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Assessing Blockchain's Potential in the Global Trade Management

Blockchain’s potential trade-related applications are numerous and could significantly transform global trade

December 02 2020Sandip Dalvi

Development of Global Trade in coming years  

World Trade Organization (WTO) predict a moderate to strong growth in the coming years for Global trade. Global trade is subject to numerous controls and regulations. Importers & exporters need to comply with the regulations otherwise penalties, delays and additional costs are the consequence which leads to increase in overall logistics cost.

At times, though the Importers & exporters complies with all the regulations, they may still face with delays & unexpected costs on the shipments that could include customs exams, missing documents, damage, demurrage, per diem, detention for not providing right information etc. and other delays like strikes. Logistics companies who facilitate trade globally need better partnership with customs department of countries to get their cargo cleared on time. Post Covid-19, logistics companies may try to take advantage of the changing rules and regulations and engage in a global trade at a more beneficial partnership with different countries’ customs departments & government clearance agencies for smooth trading experience.    

In Global trade countries have their own set of customs regulations. While basic laws are common across the globe, many laws are unique to each country. However, from a customs law’s perspective, countries in a specific geographic region have a higher amount of similarities. For example, countries in the Middle East, Europe etc., have similar customs laws. 

Global Trade Challenges & Opportunities

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Looking at recent global economic growth, companies are exploring more business opportunities overseas are also closely examining export policies and trying to mitigate risks involved. Today ‘The biggest challenge is keeping track of changing rules in global trade’ and this can be overcome by emerging technologies like Blockchain-based digitization. Global exporters are looking for the avenues to transform existing homegrown trade related software applications, integrated ERPs, spreadsheet-based record keeping manual process in the key trade operation areas like:

  • Export regulatory compliance (License management, filling export document with governments, restricted party or regulations screening.)
  • Import compliance (electronic communications with customs, duties and landed cost calculations) 
  • Free trade agreement management & Audits 
  • Rates & contract management for ocean and air shipments
  • Supply chain visibility 

With digitization kicking in, Blockchain could open multiple opportunities to enhance the efficiency and positively impact major cost factors involved like Manual Processes, Non compliances incidents & penalties. Some of the immediate opportunities including automate manual activities e.g. product code matching, product classification, support functions improvements - duty minimization, export license management. Also, by implementing tamper proof decentralized and distributed digital transaction records like supply chain security & compliance programs will help develop trust in all the stakeholders and reduce penalty incidents significantly.

Blockchain possibilities & potential across global trade management

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Global logistics companies from all segments including sea, land and other mode of transport started adopting digital transformation recently.  As per latest analysists report global Blockchain technology market in logistics industry is expected to grow by $ 811.51 million during 2020-2024 progressing at a CAGR of 54%. 

Our experience in working with multiple brokerage houses and trade authorities, coupled with our technology focused approach we believe that blockchain based solutions will help ease global trade in the next few years, find some examples below: 

  1. Global Trade Management – The arduous process of contract management can be replaced with the Hyperledger based contracts that increase trust factor within involved parties. Blockchain based immutable records can avoid tons of paperwork and counter signature issues. For faster error-free-secure & near paperless processing digital Bill of lading/Airway bills document can get locked or will be available for the appropriate parties as per the requirements. 
  2. Trade Finance – For Trade finance Blockchain technology will bring more transparency by ensuring the authenticity of documents (Bill of Lading, Letter of Credits). Additional benefits like more streamlined letter of credit process with banks and other lending agencies is possible. For credibility check and related challenges better risk management is easy especially in case of SMEs where the collateral value or the credibility of organization is unknown. At last for billing, invoicing, payments, and auditing process, error free transactions are achievable with blockchain technology.
  3. Track and Trace – In Track and trace features, faster automated processes & unaltered status across the supply chain is tested with blockchain. Blockchain would integrate systems of the different parties involved in the transit and present in immutable records of the same this will greatly enhance the visibility of the records and shipments. 
  4. Trade Insurance – B lockchain can bring increased compliance and transparency across trade value chain. During any unforeseen circumstances blockchain will help the insurance companies to settle the disputes quickly without any complexities. Finally, new generation of services blockchain can provide like easy identification of attempted frauds. 

How T-Systems can help?

Wherever you are in your blockchain journey, T-Systems will meet you there and help take you where you want to go. Our holistic blockchain service offering can help you from the idea generation workshops, business case review, technical ‘proof-of-concept’ up to online bookable services. In blockchain we power higher performance from ideation to execution phase till final product implementation.  

Since 2018, DATEV eG, Deutsche Telekom, Otto Group IT and the logistics service provider Hermes leveraging blockchain technology for an automating supply chain solution. The BIZZBLOXX project aims to enable medium-sized companies and their tax advisors to handle their e-commerce business on a decentralized platform environment - from contract initiation to shipping and the commercial aspects of the transaction. All individual steps are automatically documented in a tamper-proof manner.

About the author
Portrait von Sandip Dalvi

Sandip Dalvi

Industry Marketing Expert for Travel, Transportation & Logistics vertical, T-Systems International GmbH

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