Customs Operations and the Blockchain
The Saudi Customs Authority has piloted the processing of a shipment with the use of blockchain technology. The shipment went from Damman in Saudi Arabia to the Port of Rotterdam in the Netherlands. There it was put on a truck and transported to its final destination in Belgium.
What is Blockchain Technology?
Blockchain is essentially a distributed database. It exists on multiple computers at the same time. It is constantly growing as new blocks are added to the chain. The information in this database is encrypted in such a way that only the user that added the block with that information can access it and add to it. There is no owner of the database. Everybody has access to the full database.
Because of this setup, the blockchain is independent, secure, and transparent.
What is the impact of Blockchain Technology on Customs Authorities?
Last year the World Customs Organization researched the implications of blockchain technology on customs related processes. They found the following:
(i) Customs will become more data-driven. Through their participation in the blockchain, Customs
would be able to collect the necessary data in an accurate and timely way (all data tied to the commodity, like the seller, buyer, price, quantity, carrier, finance, insurance, status and location of the commodity, etc.).
(ii) Customs may become part of the blockchain and become more embedded within trade processes. Data conveyed by the blockchain could be integrated automatically into Customs systems and checked against the data submitted by traders and transporters. In a more integrated version, Customs could even automatically clear the goods within the blockchain itself.
(iii) Blockchain can enhance revenue compliance and cooperation between Tax and Customs. The automated access by Customs to data lodged in export countries’ systems will encourage revenue compliance in import countries. This would help Customs with issues around valuation and transfer pricing and underpin further cooperation between Tax and Customs authorities.
(iv) Blockchain can help Customs to better combat financial crimes. Customs and relevant authorities would be updated regularly on events occurring within the banking system that could be misused to conceal illicit financial flows. The iterative comparison between trade data submitted by operators and a capital transfer recorded by financial institutions would lead to a greater probability of detecting financial crimes.
You can find the full research report here.
What Happened in the Pilot?
The Tradelens platform, a blockchain initiative by Maersk and IBM, was used for the pilot. The customer uploaded the commercial invoice and the packing list to the platform. The customs broker used that information to submit an export declaration to the Saudi Customs Authority. Because the data was in a verified and secure database, the customs authority could clear the shipment immediately. Because you can capture what happened with the goods since they left the factory in the blockchain, it is easy for customs authorities to verify that everything is in order.
Both Customs Authorities, on the Saudi and on the Dutch side, could process the shipment faster while still being secure.
Blockchain in the Port of Rotterdam
The Port of Rotterdam is at the forefront when it comes to supply chain and logistics innovations. There are two areas where the port is testing blockchain: energy distribution and logistics. On logistics they say the following:
…Today’s logistics network… is a decentralised network in which the majority of positions are occupied by small and medium enterprises. For instance, an average 28 parties are involved in transporting sea containers, and they have to exchange data a total of some 200 times to ensure that a container reaches its intended destination.
Blockchain can significantly improve the efficiency of this process. ‘In this network, deploying blockchain is much more of a defensive strategy, focusing on retaining market share’, explained Aljosja Beije, logistics lead at BlockLab. ‘Platforms such as Amazon and Alibaba are also emerging strongly in logistics. You could see these as the equivalent of coal-fired power plants: efficiency is created through centralisation. For existing parties in decentralised networks, cooperation is the only option they have to improve their efficiency.’
You can find more information on this here.
Innovations and New Technology in Customs
We continue to see new developments when it comes to innovating customs related processes and the technology that goes with it. Blockchain is just an example of this. Customs Support Group will keep you updated on developments regarding customs processes and technology.