The INCOTERMS rules are constantly being updated to reflect changes in the global trade landscape.

Documentation Cost

One of the biggest challenges facing international trade today is the high cost of documentation. 15% in the revenue going into trade comes from documentation. It can take hundreds of documents to ship a container of goods from one country to another. This can be a major barrier for small businesses and SMEs, who may not have the resources to handle the paperwork.

Blockchain Use Cases

Given blockchain, sensor technology, remote sensing possible with satellites and drones, surely there is a way the documentation process can be solved. Some stats showed that a majority of trade documentation would have at least one error in it and internal documentation from some of the big trade companies shows tens of thousands of emails being traded just to coordinate this process. Blockchain technology has the potential to revolutionize international trade by streamlining the documentation process. Blockchain, a distributed ledger technology that allows for secure, transparent, and tamper-proof transactions, makes it ideal for tracking the movement of goods and documents in international trade. If we could digitalise, this would improve the documentation process and make it more efficient.

What are some use cases of a Smart Contract?

A smart contract is a software that executes itself and functions similarly to a traditional contract. In recent times, there has been a growing fascination with the possibilities of smart contracts and ledgers. Consider this scenario: what if you could track the journey of the oysters you consume, from the time they were caught, their moisture levels, the temperature they were stored in, and when they were vacuum-sealed?

These are the kinds of questions that could be answered in the future if goods were transported under the conditions agreed upon in the contract, and if not, could be self-executed based on the Incoterm® rule, sensors, and immutable ledger. Settlements could be made without the need for a letter of credit, and cryptocurrency could be used for payment and settlement. The supply chain could become intelligent and integrated into blockchain technology, with Incoterms® rules as smart contracts, thus leading to a more efficient and democratic system for all parties involved.

The use of private ledgers built in partnership with ICC can ensure transparency in trade and reduce discrimination. With smart contracts sitting on top of the blockchain, companies can track and trace containers using APIs, and smart contracts can be self-executing, reducing the need for couriers and barriers that slow down trade.

What's to come?

In the next five years, we can expect to see the following trends in the development of INCOTERMS and the impact of blockchain and smart contracts:

1. • Increased adoption of blockchain technology by businesses involved in international trade.

2. • Development of new INCOTERMS rules that take advantage of the benefits of blockchain technology.

3. • Use of smart contracts to automate the execution of trade agreements.

4. • Reduction in the cost of documentation for international trade.

5. • Increased participation of small businesses and SMEs in international trade.

The development of INCOTERMS and the impact of blockchain and smart contracts is still in its early stages. However, the potential benefits of this technology are significant. It is likely that we will see rapid progress in this area in the coming years.