Could blockchain be the future of trade and customs digitalization?

Industry News | | MIC Customs Solutions |

New research has been examining how blockchain could help traders build trust.


Since the UK left the European Union, businesses of all sizes have faced some well-publicized delays when it comes to importing and exporting products.

From extra checks to new paperwork, the divorce deal has resulted in plenty of friction that has still not been properly ironed out. However, new research has now discovered that putting blockchain-based platforms in place to manage transactions could be a way of boosting supply chain efficiency and building back trust between trading companies.

What is blockchain?

First things first - what exactly is blockchain? Essentially, it’s a system akin to a digital ledger where a record of transactions is maintained across several computers that are all linked.

It’s a decentralized system that keeps identical copies across each member computer and uses cryptography to create secure and immutable records.

Research discovers simplification

The new study was carried out at Britain’s University of Surrey and centers around what’s known as an RFIT platform, which links data together. The team wanted to look specifically at the import of bottled wine and bladders of wine from Australia to the UK.

At present, data from such transactions must be entered into Australian and UK government systems manually using paper documentation. This is a process rife with data duplication and manual data entry errors, which has been found to create distrust among governments and stakeholders on both sides.

The researchers looked at how trust develops in buyer-supplier relationships and whether or not the introduction of blockchain-based technology as proof of concept could have an impact upon it.

It was found that in employing the RFIT platform and making documentation unalterable, the supply chain benefited from increased visibility and reduced data asymmetry. In turn, this improved accuracy, timeliness and - importantly - trust, because the source data was broadcast to all ‘nodes’ on the chain.

The researchers concluded that if the findings were extrapolated and blockchain were more widely rolled out (especially in conjunction with the Internet of Things), it could increase assertive trust-based relationships between buyers and suppliers and reduce friction throughout supply chains.

Co-author of the study Mike Brookbanks said: “We truly believe that the use of this innovative digital technology will form the government's first step in developing a utility trade platform, encouraging broader digitization of our borders."

Is the future digital?

A paper on border strategy published by the UK government in 2020 described a policy to move towards a ‘single trade window’ or STW, with businesses submitting information just once as opposed to on several country-specific applications for trade documentation.

Meanwhile, the government is also looking for new ways to reduce friction at its borders, a process that has never been more important since Brexit. According to the Public Accounts Committee, businesses have faced more paperwork, delays and higher costs since Britain’s withdrawal from the EU than was the case before.

At the same time, blockchain is being viewed by many (including the World Trade Organization) as a tool that could increase the efficiency of trade processes and facilitate a move to paperless trade.

This new research is interesting because it demonstrates how blockchain can not only remove intermediary delays, but also provide a much-needed source of trust between trade participants. In using smart contracts and allowing transactions to be traced, trusted networks could be maintained without the need for a governing authority, speeding trade along.

Going forward, the technology could even be used to anticipate trade issues by observing data as it is inputted, the researchers believe.

What about the rest of the world?

Of course, the study documented here is specific to the issues surrounding Brexit, so the authors acknowledge that more research would need to be done before it is assumed that blockchain could be of general use in building supply chain trust and streamlining processes.

In addition, the WTO stated in a recent report that blockchain is only likely to work to its full potential “if all aspects of cross-border trade transactions are digitalized, from trade finance to customs, transportation and logistics, and if the semantics are aligned”.

However, the fact that other countries experience similar problems without Brexit as a cause seems to bode well when it comes to building technology like blockchain into supply chains.

It will be interesting to see if more research on this topic is carried out soon, and if the results help to persuade governments worldwide that digitizing trade could result in a more streamlined global economic system.