Embracing Blockchain for Cross-border Trade

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.

Source: Original article titled: “Blockchain Adoption as a Cure for Cross-Border Trading“, authored by Craig Adeyanju, Cointelegraph.com, 2019.09.28

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9/11 – 18 years on

WTC 6, home to the US Customs Service, New York until September 2001

As unrecognisable as the building is, the same can be said for the world of Customs today. Few contemplated a ‘Customs’ parallel at the time; but, when the Department of Homeland Security was launched, the emergence of US Customs and Border Protection (USCBP) ushered in a new way of doing business. The world of Customs was literally ‘turned on its head’. Bilateral overtures seeking agreements on ‘container security’, ‘port security’ as well as an industry focussed ‘Customs and Trade Partnership Against Terrorism’ (C-TPAT) forced the World Customs Organisation (WCO) into swift action. After years of deliberation and negotiation several guidelines were released, later to be packaged as the WCO SAFE Framework of Standards. It seemed that the recent Revised Kyoto Convention (RKC) on simplification and harmonisation of Customs procedures was already ‘dated’. Customs as a proud solo entity was gone for ever, as country after country seemed compelled to address border security through wholesale transformation and upheaval of their border frontier policies and structures. Thus was born ‘border security’ and ‘cooperative border management’. In a manner of speaking, 9/11 put Customs onto the global map. Along with WCO developments, the tech industries brought about several innovations for risk management and other streamlined and efficient service offerings. Prior to 9/11, only the wealthy countries could afford non-intrusive inspection capabilities. One key aspect of the SAFE Framework’s was to include a pillar on Capacity Building. Through this, the WCO and business partners are able to offer tailor-made assistance to developing countries, to uplift their Customs and border capabilities. In particular, countries in Africa now are now in a position to consider ‘automated’ capabilities in the area of Customs-2-Customs information exchange as well as establishment of national Preferred Trader and Authorised Economic Operator (AEO) schemes. At the same time a parallel industry of ‘Customs Experts’ is being developed in conjunction with the private sector. The end result is the availability of ‘standards’, ‘policies’ and ‘guidelines’ fit for Customs and Border operations, focussed on eliminating incompatibilities and barriers to trade. Where these exist, they are largely attributed to poor interpretation and application of these principles. With closer cooperation amongst various border authorities still a challenge for many countries, there are no doubt remedies available to address these needs. In gratitude, let us remember the thousands of public servants and civilians who lost their lives that we can benefit today.

SADC Border posts under the spotlight

GEC

Land borders in the SADC region are critical zones for unlocking economic development, regional value chains and trade. In this light the Global Economic Governance Africa programme is working with the Zimbabwe Trade Forum and the University of Zambia to look at two case studies on the border regions around Beitbridge and Chirundu. The borders, between South Africa and Zimbabwe, and Zimbabwe and Zambia, represent critical links in the North-South Corridor and are vital in both regional development initiatives as well as bilateral ones between the countries.

The seminar, attended by trade experts, policy makers and researchers from South Africa and the region discussed the field research findings of a study at the Beitbridge and Chirundu border posts conducted on behalf of the programme in June 2018.

The following presentation documents should be of interest to all parties concerned with inter regional trade and trade facilitation development initiatives.

It is also worthwhile to visit Tutwa Consulting’s webpage as it explains how the surveys were conducted and provides salient features in relation to each of the border posts concerned which may not necessarily be apparent in the presentation documents as such.

Source: Tutwa Consulting

E-commerce in China extends Belt and Road Initiative

Cross-border e-commerce freight train [Xinhua]

From ancient trade to modern tech

Two millennia ago, camel caravans trekked across an inland route centered around Chang’an – today’s Xi’an, the capital of Shaanxi province – serving to connect China to western-lying regions of the world through trade and exchange.

Today, under the guidelines of the Belt and Road Initiative, cross-border and transcontinental transactions are booming online as well, with a key difference: unlike the ancient model, the online businesses of today’s digital era are more efficient, more diverse and far more extensive.

Smart technologies and modern logistics have enabled people to pick and choose products from overseas – from Argentina’s red prawns, Mexico’s avocados and Chile’s cherries to the Czech’s crystals, Myanmar’s emeralds and Bulgaria’s rose oil – and receive them within hours or days after a simple click.

The Belt and Road online

Countries involved in the Belt and Road Initiative have launched businesses on China’s online shopping platforms, among which the e-commerce giant JD.com alone has attracted more than 50 overseas e-stores.

At the same time, these e-platforms facilitate the export of Chinese products to 54 countries, among them Russia, Ukraine, Poland, Thailand, Egypt and Saudi Arabia.

China’s e-commerce sector, projected to reach 2 billion consumers globally by 2020, has become a pillar industry supporting worldwide trade, said Xing Yue, vice president of Alibaba.com, one of China’s leading e-commerce conglomerates headquartered in Hangzhou, the capital of Zhejiang province.

“With circumstances highlighting digital dividends, cross-border e-businesses do not only focus on selling products, but also on creating service-centered trade, a signal epitomizing digital commerce,” added Xing at the second Cross-Border E-Commerce Summit held in Zhengzhou, capital of Henan Province, in May this year.

According to Alibaba.com, the company’s annual online shopping spree hosted last November 11 – a day evolved from China’s Singles’ Day into an annual online shopping frenzy – attracted buyers from 225 countries and regions, generating a revenue of 168.2 billion yuan (US$26.25 billion) and producing 812 million orders.

AliExpress, a global business division of Alibaba.com established eight years ago, reached 100 million overseas customers as of April 2017. “We may be underestimating the actual size as people under the same roof may use the same account,” said Shen Difan, the general manager of AliExpress.

“Products made in China are nothing inferior to the rest of the world. However, the problem is that the small-and-medium-sized enterprises in China were unable to reach overseas customers,” Shen said, adding that e-commerce has allowed these businesses to tap into other markets, extending connections between the two sides.

E-commerce and drones reshaping trade

The change in delivery speeds in Russia exemplifies the convenience of online business. Before e-commerce took off there, overseas packages often took as long as 60 days to arrive to Russian households, after being sent to Moscow for a security check.

Now, however, with the adoption of big data, Russian customs is no longer required to send deliveries to Moscow for unpacking and examination. Instead, detailed information about each package, including dates, types and values of commodities, is made available online, enabling direct delivery to customers.

E-commerce – arising as one of China’s four major modern inventions, along with high-speed railway, Alipay and bicycle sharing platforms – has overhauled traditional industrial chains and reshaped the trade system across the world, the People’s Daily reported.

“I have been greatly interested in the rural logistics run by JD.com,” Wu Min, the editor in chief of the Italian weekly newspaper Il Tempo Europa Cina, said while paying a visit to JD.com’s Beijing headquarters on June 1 of this year.

“In the past few years, it cost us heavily to send newspapers to the countryside, where difficult geographic conditions blocked entrance. Today, with the use of drones, we are able to surmount the last-mile challenge and send our newspapers to rural readers at much lower costs,” Wu explained.

JD.com has also developed drones, weighing 13 kilograms each, to manage deliveries to outlying areas. Additionally, smart technologies including robotic couriers and unmanned inventory have enabled the companies’ shipments to cover 99 percent of the population nationwide, saving 70 percent of total logistical costs, the People’s Daily reported.

Source: China.org.cn, article by Wu Jin, 14 June 2018

WCO News – February 2018

wconews_85

This edition of WCO News features a special dossier on the theme chosen by the WCO for 2018, namely “A secure business environment for economic development”, with articles presenting initiatives and related projects that contribute to creating such an environment. The articles touch on authorized economic operators, national committees on trade facilitation, coordinated border management, performance measurement, e-commerce, data analysis, and partnerships with the private sector.

For sub-Saharan African readers, look out for the write up of the Customs systems interconnectivity and the challenges and opportunities for Customs administrations in the SACU region.

Other highlights include articles on Customs systems interconnectivity in the Southern African Customs Union, on the experience of a young Nigerian Customs officer who participated in the Strategic Management and Intellectual Property Rights Programme at Tokyo’s Aoyama Gakuin University, on how the WCO West and Central Africa region is using data to monitor Customs modernization in the region, and on the benefits that can be derived by facilitating transit procedures.

Source: WCO, February 2018

CargoX – World’s First Blockchain Bill of Lading

CargoX

Hong Kong-based CargoX raised $7 million through an initial coin offering to build its smart contract-based house bill of lading solution. CargoX, has designs on developing so-called smart contracts to transfer house bills of lading onto a blockchain solution it is building. House bills of lading are issues by non-vessel-operating common carriers (NVOs).

The coins, also called tokens, can be used to pay for CargoX’s smart contract solutions, but those interested in the blockchain-backed bill of lading solution can also pay with traditional currencies.

“Our platform will support all the legacy payment options with fiat money, but as we are a startup based on blockchain technologies, we are working on implementing cryptocurrency payment as well,” said CargoX founder Stefan Kukman. “There will be various service levels supported, and there will be additional features and services provided to holders and users of our CXO utility tokens.”

The ICO serves two purposes in this application. It helps CargoX raise funds as opposed to seeking venture capital investment, but the coins can also be used to transact within the solution. So, the sale of the CXO tokens is ancillary to the product offering.

That’s different from another crypto-token liner shipping model that emerged in the second half of 2017 called 300Cubits. That company issued tokens, called TEUs, to underpin a solution that would penalize shippers and carriers for no-show or overbooking behavior.

CargoX, meanwhile, said it wants to be a neutral platform for global trade documentation and is starting with the bill of lading approach. The solution comprises an app, a document exchange protocol, and a governing body, which is currently being established.

“The next step is to demonstrate the viability of our platform with a test shipment,” Kukman said.

That pilot, scheduled for the second quarter of 2018, links a logistics company with its clients on a shipment from Asia to Europe.

“Technology companies often lack the shipping and logistics expertise necessary to break into this industry,” Kukman said. “On the other hand, logistics companies venturing into the tech field may be held back by their reliance on established, old-school business practices.”

To register, CargoX collects “know your customer” and NVO license information “to establish roles and permissions on the platform.”

“Once companies register, they will receive their public and private key for signing the Smart B/Ls. This can be done in the Smart B/L distributed application provided by CargoX, or with the help of the CargoX Smart B/L API (application programming interface) integrated into the company’s system.”

That integration can take a few hours or weeks, depending on the workflow of the company, CargoX said.

The ultimate goal of bringing bills of lading to the blockchain solution is to create a common, encrypted repository of data. The secondary benefit of that process would be the potential to eliminate bank-backed letters of credit for suppliers, as the smart contract would automatically trigger payment.

“The shipping industry currently wastes billions of dollars on spending related to letters of credit, which are used in global trade as a payment guarantees,” Kukman said.

In terms of how the blockchain-backed bill of lading would function in practice, Kukman said that data will be encrypted and stored in a decentralized storage application.

“These are much safer than centralized storage, as they use the same blockchain security mechanisms as the billions of dollars worth of cryptocurrencies such as bitcoin currently in circulation,” he said. “Actual ownership (of the document) will be traded (sent) in the same way people send tokens today, from one wallet to another.”

Visit CargoX website, click here!

CargoX Whitepaper, click here!

Source: American Shipper, E, Johnson, 14 February 2014

US-China: First Agricultural Commodity traded through Blockchain

bulk-carrier

The first full agricultural commodity transaction using a blockchain platform has been completed by Louis Dreyfus Company (LDC), Shandong Bohi Industry, ING, Societe Generale and ABN Amro.

The trade included a full set of digitalized documents (sales contract, letter of credit, certificates) and automatic data-matching, thus avoiding task duplication and manual checks. Time spent on processing documents and data was reduced five-fold. The companies involved said that other benefits included the ability to monitor the operation’s progress in real time, data verification, reduced risk of fraud and a shorter cash cycle.

In the test, the Easy Trading Connect platform was used to execute a soybean shipment transaction from the U.S. to China. The transaction involved user participation on the blockchain-based platform by teams from Louis Dreyfus Company as the seller and Bohi as the buyer, with banks issuing and confirming the letter of credit. Russell Marine Group and Blue Water Shipping also participated in the process, issuing all required certificates. The U.S. Department of Agriculture provided valuable insights on how to include phyto-sanitary certificates in the process.

The Easy Trading Connect platform was first validated with an oil cargo transaction in February 2017, with the subsequent launch in November 2017 of an energy consortium aiming to offer blockchain-based services to the energy sector. The same principle was then applied to develop a blockchain-based platform tailored to agricultural commodities trading.

ING, Societe Generale, ABN Amro and other major industry players such as LDC have a long-term ambition to improve security and operational efficiency in the commodity trading and finance sector through digitalization and standardization.

“One thing is clear: the digital revolution is transforming the commodities sector,” said Gonzalo Ramírez Martiarena, Chief Executive Officer of LDC. “Distributed ledger technologies have been evolving rapidly, bringing more efficiency and security to our transactions, and immense expected benefits for our customers and everyone along the supply chain as a result. The next step is to harness the potential for further development through the adoption of common standards, and welcome a truly new era of digital trade flow management on a global level.”

Source: Maritime Executive, 3 January 2018 (Image credit: David Hundley (LDC)

Customs Community Adopts Resolution on Cross Border E-Commerce

Luxor Resolution.png

The WCO Policy Commission (PC) has seized the momentum garnered in the domain of electronic commerce and has unanimously adopted the Luxor Resolution at its meeting held this week from 4 to 6 December 2017 in the Egyptian city which gives its name to the Resolution.

The Resolution, developed in close collaboration with all stakeholders, outlines the guiding principles for cross-border E-Commerce addressing eight critical aspects, notably Advance Electronic Data and Risk Management; Facilitation and Simplification; Safety and Security; Revenue Collection; Measurement and Analysis; Partnerships; Public Awareness, Outreach and Capacity Building; and Legislative Frameworks.

The Resolution is aimed at helping Customs and other government agencies, businesses, and other stakeholders in the cross-border E-Commerce supply chain to understand, coordinate and better respond to the current and emerging challenges.

Additionally, and taking into consideration the relevance of the topic and the need to better position the work of the WCO and coordinate ongoing efforts, the PC has also issued a Communiqué to the Eleventh WTO Ministerial Conference (MC11), the Organization’s highest decision-making body, attended by trade ministers and other senior officials from the WTO’s 164 Members, that will take place in Buenos Aires, Argentina, from 10 to 13 December 2017.

The Communiqué strongly reaffirms the WCO’s leadership in providing policy and operational frameworks for the effective management of cross-border E-Commerce from both a facilitation and a control perspective, and clearly demonstrates its strong commitment to supporting the WTO’s Work Programme on E-Commerce, moving forward. Source: WCO 

  • Access the Resolution on Guiding Principles here!
  • Access the Communique here!
  • Visit the WCO’s Cross-Border E-Commerce webpage here!