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Blockchain-based Certificates of Origin Begin Moving into International Trade

By Bill Camarda

In international trade, a certificate of origin is often required to prove the source of goods and comply with local or international rules.1 But certificates of origin can be forged or misrepresented, and therefore companies are sometimes not confident about the true provenance of goods they’ve purchased. In recent years, some supply chain technology experts have proposed using blockchain technology to address this challenge. Early blockchain-based certificate of origin solutions are now moving into the pilot stage – a meaningful step towards possible widespread use.

What Is a Certificate of Origin?

 

Certificates of origin are key international trade documents that ostensibly guarantee that a shipment’s goods were obtained, produced, manufactured or processed in a particular country. Governments use them to determine whether the goods can be legally imported, whether they fall under a quota system, whether they qualify for preferential treatment under a trade agreement, and what duties apply.2 Trade finance providers often require them before agreeing to lend.3

 

Certificates of origin and similar documents can be used to track provenance in complex supply chains, often to protect the environment or public health and safety. For example, in the U.S., importers of frozen and processed tuna products must declare their dolphin-safe status through a Fisheries Certificate of Origin.4 In Europe, environmentally sensitive “green power” is tracked through an electronic Guarantee of Origin (GoO), which specifies the renewable source of the energy and is intended to be traceable from producer to final consumer.5

 

However, certificates of origin and similar documents aren’t immune to fraud. As The Straits Times of Singapore reported, a company director was fined $434,000 in 2015 for importing Chinese zippers to Europe with certificates of origin that falsely claimed they were manufactured in Indonesia, and thereby qualified for lower tariffs.6 Similarly, Vietnam reported discovering 80 cases of origin fraud in a single year, many aimed at evading anti-dumping duties or import restrictions on garments, footwear, seafood, produce, crafts, and other goods actually produced in neighboring countries.7 Within the U.S., concerns have been raised about companies declaring exports “Made in the U.S.A.” when they actually weren’t.8

 

Blockchain Electronic Certificates of Origin Launch in Singapore

 

In response to these concerns, the Singapore International Chamber of Commerce (SICC) and Singapore-based international trade facilitator vCargo Cloud (VCC) recently announced a blockchain-based platform for electronic certificates of origin. The SICC/VCC blockchain is intended to improve transparency, security, and efficiency in authorizing trade documents. A private blockchain distributed ledger will track electronic certificates of origin throughout all stages of trade, promising to prevent fraud by providing a clear, unambiguous audit trail and making any alteration or third-party interference immediately apparent.9

 

According to SICC and VCC, the process of creating electronic certificates of origin will be overseen by SICC, which already authorizes certificates of origin in Singapore. An exporter will apply for the certificate and submit supporting documents online.10 Once SICC approves and generates an electronic certificate of origin, a digital copy will be added to the blockchain and propagated to each node connected to it.

 

This should make the electronic certificate instantly accessible to the exporter, importer, and everyone else involved in the transaction. It should also enable near-immediate verification. Each electronic certificate will have a unique QR code, also making it easier to check the authenticity of printed copies.11

 

Blockchain Certificates in Africa and Europe, Too

 

Blockchain-based electronic certificates of origin are one element of Singapore’s broader strategy to help expedite freight clearance and reduce manual paperwork throughout the 10 nations of the Association of Southeast Asian Nations (ASEAN) Single Window. VCC says it plans to promote its new platform globally, and expand it to manufacturing exporters, including in Japan, Myanmar, and Sri Lanka on a pay-per-use basis.12 A month after launching in Singapore, VCC agreed to partner with the Kenya National Chamber of Commerce and Industry (KNCCI) to implement blockchain-based certificates of origin there, too.13

 

Late in 2017, an international group including a Canadian fintech company, an Israeli shipping firm and a Hong Kong logistics services provider piloted blockchain-based technology for digitally exchanging and managing certificates of origin and inspection, along with other shipping and trade-related documents, This early trial reportedly reduced the time required to execute an export letter of credit from a week to four hours.14

 

More recently, the U.K.’s Business West Chambers of Commerce, together with a technology partner, announced it had processed the first-ever blockchain-based European Certificate of Origin. As with SICC/VCC’s platform, Business West also generated a complementary physical document with unique QR barcode linked to the blockchain and its digital proofs of certification.15

 

Finally, according to recent reports, U.S. Customs and Border Protection plans to pilot-test blockchain for certificates of origin used to qualify goods for preferential treatment under various trade agreements, as well as for the aforementioned Fisheries certification that imported frozen and processed tuna is dolphin-safe.16

 

The
Takeaway:

International trade is sufficiently complex that a widespread switch to blockchain-based certificates of origin will take time, even in best-case scenarios. But questions about the capacity of blockchain to secure certificates of origin are being answered. Soon, blockchain-based electronic certificates of origin may be making import-export business’s cross-border trade safer and more reliable.

Bill Camarda - The Author

The Author

Bill Camarda

Bill Camarda is a professional writer with more than 30 years’ experience focusing on business and technology. He is author or co-author of 19 books on information technology and has written for clients including American Express Private Bank, Ernst & Young, Financial Times Knowledge and IBM.

Sources

1. “Certificates of Origin,” International Chamber of Commerce; https://iccwbo.org/resources-for-business/certificates-of-origin/
2. “Documentary Risk in Commodity Trade,” United Nations Conference on Trade and Development; http://unctad.org/en/Docs/itcdcommisc31_en.pdf
3. “Singapore chamber brings trade documents onto blockchain,” Global Trade Review; https://www.gtreview.com/news/asia/singapore-chamber-of-commerce-brings-trade-documents-onto-blockchain/
4. “NOAA Form 370 – Fisheries Certificate of Origin,” National Oceanic and Atmospheric Administration; https://www.fisheries.noaa.gov/national/marine-mammal-protection/noaa-form-370-fisheries-certificate-origin
5. “What is a guarantee of origin?” KYOS Energy Consulting; https://www.kyos.com/faq/guarantee-of-origin/
6. “Company director fined $434,000 for submitting false information to Singapore Customs,” The Straits Times; https://www.straitstimes.com/singapore/courts-crime/company-director-fined-434000-for-submitting-false-information-to-singapore
7. “Origin Fraud Still Runs Rampant,” Vietnam.Net Bridge; http://english.vietnamnet.vn/fms/business/78277/origin-certificate-fraud-still-runs-rampant.html
8. “Loose oversight of 'Made in USA' export certificates undermines U.S. business, experts warn,” Trib Live; https://triblive.com/business/headlines/3763944-74/chamber-certificates-origin
9. “Singapore International Chamber of Commerce and vCargo Cloud Launch World’s First Blockchain-Based eCertificate of Origin (“eCO”), SICC/VCC; https://www.vcargocloud.com/wp-content/uploads/2018/05/Singapore-International-Chamber-of-Commerce-and-vCargo-Cloud-Launch-Worlds-First-Blockchain-Based-e-Certificate-of-Origin.pdf
10. “Certificate of Origin Blockchain Platform Launched,” The Maritime Executive; https://www.maritime-executive.com/article/certificate-of-origin-blockchain-platform-launched#gs.fegBvaI
11. “Singapore Introduces Blockchain-Based eCO,” Institute of International Banking Law & Practice; http://iiblp.org/blockchain-singapore/
12. “Global First Blockchain e-CO Platform Launched in Singapore,” CDO Trends; https://www.cdotrends.com/story/13769/global-first-blockchain-e-co-platform-launched-singapore
13. “Blockchain-based certificates of origin come to Kenya,” Global Trade Review; https://www.gtreview.com/news/africa/blockchain-based-certificates-of-origin-come-to-kenya/
14. “Wave kicks off live blockchain pilots for paperless trade solution,” Global Trade Review; https://www.gtreview.com/news/fintech/wave-kicks-off-live-blockchain-pilots-for-paperless-trade-solution/
15. “i2i Infinity Ltd and The Bristol Chamber of Commerce put the first ever EU Certificate of Origin on a Blockchain,” i2i Infinity; https://blog.4-exim.com/2018/07/12/i2i-infinity-ltd-and-the-bristol-chamber-of-commerce-put-the-first-ever-eu-certificate-of-origin-on-a-blockchain/
16. “Pilot Test of Blockchain for NAFTA/CAFTA-DR Certifications Could be Launched This Year,” Sandler, Travis & Rosenberg Trade Report; https://www.strtrade.com/news-publications-blockchain-NAFTA-certification-carnet-pilot-CBP-031918.html

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