety of TMS, ERPs and other supply chain and logistics applications, whether on premise or cloud-based.
Permissioned data sharing across the maritime industry, improving the speed of data connectivity between different stakeholders, plus the need to digitalize and automate workflow processes has been a pain point for the industry for decades.
Youredi will support BCOs, 3PLs, carriers, freight forwarders, ports and terminals, authorities, customs brokers, and any other stakeholders to connect with the TradeLens platform rapidly with a predictable cost, effort and time commitment. Connecting different stakeholders with the platform will create a more transparent container shipping industry in which all parties can collaborate and trust each other.
The Youredi solution takes care of the data translation, so you can always send and receive data in your preferred data standard or format. The solution can work both with structured (rich data) and unstructured (PDFs, scans, images) data. Whenever required, Youredi can also provide data validation and data enrichment logic.
Mediterranean Shipping Company (MSC) has announced it will accelerate efforts to promote an electronic Bill of Lading (e-B/L) across the maritime industry in response to the crisis brought on by COVID-19.
In a statement, the carrier said it has been running a pilot scheme alongside its third-party blockchain platform WAVE to introduce the e-BL in India since late-2019.
MSC’s customers continued to ship goods by using what it called the “reliable and secure digital platform for the fast transfer of trade-related documents”, even through throughout the pandemic, the company said.
The pandemic caused a drop in TEU volume across the world but as China has resumed exports, congestion has hurt port operations, particularly in India.
The problem has been exacerbated by lockdown measures forcing people to work remotely which has led to vital documents such as the Bill of Lading (BL) being incomplete.
To mitigate this problem, MSC has said it will offer the WAVE e-BL solution to streamline affected operations and ensure continuity of service.
In the pre-COVID, paper-based process, it would take days for the BL to travel from origin to destination, physically changing hands several times along the way.
“We have had situations where couriers were unable to deliver documents between ports, trade offices and banks due to quarantine measures,” relates Capt. Deepak Tewari, Managing Director at MSC India.
“WAVE mirrors the paper-based process that the shipping and cargo transportation industry is used to, only without physical couriers.
“Thus, it’s an ideal solution to implement at a time when our customers need to rapidly adjust their processes, as the learning curve is quite low.” he adds.
Captain Deepak Tewari, MSC, also commented: “We have been working with WAVE on introducing and piloting an e-BL solution since 2019. We ran successful pilot projects with some of our customers last year, where we saw first-hand the benefits which arise from digitalising this part of the process.
“When the COVID-19 pandemic hit, we decided to accelerate our roll-out and offer the e-B/L solution to our broader base of customers.”
Gadi Ruschin, CEO at WAVE, comments: “Our mission since founding WAVE has been to transform the efficiency and security of international trade documentation through our robust digitisation protocol.
“We now see ourselves as ‘mission critical’ to ensuring trade can continue as physical movement of people and the paper they carry has been shuttered across the world. It couldn’t come at a more critical time as countries rely on trade to fight COVID-19 and save their economies.
“We launched this unique onboarding effort to help MSC swiftly onboard stakeholders and navigate the challenges while preparing the carrier to flourish once conditions normalise.”
MSC claimed its e-BL solution can cut BL transit time from days to minutes, without the need for physical contact. The e-B/L is sent using WAVE’s blockchain-based system, which uses distributed ledger technology to ensure that all parties can issue, transfer, endorse and manage trade-related documents through a secure, decentralised network.
To further assist small and medium sized businesses with the complexity of managing their supply chains, Maersk is launching Maersk Flow – a digital platform which provides customers and their partners with everything they need to take control of their supply chain, from factory to market.
The solution enables transparency in critical supply chain processes and ensures that the flow of goods and documents is executed as planned. It also reduces manual work and costly mistakes, while empowering logistics professionals with all the current and historical data they need to sustainably improve their supply chain.
The daily life of small and medium sized businesses is increasingly global, complex and fast-paced. Every day thousands of products are moving through the supply chain, on multiple carriers, coming from and reaching many supply chain partners and customers. And for many of these companies this complexity is managed fully manually via spreadsheets, emails and phone calls, which despite lots of hard work is leading to reduced visibility and control – and ultimately higher costs or lost sales. With Maersk Flow these companies will be able to take control of their supply chains.
Maersk Flow further extends Maersk’s customer reach and strengthens the company’s position as an industry leader in digital solutions.
Maersk Flow facilitates the uninterrupted flow of information, cargo, and documentation to empower you and your partners to take the right action at the right time. Its unique features give you convenience and bring coherence to your everyday operations, so that you can optimise your supply chain logistics and refocus your resources on delivering value to your customers. The tool will assist with –
Like with most businessecosystems, the functioning of global trade relies on efficient exchanges of information, especially of documents. While industries and ecosystems around the world are now digitizing associated processes and automating the bottlenecks, the business ecosystem of global shipping has been slower to realize innovation and digitization.
Supply chain processes require close coordination among many parties and a major choke point in this process is the requesting and finalizing of bills of lading with ocean carriers. There are many situations which cause even the most straight-forward flows to be disrupted and require multiple versions of documents to be created, reviewed and exchanged until final approval and the final bill of lading submission.
TradeLens Workflows utilize blockchain smart contracts to automate and digitize multi-party interactions — this helps drive efficiencies across supply chains. Let’s take a look at each major element to understand what digitizing document workflows looks like for the shipping industry.
Blockchain as the foundation
The foundation of TradeLens Workflows is a permissioned blockchain which guarantees the immutability and traceability of shipping documents and their processes on the platform. This is a very important building block in providing the trust needed to scale.
The permissioned blockchain transforms some of the basic concepts around business networks — contracts, ledgers, transactions, the flow of assets and identity of participants — and introduces the following:
Consensus. Transactions in a blockchain network are first proposed, then consented to by the group, and only then committed to the ledger.
Shared ledger. Trust anchors have an exact copy of the ledger.
Immutability. When a block is committed it is cryptographically secured with previous blocks in the ledger forming an audit log that becomes the foundation of trust.
Accountability: All participants are digitally identifiable, and each blockchain transaction is signed with a permissioned user digital certificate.
TradeLens Document sharing provides a framework for organizing and sharing trade documents related to a host of information such as shipments, consignments and transport equipment. This is all done through permissioned access according to the role of different players and includes security, version control and privacy provisions.
Each trade document is stored on a single stack within the blockchain network, under the control of the operator and accessible only to permissioned parties within a channel. Users can upload, download, view and edit documents as allowed by their permissions and access control on that specific type of document for the trade object in question.
It is important to note, only the hash of a given document is stored on the ledger. The document itself is stored securely where access is granted according to the TradeLens Data Sharing Specification. Each time a document is edited or uploaded, a new version is created and added to the document store. Every version can be verified against a hash of its original submitted content in the ledger.
Blockchain ensures the immutability and auditability of all these documents, promoting trust and alignment across trading partners.
Beyond document sharing
The TradeLens Workflow feature takes thedocument sharing capability one step further. It provides a way to interpret structured documents and take actions on them according to well-defined workflows. In other words, by understanding the purpose and contents of documents we can automate certain actions and notifications in the shipment flow.
As documents are submitted through the TradeLens API or UI, they are interpreted by looking at specific attributes that determine which trade object the document is applicable to, and which actions to perform. The actions are checked against defined rules and only specific actions by specific actors are accepted.
When all requirements are fulfilled, the document is saved and the appropriate action gets recorded as a transaction on the blockchain. Smart contracts ensure the state and progression of a TradeLens Workflow — what can be done at each step, and by which organization or actor.
Our workflows also update generated events to help notify subscribers (members of the supply chain) of the actions and results.
An example of TradeLens Workflow: SI-BL Flow
Let’s talk about a specific TradeLens Workflow — the SI-BL. This variation simplifies the process of sending a shipping instruction (SI) to the ocean carrier and receiving back a verified bill of lading (BL). The TradeLens SI-BL Workflow removes the need to manually edit, amend and transfer these critical documents, accelerating end-to-end flow to achieve a final bill of lading.
When a shipper (or their representative) submits a SI to the TradeLens Platform, it is analyzed by its attributes to determine which consignment it’s related to and which ocean carrier should be notified. Once the carrier has it, a draft BL is submitted back to the platform, the shipper can review and make amendments and share back to the carrier and so on, until a final BL is agreed upon. Because this is an automated process between systems at the shipper and carrier, manual tasks are eliminated along with their inherent delays.
There are many other variations of this flow, but the benefits come from the visibility and increased speed in processing these transactions. Also helpful for shippers, this offers a single mechanism and process for interacting with different ocean carriers with an immutable, shared audit trail for all draft BL revisions and approvals — all recorded on the blockchain ledger.
A digital ecosystem to meet old and new challenges
TradeLens Workflows help connect your ecosystem, drive information sharing and foster collaboration and trust by enabling the digitization and automation of how you work with others.
Customs authorities are age-old institutions whose missions have been subject to numerous changes over time. Historically, the main role was to levy customs duties, which, in other words meant collecting resources for the benefit of local authorities. Today, customs performs many other functions, from securing national borders, recording import and export trade and prevention of fraud and illegal trade activity.
From the customs authority’s perspective, there is a constant focus on finding innovative technology and new methods and techniques to become more effective on risk assessment and inspection of the goods circulating across their borders. At the same time, customs authorities must examine the consequences these changes will have on trade, avoiding the creation of additional burden and obstacles for industries and entities involved in the exchange. Adopting flexible technology is often key for meaningful strategic transformations.
More quality data with accuracy and speed
Each country has its own policies for operating border control when goods arrive or depart from their territory. Most of these policies work from systems built off a central repository, powered by data collected from different sources. Time and effort are often spent in sorting and cleansing data from these various sources but disconsonant data can still create confusing outcomes when analyzed.
While globalization gives an incentive to operate in an open market, the increased amount of trade activity also conceals illicit activities that must be supervised by customs authorities, such as tax evasion, drug traffic or smuggling. It is in the best interest of the entire industry to cooperate, allowing data sharing to flag the early recognition of risky trade transactions.
Receiving data related to the supply chain activities prior to and during the transportation process can assist authorities, supporting them to pinpoint risky elements on international trade. Data validation across various trade and transportation documents allows authorities to manage detailed risk assessment processes and is enhanced with access to earlier and more granular information.
Providing government authorities with access to upstream transport data is one of the features of TradeLens. On the platform, customs authorities have access to data related to their countries from the moment a booking is placed with a carrier. Updates on documents from different data sources and transportation milestones are shared in near real-time.
Additional data is not only a way to make sure that accurate risk assessments are being made, but it can also help decrease the burden placed by the bureaucracy related to importing or exporting goods. Increasing the accuracy of the inspection of goods, can enable authorities to focus their resources on the most important targets and improve trade documentation processing for reliable shippers, truckers and carriers. Enhancing global trade and the upstream exchange of information can drive growth and prosperity for the entire ecosystem.
Doing more with less
While many technologies and platforms exist in the marketplace, organizations are often constrained by limited public resources that must be utilized wisely. TradeLens does not aim at replacing existing systems but enhancing them with additional data from the supply chain. The TradeLens Platform provides a forum for authorities to run pilots and test innovative solutions in a true end-to-end shipment lifecycle.
In order to contribute to the logistics operations of the entire ecosystem, customs authorities can send notifications related to their inspection and release activities to TradeLens. This information will be made available in near real-time to all the players involved in the shipment and permissioned to see the data.
But for as much as shipping has changed over the decades, not much about the bill of lading (BL) has. Today, it’s pretty much the same often-paper, always-time-consuming document it ever was.
That’s why driving an eBill standard is largely considered the Holy Grail of global trade. Succeed in that, and partners up and down the supply chain would benefit from the days and weeks that paper BLs add to the process as they are printed, pouched, messengered, lost, found and waited upon.
It’s ironic because there isn’t a single aspect of the BL that couldn’t be done better digitally. To demonstrate, let’s dive into the essence of these documents and the challenges that remain to making them digital.
How does an original paper bill of lading work?
Once the vessel departs, an original BL can be issued by the ocean carrier. After the shipper endorses the original bill, it is couriered to the buyer who then needs to surrender it back to the carrier at destination as part of the cargo release process.
It sounds simple enough, but along the way the BL impacts many other processes and actions. Even before issuance, the time-consuming process from a shipping instruction to the issuance of a verified BL, many iterations and changes can occur to get the BL into an approved state.
The BL, and its critical data fields are required for customs clearance, letter of credit, change of title and other processes. One delay in any of these can result in costly extra charges.
The functions of a bill of lading were made to be done electronically
In oftentimes convoluted international shipments, the BL is the legal go-to document that facilitates negotiation, lending and risk reduction by performing three key functions:
1. It is evidence of a contract of carriage
2. It confirms receipt of goods
3. It serves as the title to the goods
So, can eBill perform these functions while maintaining the integrity and legality that’s required? The P&I Clubs think so. Today’s top eBill solutions meet these challenges through rule frameworks and advanced security measures — all while providing significant cost and time savings.
eBills can play a pivotal role — and a digital role
Carriers issue the BL, but they rely on information from shippers which may change multiple times during the booking and shipper’s instruction processes. Electronic features like structured documents make creation, approval, distribution, tracking — everything — easier than paper.
This benefits not only the shippers but the carriers, buyers, sellers and banks without having the need to continue to print out paper — which defeats the purpose
Digital does the different types of bill of lading better
There are many types of BL, reflecting the complexities of international trade. Eliminating paper is only the beginning of the ways eBills can help streamline processes related to the two main categories of BL:
Sea Waybills are sometimes referred to as “Express Release.” They have a named consignee on them but are issued without any original documents that have to be presented for the release of the cargo. Non-negotiable and non-transferable, they are usually used in three cases:
Intra-company shipments between divisions located in different countries
Shipments when no negotiations take place between the seller and the consignee
Instances when the shipper doesn’t have to submit an original BL to any party in order to secure their payment
Original BLs have different forms that all hinge on the issuance of original BL documents in some way.
· Order BLs are the most common type of BL. They enable delivery of the cargo to be made “To Order” to the bonafide holder of the BL. These types of BL are negotiable and often linked to letter of credit transactions. Often banks must verify and endorse the original BL before the cargo can be released to the buyer.
Straight BLs stipulate that the cargo may only be released to the specified consignee and only upon the surrender of an original BL.
Open BLs are negotiable and transferable. The name of the consignee can be changed with the consignee’s signature and transferred — often multiple times.
Going Digital assists in filling out the bill of lading
With shippers providing the majority of the information for a BL, completeness and correctness is crucial. eBills help guide the way. If shippers can provide bill of lading information digitally, there’s less risk of keying errors. Form fields and autofill features all speed the process and lead to time savings.
One of the challenges of going paperless with BLs from the very beginning is standards. Adhering to set data standards makes information useful for different parties within organizations and multiple supply chain partners and it enables seamless workflows from automation. Unfortunately, standards are far from being standard today.
Digital makes the information included in a BL more useful
Users look to the bill of lading as an infallible source of essential and comprehensive information like names and addresses, purchase orders or reference numbers, special delivery instructions, pickup date, description of items, packaging type, NMFC freight class and DOT hazmat designations.
eBills of lading can make this information highly transparent to supply chain partners who can use it. But like many of the benefits of eBills, this transparency hinges on adoption — if all the participants of the supply chain are rowing together digitally, it works. If not, it just makes for another manual process that may end up being even more work than paper.
With its centrality to supply chains and essentiality to digitizing global trade, it’s easy to understand why the industry has its sights set on digitizing this important document. But acceptance of the eBill remains both the goal and the greatest challenge today. That’s why getting the eBill to catch on will require successfully digitizing the entire process for eBills, too.
TradeLens, with its relationships with the world’s largest ocean carriers, is in a unique position to explore the digitization of this process at an unprecedented scale. Within an ecosystem where there’s already widespread acceptance, the potential of the eBill could finally be revealed.
CargoSmart Limited, a leading shipment management technology solutions provider, announced that it conducted a pilot project with COSCO SHIPPING LINES (COSCO), Shanghai International Port Group (SIPG), and Tesla, Inc. (Tesla) for a new application to transform the cargo release process. It is among the first pilot projects with an ocean carrier conducting a real-time exchange of shipment data with a terminal operator through blockchain. The pilot not only demonstrated the benefits of having a single, trusted source of truth in cargo documentation, but also the efficiency gains for industry participants. Such an application will undoubtedly accelerate the digitalization of shipping industry processes and the further optimization of currently stressed global supply chains. The application will be further developed for participants of the Global Shipping Business Network (GSBN) blockchain consortium, once it is officially established.
The pilot project was designed to minimize consignee and shipping agent verification steps with their ocean carriers in order to speed up the release of sea waybills. As a result, truckers are able to pick up their cargo at the terminal faster, helping shippers meet delivery windows and ensure that service quality and customer commitments are met.
During the pilot in December 2019, COSCO and SIPG streamlined the cargo release process by enabling Tesla to accelerate its cargo pick up procedures on a trusted and secure platform (related post on COSCO’s official WeChat account). The pilot also allowed SIPG to view a single, trusted source of COSCO’s sea waybill data, enabling faster preparation of delivery orders for consignees and their shipping agents. In late March 2020, CargoSmart further enhanced the application to display laden gate out, appointment date, and terminal release, enabling shippers to have better visibility of their cargoes.
Henry Huang, Executive DGM of Operation & Business Department of SIPG, said, “The pilot is a key component of our journey towards paperless, trusted, and seamless trade processes at the Port of Shanghai, and it demonstrates the benefits for supply chain stakeholders around the world. We look forward to extending the collaboration with more supply chain stakeholders to render extraordinary service to our community.”
Wu Yu, General Manager of Business Process & System Division of COSCO said, “The pilot with SIPG and CargoSmart showcased significant efficiency gains not only in the cargo release process, but also for downstream supply chain planning by presenting a single source of truth for documentation for all involved parties. We look forward to more blockchain-based applications that can create value for customers and the industry alike.”
Expanding Value to More Carriers and Terminals
The successful pilot has proven that the unique collaboration model between ocean carriers and terminal operators is able to create benefits for stakeholders along the global supply chain. Leveraging this successful experience, the cargo release application is expected to further promote carrier-terminal data exchange and streamline operations. It is envisaged that this application will unleash the full potential of the proposed GSBN platform once it is established, subject to the requisite regulatory approvals.
As preparations continue for the future formation of the GSBN, contingent upon securing required regulatory approvals, CargoSmart will conduct similar pilots with Xiamen Ocean Gate Container Terminal Co., Ltd. (XOCT) and other terminal operators such as those at the Port of Qingdao in China and the Port of Laem Chabang in Thailand. The objective is to broaden the scope of the pilot by involving more carriers and terminals, and eventually extending the pilot to other industry participants in the near future. To further enhance the value of the pilot application, CargoSmart will enable APIs to explore and test ways to extend visibility to shippers for greater efficiencies throughout the cargo release process.
The IBM development is unarguably one of the leading bodies driving global adoption, with the development of a blockchain platform built with flexibility and ability to run on any cloud. The blockchain platform allows upcoming projects to build, operate, govern and grow blockchain solutions across any computing environment through its blockchain technological advancement.
IBM successfully introduced its TradeLens platform in partnership with the Danish transport giant, Maersk in 2018. TradeLens has recorded huge success, partnering with major organizations and government agencies across the world due to its ability to deliver services such as cross border goods shipping at a faster rate.
Blockchain taking the Centre Stage
With blockchain gaining more followers and the adoption race picking up pace, many organizations, countries, agencies, and more seem to be jumping on the blockchain train before they get left behind with IBM blockchain technology in the forefront of delivering products that are needed by upcoming blockchain projects to strive. Recent news coming from Indonesia, revealed that after several months of working towards implementing a new partner on its platforms, the Indonesian Customs and Excise Department have announced that it would make use of IBM TradeLens technology.
Indonesia’s customs department is set to be the 11th government agency to be part of the TradeLens consortium after the realization of the benefit and advantage of making use of the TradeLens platform, other countries whose custom departments have partnered with TradeLens includes Thailand, Canada, Azerbaijan, among others.
The effects of customs agency deploying IBM TradeLens technology
The company’s stated goal is to facilitate faster trade and to eliminate altogether paper-based verification processes thereby paving the way for quicker trade and customs validation
By digitizing the supply chain industry using blockchain, the country stands to boost its production potential by around fifteen percent (15%), which is a substantial figure in an industry driven by extremely thin margins
The president/director of IBM Indonesia, Tan Wijaya is optimistic that the partnership with Indonesia’s custom departments will be beneficial to all stakeholders in the entire logistics ecosystem and it will encourage the overall modernization of trade.
The company’s stated goal is to facilitate faster trade and customs verification and eliminate paper-based processes which are in line with Indonesia’s custom and excise service.
As TradeLens continues to onboard new projects and partnership with other organizations, its platforms which allows supply chain data to be immutably tracked and broadcasted using a permissioned blockchain. The company’s highlighted objectives are to facilitate faster trade and customs verification and also to eliminate completely the strenuous paper-based procedures. Other constraints include the inability to provide a comprehensive risk assessment, complex promotion, inefficient and expensive stakeholder communication, and lack of transparency.
IBM initially launched TradeLens in partnership with Danish transport conglomerate Maersk during August, 2018. Earlier this month, Maersk estimated that approximately 10 million supply chain events are being tracked on TradeLens each week which points to how successful the platform is turning out to become.
Early February, The United States Federal Maritime Commission granted an antitrust exemption to five US-based members of the TradeLens consortium to be able to share data in regards to American supply chain events with the agreements between the five (5) parties coming into effect on 6th February,2020.
Regulators from Indonesia embrace Blockchain
It is worth noting that TradeLens Partnership with Indonesian custom authorities is not the first venture of the country’s positive nature towards the adoption of blockchain and its technologies.
The recent partnership announcements between TradeLens and Indonesia customs departments comes three weeks after Indonesia’s oldest cryptocurrency exchange, Indodax formerly known as bitcoin.co.id, received full license from the country’s Commodity Futures Trading Regulatory Agency (BAPPEBTI) to operate in the country.
This and other partnerships of blockchain projects in Indonesia shows that the country is primed and set to grow along with the new blockchain technologies.
ICC has launched the Digital Trade Standards Initiative (DSI) – a collaborative cross-industry effort to enable the standardisation of digital trade.
The ICC Digital Trade Standards Initiative (DSI) will build on work done by various likeminded initiatives, many of which aim to digitise trade, notably through the development of open trade and technology standards to promote interoperability.
The ICC DSI will promote greater economic inclusion through the development of open trade standards. This will facilitate technical interoperability among the variety of blockchain-based networks and technology platforms that have entered the trade space over the past two years.
“Universal standards will connect existing digital islands and enable market forces to improve customer experience,” said ICC Secretary General John W.H. Denton AO. “As a leading and neutral voice in the industry, it made sense to bring this project under the umbrella of ICC. This will allow the ICC DSI to lead and coordinate efforts in developing standards and protocols to digitise trade.”
The ICC DSI is unique among trade digitisation initiatives due to its collective nature. Too often, digitisation is enacted through bilateral agreements between institutions that require members to run on the same platform. This has resulted in siloed data and bespoke trade and trade finance processes.
“The ICC DSI seeks to coordinate all parties in the standardisation of data formats and processes, rather than duplicate existing efforts. In turn, membership will be open to all organisations across industries and geographies supporting the project’s core mandate, including existing industry associations and initiatives,” explained Steven Beck, Head of Trade Finance at the Asian Development Bank.
The ICC DSI will be supported by seed-funding committed by the Asian Development Bank and the Government of Singapore, in addition to ICC’s support. The ICC DSI will be run as an independent entity out of the recently-established ICC Centre for Future Trade.
“We have seen the tremendous impact of technology in growing businesses and facilitating international trade,” said Gina Lim, Director of Financing Ecosystem Development at Enterprise Singapore. “The ICC DSI will promote greater adoption of technology within the trade ecosystem and facilitate greater inclusiveness for small businesses. We are excited for the establishment of the ICC DSI office in Singapore and look forward to working with our global partners across geographies and sectors.”
ICC anticipates the implementation of a full-time management team, and a global and diverse steering committee to provide guidance and set priorities for the project’s development.
ICC has opened the recruitment process to hire a managing director to lead operations within the ICC DSI, with an official launch event to follow once this first process completed.
To mark International Customs Day 2020 – focusing on the theme of ‘fostering Sustainability for People, Prosperity and the Planet’, the following article from the Spring 2018 edition of World Trade Matters by Jan Hoffmann, the Chief of the Trade Logistics Branch, Division on Technology and Logistics at UNCTAD, is relevant. The article discusses global trade facilitation reforms, the digitalisation of trade and measures towards ensuring long-term sustainability in the maritime industry.
Confronted with growing populism and a surge in protectionist measures recorded by the WTO, policy makers and enterprises are struggling to avoid a backlash in international trade. At UNCTAD’s Trade Logistics Branch, we support these endeavours by helping to make trade work better. Through trade facilitation reforms, the promotion of digitalisation, and ensuring the long-term sustainability of international transport, we aim at ensuring that the international movement of goods is not confronted with unnecessary obstacles and costs.
A multilateral agreement to facilitate international trade
Under the Trade Facilitation Agreement (TFA) of the World Trade Organization (WTO), developing countries commit to implement a number of very practical measures that make trade easier and more transparent. Countries are obliged to publish duties and procedures on the web, traders can transmit their declarations prior to the arrival of the goods, payments can be made electronically, and fees and charges must not become hidden taxes to generate income for the government. These are but some of the 37 concrete measures grouped into 12 Articles of the TFA. They are all useful and help make trade more efficient.
However, many of these measures involve an initial investment or reforms that require human and financial resources to start with, which developing countries many not have. The good news is that the TFA also includes a novel mechanism – the so called “Special and Differential Treatment” – that helps developing countries plan and acquire the necessary capacity prior to being fully committed to comply with all 12 Articles. Concretely, the mechanism puts the developing countries in the position – and obligation – to analyse and notify their own implementation capacity. At UNCTAD, we are working closely with the developing countries to enable them to do so. Our main counterpart in this endeavour are the National Trade Facilitation Committees (NTFCs) that each country must set up under the TFA. UNCTAD’s Empowerment Programme for NTFCs includes training and knowledge development for the members of the NTFC, combined with advisory services and the development of a Roadmap of TFA implementation.
By the same token, UNCTAD also supports developing countries in setting up Trade Information Portals. Under the TFA, members of the WTO are obliged to make relevant information on tariffs and trade procedures available on-line. UNCTAD’s Trade Information Portals not only help countries become compliant with this obligation, but in the process of analysing and publishing applicable trade procedures, a Trade Information Portal effectively helps countries identify the potential for the further simplification of procedures. Thanks to these new insights, NTFCs can then develop programmes and reforms that subsequently ensure the further simplification of procedures.
Technological progress will never be as slow as today
My favourite provision of the TFA is Article 10.1., as it provides for a dynamic dimension of the Agreement. According to this article, countries need to minimize “the incidence and complexity of import, export, and transit formalities”, continuously “review” requirements, keep “reducing the time and cost of compliance for traders and operators”, and always choose “the least trade restrictive measure”. As such, even if a country is compliant with all TFA provisions today, countries will need to continue monitoring if existing procedures are still appropriate in view of technological or regulatory developments.
As trade becomes increasingly digitalised, and new technologies which do not yet exist will be developed, it will be important that governments continuously revise and review the applicable rules and regulations.
Digitalisation comes in stages. First, we optimize existing procedures, making use of cargo tracking, the Internet of Things, blockchain et al. Second, new businesses are developed which could not exist without the new technologies; new platforms come into being and we see more “uberisation”. Finally, there is transformation and science fiction; still in our lifetime Artificial Intelligence will overtake human capabilities to manage international trade and its logistics.
But let us take one step at a time. At UNCTAD, we support developing countries through eTrade readiness assessments, the development and upgrade of technological solutions in Customs automation and Single Windows, and by providing a Forum for our members to analyse and discuss the challenges that come with digitalisation. We encourage the development of global standards that allow for interoperability among new systems. The challenge for policy makers it to encourage private sector investments in new technologies and solutions, while ensuring that no new monopolies emerge that might exclude smaller players.
And it has to be sustainable
While we aim at ensuring continued growth in international trade, there is a catch. The transport of this trade encompasses increasing externalities, such as pollution, green-house-gas emissions, and congestion.
Ports need to minimise social and environmental externalities. Many port cities are among the most polluted places to live, as ships burn heavy oil, and delivering trucks produce noise and cause traffic congestions. In addition, ports need to be resilient in the face of disruptions and damages caused by natural disasters and climate change impacts.
International transport, including shipping, needs to play a larger role in addressing global warming and contribute to mitigating the carbon emissions that are causing climate change. Shipping emits less carbon dioxide (CO2) per ton-mile than other modes of transport, but then due to its sheer volume it also produces many ton-miles. Would it be possible that the industry could be charged by its main regulatory body not per ship tonnage (as is currently the case), but per tonne of CO2 emission?
Currently, the International Maritime Organization is funded proportional to the tonnage registered under the members’ flags. Like this, Panama, Marshall Islands and Liberia pay for the largest share of the IMO budget – and in the end, this is passed on to the ship-owner, who in turn passes this on to the shipper, who will charge the consumer. This is a good established mechanism that could be expanded to also internalize the external costs of CO2 emissions.
Being the most globalized of all businesses, maritime transport should consider adopting a global regime that helps further internalize its environmental externalities – to ensure prosperity for all.
It is all about efficiency
Investing in trade facilitation reforms, making intelligent use of the latest technologies, and ensuring that externalities are internalized are all several sides of the same coin. Trade efficiency is necessary to promote an open international trading system. It requires a continuous effort by policy makers to continuously review current procedures, apply the most appropriate technological solutions, and support an efficient allocation of scarce resources.
Source: Jan Hoffman, UNCTAD – originally published in World Trade Matters, Spring Edition, 2018
In August of 2019, both the United States and Thailand announced their plans to test blockchain applications for tracking and managing shipments. The U.S. Customs and Border Protection (CBP) is planning to test a blockchain application against their current system to determine how distributed ledger technology (DLT) can improve its existing processes. Thailand, on the other hand, plans to use IBM’s blockchain-based logistics platform Tradelens to improve customs processes such as data sharing.
Originally developed in a joint venture between IBM and logistics giant Maersk, Tradelens seeks to streamline processes in the global shipping industry by making the flow of information occur in real-time. The blockchain platform is reported to currently process about half of the world’s shipping data.
These moves highlight countries’ increasing interest in employing blockchain technology in their customs and border operations. The Tradelens website says its ecosystem comprises over 100 different organizations including carriers, ports, terminal operators, third-party logistics firms, and freight forwarders. More specifically, a map on the Tradelens website suggests that about 60 ports and terminals worldwide are directly integrated with TradeLens.
Elsewhere, the Directorate-General for Taxation and Customs Union (TAXUD), which develops policies and operational systems for the European Customs Union, explored the applicability of blockchain in customs and taxation with a focus on utilizing blockchain as a notarization service.
The Union is looking into using blockchain to digitize ATA Carnet, an international customs document used in 87 countries for temporarily admitting goods duty-free. A pilot project conducted in collaboration with the International Chamber of Commerce World Chambers Federation (ICC WCF), was successfully tested in 2018.
The ICC WCF, a body of the ICC that helps facilitate mutually beneficial partnerships between ICC members, has been working with different customs authorities to develop solutions for converting ATA Carnets into electronic documents.
About 80 countries around the world have developed authorized economic operator (AEO) programs and signed a mutual recognition agreement (MRA), all in an effort to streamline cargo security. Under such arrangements, individual countries identify and approve trustworthy logistics operators that pose a low risk in security and share the approval information with participating countries.
This allows countries to piggyback on the security checks of other countries to make customs operations more efficient. However, a few problems have arisen with the program.
There are information leakage risks associated with the conventional way of sharing AEO data by email. While a sender’s email server may be encrypted, there is no guarantee that the receiver’s is as well, and vice versa.
Data sharing is not real-time, but monthly or at an agreed-upon interval. This limits the speed at which information on new or suspended AEOs can reach all participants.
To avoid the aforementioned problems as well as achieve additional time and cost savings on security procedures, customs administrations in Mexico, Peru and Costa Rica are working with the Inter-American Development Bank to develop a blockchain application called Cadena.
The move by governments around the world to employ blockchain to improve cross-border trade marks a step toward paperless customs processes, which originally began with the digitization of information flows by making trade-related data and documents available and exchangeable electronically. For all the improvements they’ve brought to paper-heavy processes, traditional electronic data exchange systems still face the challenges of authenticity and the unavailability of real-time data exchange.
For instance, the Netherlands and China launched a five-year project in 2010 to test the applicability of electronic sanitary and phytosanitary (SPS) certificates. A World Economic Forum white paper titled “Paperless Trading: How Does It Impact the Trade System?” noted that concerns around the authenticity of the electronic documents arose. This necessitated the adoption of electronic signature systems and a whole new legal framework that recognized the electronic signature.
Still, the entire process requires longer procedures and the introduction of new types of intermediaries — e-signature providers, for instance. Moreover, low-income countries, the trade costs of which remain high compared to high-income countries as according to World Bank data, may not have the budget to implement several new systems for data and document digitization. They still need to invest in better customs infrastructure.
Blockchain, on the other hand, if implemented in border protection, will ensure real-time availability and immutability of customs documents while saving considerable costs on excessive paperwork.
The World Customs Organization (WCO) has initiated work to identify possible case studies and uses of blockchain for Customs and other border agencies with a view to improving compliance, trade facilitation, and fraud detection (including curbing of illicit trade through the misuse of blockchains and Bitcoins), while touching on associated adjustments in legal and regulatory frameworks.
The objective of this research paper is to discuss ways in which Customs could leverage the power of blockchain and the extent to which the future of Customs could be shaped by the use of blockchain-based applications. Blockchain projects are currently in the beta testing phase in the finance sector (facilitating inter-banking system processes), insurance sector (preventing fraud and accelerating coverage) and international trade. With regard to the latter, this paper focuses its attention on two initiatives.
The first was launched by MAERSK-IBM as a global trade digitalization platform to which Customs administrations are expected to join.
A second initiative consists of an “information highway”, joining the National Trade Platform of Singapore and the Trade Finance Platform of Hong Kong, with a view to creating a Global Trade Connectivity Network (GTCN).
A conclusion that has been reached after discussion is that Customs would be able to have a broader and clearer picture of international trade particularly in terms of the movement of cargoes and consignments as being tied with the flow of capital. With blockchain-based applications, therefore, Customs could become a full-fledged border regulator with greater capabilities in the future.