Blockchain: unveiling its potential for Customs and trade
16th October 2018
This section of the magazine gathers several articles on the “Blockchain,” a term which refers to a type of data structure that identifies and tracks transactions digitally and shares this information across a distributed network of computers. Blockchain is one type of distributed ledger: distributed ledgers use independent computers – referred to as nodes – to record, share and synchronize transactions, instead of keeping data centralized as is the case with a traditional ledger.
The Blockchain organizes data into blocks, which are chained together in an append-only mode. It has the capability to move any kind of data swiftly and securely and, at the same time, make a record of that change, movement, or transaction instantly available, in a trusted and immutable manner, to the participants in a Blockchain network. In addition, the use of “smart contracts,” a set of rules that are written down and executed automatically, enables the avoidance of intermediaries, which act as arbiters of money and information.
In terms of governance, Blockchain technology is decentralized. There is, however, an operator function that sets the rules for everyone in the network, along with regulators and government agencies. If the network detects that something “untoward” may be going on, the associated individual participant would be frozen out of the network. However, if the untoward activity was merely an accident, the participant would be re-admitted. In contrast, in the case of a deliberate attempt to commit fraud, the operators would work with the relevant authorities to take appropriate action.
The big advantage of Blockchain technology is that it creates an environment of “trust” between and among unknown parties to transact business and exchange information without an intermediary, whilst ensuring data integrity and providing a full audit trail. Although the technology was initially developed from a financial services perspective, it can serve as a basis for many other useful applications, including information management, far beyond monetary transactions.
This technology could equally be applied within the Customs and trade environments, where participants in a transaction need to exchange information. Use of the Blockchain enables the same copy of a ledger to be instantly available to all parties at different nodes in an updated, trusted, secure, and immutable manner. It also obviates the need for each party to maintain separate ledgers, as is currently the case.
The articles that follow this introduction present some of the different platforms that have been developed to enhance the logistics chain based on Blockchain technology:
- The interface project built as part of Mercury II, the system used in the context of the dematerialization of the ATA carnet, which reproduces the paper procedures of the carnet.
- Tradelens, jointly launched by MAERSK and IBM, which allows all organizations involved in an international shipment to exchange information about events and transport documents in real time.
- Cadena, which enables information-sharing on authorized economic operators (AEOs) among the Customs administrations in Costa Rica, Mexico and Peru, to ensure the efficient implementation of Mutual Recognition Arrangements/Agreements (MRAs).
- Global Trade Connectivity Network (GTCN), a global information highway with a global vocation, but limited for the moment to the exchange of information on trade finance between the Singapore Monetary Authority and its Hong Kong counterpart.
Readers are also invited to consult the documents developed by the WCO on this technology, such as the Study Report on Disruptive Technologies and the WCO Research Paper No. 45 entitled “Unveiling the Potential of Blockchain for Customs.”