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Use of blockchain technology in customs

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Currently, quite active transformations are taking place in the world’s digital sphere. The set intensive pace implies that the digital transformation of the economy as a whole and the economies of the participating countries will proceed gradually, based on the use of modern technologies. Today, international experience and domestic practice demonstrate the insufficiency of measures taken by customs authorities and the need for more efficient technologies that ensure both the protection of national interests and the facilitation of international trade. This leads to the study of blockchain technology as a basis for customs regulation and an assessment of the possibilities for its application.

The blockchain technology, which is the foundation of Bitcoin and many other decentralized exchange systems and platforms for creating programs, is of great importance for solving problems and tasks in the modern economy. The exchange tool is one of the many potential functions of this technology that has made it popular.

In September 2016, the World Economic Forum in the report Technology Tipping Points and Societal Impact predicted the prospects for the development of information technology, namely blockchain technology. Interviewed experts believe that the final integration of the public sector and the blockchain will occur by 2023, and the highest flowering of bitcoin and blockchain can be achieved by 2027.

New technologies can seriously affect international trade for a number of reasons: first, many companies are starting to accept payments in bitcoin (and other virtual currencies) around the world; secondly, blockchain technology can provide significant savings, thirdly, the possible use of blockchain in various fields will expand, fourthly, some companies have begun to use “smart contracts” instead of paper contracts.

Currently, the Consultative Committee of the US Customs and Border Protection Service is exploring the use of blockchain technology in its activities. According to the report, the Consultative Committee established a working group in September 2017 to address issues related to the promotion of existing technologies or the creation of new technologies that will have a positive impact on trade. The working group plans to investigate the use of blockchain technology for processing financial transactions. The event, organized with the support of the Ministry of Homeland Security, has already taken place, which was devoted to the technology of the distributed registry and the possibilities of its use. The report contains the following information: “The group demonstrated 14 options for using technology in the customs field. Among them are the collection and tracking of data from government partner agencies, such as licenses, permits, certificates of origin and free trade agreements, product quality, customs license “

In addition, the experience of using the blockchain in the USA is known for using technology to control the movement of meat products. For example, in Arkansas (USA), farmers use distributed registry technology to track poultry supplies. The final consumer can check the quality of products due to the QR code. This approach is planned to be used in other areas.

Also, the US Customs and Border Services is actively involved in joint projects with other countries on the use of blockchain technology. Thus, the Danish shipping company Maersk has completed tests of its first project on the blockchain, the purpose of which was to simplify the algorithm for the international delivery of goods. Maersk Transport & Logistics, the director of digital technologies, said that the company would benefit from the use of blockchain technology in the supply chain management process, as well as exploring other options for its use: “The blockchain has great potential in moving goods. so far, this solution cannot completely replace traditional systems. Therefore, we study the technology, launch pilot projects based on it in various areas in order to understand how it is best used. “

For example, Maersk and the American hardware and software company IBM announced a joint project to create a digital solution for global commerce. The idea is to simplify the workflow process during container transportation by moving it to the Internet through the use of blockchain technology. The blockchain solution for the transport business was launched in 2017. It operates on the basis of the open platform Linux Foundation Hyperledger Fabric. The customs authorities at the same time have the opportunity to see the goods online and have better information for risk assessment and the decision to conduct additional customs control. Each participant in the supply chain sees the movement of cargo at each stage and understands the location of the container at the moment. Participants in the process can also see the status of customs documents, bills of lading and other data.

At the beginning of 2016, a report titled “Technology of Distributed Registries: Beyond the Blockchain was published in the United Kingdom – a study conducted by the State Department of Science under the leadership of the Chief Scientific Adviser of the British Government Richard Kastelein. The report states that the main task of the state is to develop a specific concept of how blockchain technology can contribute to improving business processes of state bodies and what forms of its use to provide services to citizens.

David Davis, talking about Brexit, announced that by 2019 a new customs system would be created. Companies that rely on high-traffic routes on Irish border and canal ports, such as Dover, are concerned that new bureaucratic measures will cost both time and money as they continue to interact with EU member states. The blockchain technology offers the best way to record customs data so that it can be shared safely with several participants in the supply chain. The marine supply chain has already shown that blockchain can significantly reduce the associated administrative costs and time delays.

One of the clearest examples of the use of blockchain technology in the UK is the London-based company Everledger, which has created a register for diamond certification and history of transactions associated with them based on the blockchain. The company registers diamonds in the blockchain, recording all their data. After making the gem in the database, all its characteristics and transaction history are available to users of the Everledger network, which contributes to the fight against counterfeit goods. The company’s task is to create a “fraud detection system” using the blockchain, which allows diamond owners, law enforcement agencies and insurance companies to track any gem. Everledger does not plan to specialize only in diamonds, their main goal is to create a platform for premium products.

Currently, South Korea plans to become a leader in blockchain technology. More recently, companies that do not know what a distributed registry is and what its purpose is, have suddenly started to pay a lot of attention to technology. Later, the central government also began to have a positive attitude to the blockchain, and funded start-ups were launched in the region. The greatest influence on the situation had a sudden interest in this industry from large corporations – Samsung, LG and Hyundai. Samsung has also previously worked on a blockchain-based payment system, which was supported by a local security company and a British company. After a massive briefing for the directors of the Samsung Group in 2016, SDS focused entirely on distributed registry technology.

In May 2017, Samsung SDS, a division of Samsung Corporation, led the Korean blockchain consortium, which included logistics companies and Korean government research centres. Among the members of the consortium created to study the use of the blockchain in the field of logistics is the Korean Customs Service. During logistic processes, blockchain technology can effectively manage the history of production, processing, storage and transportation of goods, which prevents fraud associated with changes in the distribution period and false advertising. Thanks to the blockchain, you can also track in real time the current position of the cargo. According to the Korean customs officers, the blockchain is able to simplify the customs clearance of companies and reduce logistics costs.

In addition, the Korean Customs Service plans to make efforts to investigate crimes related to money laundering using cryptocurrency, smuggling of illegal goods such as drugs, and other similar operations. In Korea, according to the customs service, about 600 million dollars in foreign currencies were used in the activities of illegal exchanges, which provoked an untraceable capital outflow through cryptocurrency. This investigation is part of an extensive project of the South Korean government to study activity related to cryptocurrency. At the end of January 2018, South Korea finally banned anonymous cryptocurrency trading.

Dubai was the first city in the world to support the blockchain at the government level. Dubai Customs Service will cooperate with the American company International Business Machines. The volume of international trade excluding oil in Dubai in the first three quarters of 2016 amounted to about 259 billion dollars, which makes the city a major trading hub that connects the markets of Asia, Africa and Europe. It is planned that the blockchain will reduce the amount of customs documentation, which is still accompanying the transportation of goods, as well as allow their suppliers and recipients to monitor all processes in real time.

The active development of the blockchain in China promotes the use of new technology in international trade. The first Chinese blockchain platform was launched by Dianrong in conjunction with the iPhone manufacturer Foxconn. New technology should provide continuous and rational financing of supply chains. The buyer sends the list of approved shipments to the blockchain platform, then the supplier selects those that need to be financed. The credit organization finances the specified supplies. The buyer sends funds to the bank to repay the debt on the financed supplies. This process is automated, therefore eliminates any failures and delays.

Another example is Alibaba, a publicly traded online commerce company. The company using the blockchain technology solves the problem of the PRC related to the supply of counterfeit food. Alibaba announced the development, in conjunction with PricewaterhouseCoopers, Blackmores and Australia Post, a blockchain platform that allows them to control the entire logistics supply chain of products from the manufacturer to end consumer. Thus, it is supposed to exclude the possibility of substitution of normal products with counterfeit.

In 2016, the government of Singapore and the Indian state of Andhra Pradesh began to interact on the use of blockchain technology. In October 2016, the Central Bank and the Monetary Authority of the country signed a Fintech Cooperation Agreement with the state government. Emphasis was placed on cooperation in the field of innovative projects and digital financial technologies and payments. Today, the blockchain is the basis of the interaction between the Monetary Authority of India and the government of Andhra Pradesh. More than 50 startups based on this technology are actively implemented in the city-state. Successfully study the possibilities for combining trade and customs activities in the blockchain format. Reducing the turnover of paper documents and the transition to digital interaction in the field of trade are designed to significantly facilitate and accelerate the work of thousands of people in this field.

Thus, the study of foreign experience in the use of blockchain technology in foreign countries allows us to conclude that the above-mentioned countries are introducing technology in various fields, including customs. The countries interact with each other, organize joint projects on the implementation of technology at the state level. These examples show that the blockchain technology has advantages and will continue to be implemented in the work of the customs authorities. The study of international experience contributes to the understanding of the current prospects for the development of blockchain technology in the European customs authorities.

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Use of blockchain technology in customs

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