Blockchain: The future of customs and supply chains

A chain with a digital backround

The potential of blockchain in Customs processes could mean improved compliance, trade facilitation or fraud detection - enabling fluent supply chains globally.

What is Blockchain, and how does it work?

The blockchain is a decentralised digital ledger that records transactions across a computer network. Every time new transactions are added to the blockchain, a new block is created. Once a block is added to the blockchain, the information in it cannot be altered, making the blockchain highly secure and resistant to fraud. The decentralised nature of the blockchain means that any single entity does not control it, making it highly transparent and difficult to corrupt. The most famous blockchain technology is the one used by Bitcoin.
A simple application of blockchain

An example of how a blockchain works in a simplified scenario:

  1. Angela wants to send Richard some money using a blockchain-based digital currency.
  2. Alice initiates the transaction by broadcasting it to the network. The transaction includes the amount of money sent, Angela's digital signature, and Richard's digital address.
  3. The transaction is grouped with other transactions into a "block" by a group of computers called "nodes".
  4. The nodes then use complex algorithms to validate the transactions in the block and ensure that Angela has enough funds to send the money to Richard.
  5. Once the transactions are validated, the block is added to the existing blockchain. Each block in the blockchain contains a unique code called a "hash", as well as the hash of the previous block. This creates a chain of blocks, hence the name "blockchain".
  6. The transaction is now recorded on the blockchain, and Richard can see the funds in his digital wallet.

Blockchain and Supply Chain

Blockchain can significantly benefit the supply chain industry in terms of cost savings, improved tracking, and better data security. 

Cost Savings: Blockchain can reduce logistics costs by increasing the efficiency of operations. By utilizing distributed ledger technology, logistics companies can streamline processes and reduce the need for manual labour. This can lead to cost savings in terms of labour, as well as overall operational costs. 

Improved Tracking: all parties in a supply chain can better track and monitor goods in transit. This can help reduce the risk of lost or delayed shipments. Blockchain also provides real-time visibility into the status of shipments, allowing logistics companies to respond quickly to any issues that arise. 

Data Security: Data security can be improved across the supply chain. By utilizing distributed ledger technology, companies can ensure that data is secure and immutable. This can provide peace of mind to customers, as they know their data is safe and secure. 

As both the industry and solutions based on blockchain continue to evolve, blockchain technology is sure to play an essential role in the future of logistics.

Blockchain and Customs

Looking more specifically at Customs processes and procedures, there are applications of blockchain technology that could greatly improve both the efficiency and the security of the flow of goods across the globe. 

First and foremost, blockchain could help to simplify the customs process by providing a secure, transparent and efficient way of managing data. 

By using blockchain, customs agencies would be able to securely store and share important information such as customs declarations, product information and shipment status. This could reduce the need for manual data entry and make it easier for customs agencies to keep track of shipments. Second, blockchain could help to increase the security of customs processes and procedures. 

By using a distributed ledger system, customs agencies would be able to store data in a secure and immutable format, allowing them to monitor and prevent any potential fraud or illicit activities. This would help to ensure the integrity of the customs process and reduce the chances of data being manipulated or misused.
Third, blockchain could help to reduce costs associated with customs processes and procedures. 

By streamlining the process, paperwork can be reduced which results in lower administrative costs. Additionally, it could reduce the time it takes to process shipments, as data would be stored and shared in a secure and efficient way. 

Finally, blockchain could help to improve the transparency of customs processes and procedures. By providing a secure, immutable record of all customs-related activities, all parties involved in the process have full visibility and are held accountable at the same time.

How Could This Work for an Importer?

Let us imagine on a future scenario, enabled by blockchain technology:

“You’re an importer and you are expecting an extremely important and expensive spare part from China. You log in to a platform system implemented using blockchain technology, where all of the consignment data is visible to every single actor in their own place. The system already contains data input by the shipping company, freight forwarder, port operator, the party responsible for declaring customs, and the domestic logistics company. It works! All of this without five different websites and tracking services. What’s more, no phone calls or printouts necessary! You simply move on to your next task.”
Esko Holopainen, Manager Customs for Customs Support in Finland

Supply Chains of the Future

Supply chains are run by many different parties each often using multiple systems. A lot of time and energy is spent on letting these systems communicate with eachother to exchange the infinite amount of data that is generated and needed to process each step in those supply chains. Systems are connected to automatically exchange information (best case) or people are keying in data across systems manually (worst case).

The key to succesful and efficient supply chains is information. The trustworthiness and validity of that information is essential. Using blockchain technology data can shared efficiently and securely ensuring that each party in the supply chain can access only the data they need to do their part.

Digital first

As a digital-first customs broker, we strongly believe in the power of digital. Digitalising both internal processes and the interaction with clients and customs authorities has made our organisation much more efficient. From eliminating manual data entry, to using the increased availability of data to get better insights for our clients. We follow blockchain technology developments with interest.