By: Eduardo Ubide (guest author)
The international environment and mechanics related to international trade are constantly evolving. In addition, remote relationships between customer and supplier, aspects related to trust, agility and operating costs, force us to look towards other alternatives that, in one way or another, allow international trade of products and services to grow steadily and above all, safely. About 10 days ago we wrote an article about the economic damage that international trade was generating, with a really important global figure.
This technology will undoubtedly be in the constant change that will generate in the institutions that today lead international trade relations, and these changes come from different aspects of international operations.
Some changes that we can already cite related to blockchain are:
In the banking system, modifying and, of course, drastically reducing the costs of international collections and payments in operations, as well as in documentary processes, simplifying them significantly. It is worth remembering that Bitcoin, which began operating on January 3, 2009, is a technological system that allows for the first time the transmission of value without the need for a third party guarantor (in this case a bank).
From the point of view of customs, it will be able to clearly solve the formalities in their processes of entry and exit of a country. Tariff payments, compliance with non-tariff barriers, certifications, certificates of origin and other documentation that must accompany the goods in their transportation and logistics processes. By way of example, we could say that, although information and communication technologies have profoundly affected the organization of production, they have not yet succeeded in digitizing commercial transactions. Despite recent efforts to implement electronic processes to manage some aspects of trade (e.g., the electronic single window), trade transactions still rely heavily on paper. A shipment of roses from Kenya to Rotterdam can generate a pile of paper 25 centimeters high, and the cost of managing it can exceed the cost of transporting the containers.
Advantages of blockchain in international trade
The advantages that blockchain could offer in this area would be:
–Overcome limited interoperability. The current system generates duplication of efforts, slowness and lack of visibility from origin to destination.
–To put an end to paper and lack of automation. In the 21st century, there are inefficiencies in the management of databases, customs duties and tariff payments.
–Traceability of goods in value chains. Agencies are currently unable to verify the origin of goods, trace them through value chains, and detect anomalies and fraudulent patterns.
–Concerns about the security of companies’ commercial and financial data. Instead, a reliable, agile, immutable, secure and efficient system would be used.
In this regard the U.S. Customs and Border Protection Advisory Committee is exploring the use of blockchain technology in its activities. On the other hand, in the UK, a report entitled “Distributed Records Technology: Beyond Blockchain” was published in early 2016. It is a study conducted by the Department of State Science under the direction of the UK Government’s Chief Scientific Advisor Richard Kastelein. The report has an impact on how blockchain technology can contribute to improving the business processes of state agencies. Finally the Integration and Trade Sector of the Inter-American Development Bank (IDB) and the Center for the Fourth Industrial Revolution (C4IR) of the World Economic Forum (WEF) teamed up in 2018 to develop the blockchain-enabled foreign trade single window project.
From the legal point of view, the capacity of the automatic contract by means of Smart contracts would generate an agility and security that is essential in international commercial processes. In addition, it would be possible to resort to agile, efficient and digital dispute resolution mechanisms based on private arbitration.
Well, having said that, should we understand that the international trade professional, responsible for international sales and purchase operations, is aware of the changes that may occur? And what about the organization’s shipping managers? Although the WTO understands that it will still be necessary to develop scalability processes, Blockchain technology is here to stay, and whether we like it or not, it will change all the aspects that we have developed in the traditional way up to now.
The question is, fundamentally, that companies that adopt BC technology in their operations will have clear competitive advantages, derived from two essential aspects. On the one hand, in the speed of response, agility and therefore cost reduction, reduction of technical defaults, etc. On the other hand, clear reductions in customs clearance, speed of passage through customs, and last but not least, the reduction of costs and increase in financing derived from the speed of collection of international operations.