Blockchain in International Trade
International trade moves billions of dollars of goods everyday, from one part of the world to another. The extensive acceptance of Blockchain in international trade will help in decreasing the friction in the international economy. From trade finance to customs clearance, transportation and logistics, trade in goods involves multiple actors and remains paper-intensive. Blockchain is seen by many as an interesting tool to improve the efficiency of trade processes and help move towards paperless trade. The complexity and costs associated with international trade in goods has led an increasing number of companies and governments to investigate how Blockchain could be used to cut paperwork and enhance processes involved in the export of goods, from trade finance to border procedures and transportation, with the hope of moving closer to truly paperless trade.
Documents of International Trade Transactions:
• documents related to the commercial transaction itself, including the sales contract, commercial invoices and if needed, a packing list submitted by the
• exporter prior to exportation;
• documents related to trade financing, such as letters of credit;
• transport documents, including bills of lading, etc.; and documents for border procedures.
International trading involves many participants all around the globe. These participants may not necessarily have the needed trust of all parties, especially at the initial stages, when newcomers join the trade. The availability of trade finance is crucial for trading activities. Only a small part of international trade transactions are paid cash in advance, as buyers usually want to pay only once the goods have been properly delivered. According to the WTO, up to 80 per cent of trade is financed by some form of financing, which includes traditional mechanisms, such as letters of credit, and supply chain finance. Letter of credit transactions is labour and paper intensive and involves multiple players.
Blockchain could help to automate letters of credit processes, improve the efficiency of transactions and enhance security. Blockchain can provide the needed trust to capture key transaction activities as immutable records, as well as storing and sharing encrypted legal and financial documents. Because blockchain provides a distributed digital record that does not require trust or coordination between firms, it allows for secure, standardized transactions to occur almost instantaneously, even across borders.
Since the introduction of Blockchain and AI technology, many companies have gained confidence that it is possible to have faster and efficient workflow in cross-border trade which can help in improving overall customer experience without compromising the safety of sensitive information. Within the international trade and finance sector, importers and exporters need to better streamline their payments and documentation flow.
The widespread adoption of blockchain would reduce friction in the global economy. Blockchain can serve as a single, transparent and secure network, and make it visible to buyers and sellers. Visibility of transaction records and documents are tightly controlled by blockchain, permitting sharing only among entrusted and allowed parties. IBM is working on trade-related blockchain technologies with partners including Maersk and Walmart. In this demo, IBM demonstrates how blockchain may support such an application.