'Globalization includes expanding economies around the globe, transacting cross-border trade across national to international levels, advancing worldwide exchange of goods and services, people, information, technology, capital and so on.'
It has benefited the interaction between individuals and companies on a worldwide scale.
Whenever the goods and services involved in cross-border trade, data should be passed between appropriate parties, regardless of whether privately owned businesses or open bodies, including providers, customs, regulative and administrative offices, dealers and purchasers. Though the transfer is between the two parties, it is the collaboration between two potential partners in the vast geographical area, time zones, and boundaries.
However, cross-border trade has a lot of barriers to reducing this process and improving unnecessary costs. The main problem is the handling of documents relating to fraud, human misconduct, mismanagement in shipping, and delayed removal of unwanted expenses. The documentation revolves around zillions of international business transactions. The three major documents include-
3.Government customs documents
Commercial Documents: This include Quotation, Sales Contract, Pro-forma Invoice ,(Prepared by exporter), Commercial Invoice (Prepared by exporter), Packing List – (Prepared by exporter), Inspection Certificate – (Prepared by inspection party or exporter), Insurance Policy– (Prepared by the insurer or insurance agent), Insurance Certificate – (Prepared by the insurer or insurance agent), Testing / Inspection Certificate – (Prepared by the laboratory / SGS), Health Certificate – (Prepared by Inspection Authority), Phytosanitary Certificate – (Prepared by exporter), Fumigation Certificate – (Prepared by inspection company).
Transport Documents: This includes Shipping Order –(Prepared by shipper), Dock Receipt – (Prepared by shipper), Bill of Lading (B/L) (Prepared by shipper), Sea Waybill – (Prepared by shipper), Air Waybill (AWB) –. (Prepared by airline), Packing List – (Prepared by shipper).
Government Customs Documents: This include Certificate of Origin (CO)- (Issued by trade councils / Embassies / Consulates / Chambers of Commerce), Import / Export Declaration – (Prepared by exporter or importer and certified by customs), Import / Export Licence – (Issued by Director General of Foreign Trade), Customs Invoice – (Prepared by exporter, attested by customs)
These traditional documents are complex and confusing. A blockchain technology which is based on an open distributed digital ledger records a transaction between two anonymous parties that does not require trust or coordination between them, dealing in a peer to peer network, and replaces the documents with the intention of expanding smart contracts across borders.
Let us see how cross-border trade in Blockchain works.
Assume this cross-border contract trade contract for shipping the goods is between Alice(the supplier) and Bob(the buyer). Alice will begin acquiring, stocking and packing the goods to be dispatched to Bob. At the point when Alice begins the process, she will broadcast this information about the acquisition of goods in a permission blockchain network. Likewise, every activity attempted by Alice until the point when the goods reach Bob will be recorded and broadcasted to this network. This cannot be reversed creating an immutable sequential data blocks. Now is where smart contracts come into the picture.
Under cross-border trade in the blockchain, the smart contracts come as the digital version of contracts with terms of agreements, here it is agreed between Alice and Bob. The agreement is written in the programming language. It allows building trust between two anonymous parties without any legal formalities or intervention of central authority. In cross-border trade in the blockchain, transactions are more traceable and transparent in nature unlike prior.
When the smart contract gets successfully accomplished by both parties, Blockchain network confirms them and followingly execution of the very smart contract. Soon after the execution of the smart contract, the container gets stacked to the ship. Here, both the parties are embedded in the provision of overviewing the ongoing processes. Once the container reaches Bob’s port, it is cleared by customs without any trouble. The reason for clearance is on account of prior deployment of respective smart contract. Bob then digitally signs conveying that smart contract and transaction commitment is successfully undertaken.
1. Minimizes administrative costs,
2. Create more efficient handling of documents,
4. Less processing time
5. Increased transparency between the parties
6. Capital transferred quickly, unnecessary blocking of funds will not take place.
7. Make it easier to trace transactions.
8. The faster transaction, the process from issuing to approval which usually took 10-15 days could be reduced to less than 3-4 hours.
9. Records cannot be manipulated, duplicated and faked thus reducing the possibility of fraud.
10. Inspection of goods at each and every stage builts an unprecedented level of trust
11. Consumers can check the quality of the product and can be informed of every step in the process.