12 Daily Cargo News www.thedcn.com.au November 9, 2017 November 9, 2017 www.thedcn.com.au Daily Cargo News 13 Trade-Related Financial Services Trade-Related Financial Services SPECIAL REPORT and Insurance and Insurance SPECIAL REPORT continued from page 12 rations also provide • Consider whether in- appears to be little will have a conse- “2017 Rethinking some assistance terests are properly to stop significant quent positive affect Trade & Finance - An Methods of and much can be protected under the growth in its use. For on the availability of ICC Private Sector managing insurance gained from others terms of the PPS re- example, the World finance and insur- Development Per- Finance and insurance keep in the supply chain gime. It is not enough Economic Founda- ance for such trans- spective” and a pub- and finance issues who may be willing to to include provisions tion (WEF) found that actions especially lication entitled “The Accordingly, a lot of work provide advice such in relevant terms and 80% of global banks as the finance and future of Australia’s goes into mechanisms and as licensed customs conditions of trade or will have initiated insurance industries Trade - a digital vi- methodology to manage brokers and freight contracts which pur- blockchain - related are key participants sion for 2025” pub- the significant risks existing forwarders. State port to create a PPS projects by the end in the development of lished by the ECA, the supply chain circulating in the supply chain. These KPMG and ADCA on and Federal Govern- interest. That interest of 2017. Further, the blockchain. The use include the following: ment agencies such needs to be regis- WEF also predicts by government agen- 2 November 2017. Andrew Hudson* toring Report for 2016-17 Image: Shutterstock • Additional due dili- as Austrade also pro- tered on the PPS Reg- that by 2027, 10% cies of the informa- • Look to the devel- makes particular reference gence prior to a vide resources. ister and steps need of global gross do- tion contained in the opment of new and MUCH of the focus in the to the adoption of new in- transaction being • Review existing to be taken to ensure mestic product will blockchain to satisfy innovative financial supply chain revolves frastructure charges by undertaken on the terms and conditions that those rights are be held in blockchain with their regulatory and insurance prod- around the physical logistics stevedores as a basis for goods being carried, of trade or other ser- properly protected technology. We are requirements instead ucts within industry. of moving goods to their fi- new revenue streams. the parties involved, vice contracts. These and asserted. beginning to see the of requiring separate I am aware that a nal destination and the regu- Those operating in the and the financial risks need regular review • Careful monitoring of use of blockchain reporting would ad- number of parties in lation of that movement. supply chain require ex- of the transaction. and attention espe- customer accounts technology in the vance the concept the insurance indus- However, two aspects ternal funding as do those Assistance can be cially in light of the once work has com- supply chain and the even further. Sepa- try involved in insur- which do not attract quite buying and selling goods sought in undertaking commencement of mended. There needs recent presentation rately, the recent Bul- ing the global supply the same attention from passing through the sup- due diligence through the new “unfair con- to be good “financial by Richard White the letin of the Atomic chain are developing those within the supply ply chain. industry associations tracts” legislation hygiene” and on oc- CEO of WiseTech Scientists contained new and improved chain (as opposed to those Even with the develop- such as the CBFCA, affecting contracts casion services need Global at the CBFCA an article which iden- products to deal with outside of the supply chain) ment of new funding op- ECA, FBIA and the with small business- to be withdrawn. National Conven- tified that blockchain the changed risk are the various finance and tions by the major banks Ai Group. There are es. A recent decision • Pay close attention tion, provided details might be a new aid profile being experi- insurance aspects of the and other parties such as also other parties of the Federal Court to the increase in the of how blockchain to nuclear and other enced by those pro- supply chain. the Export Finance and whose business in- struck out a num- use of blockchain and practices and the export controls. In viding services in the However, they are equal- Investment Corporation, cludes such research ber of provisions in related digital con- use of artificial intel- the context of supply chain. ly important. After all, their much of that funding will and due diligence a standard contract cepts in the supply ligence can improve blockchain and As always, if pain per- absence would cause the usually operate accord- and I have a long- of services on the chain to assess how the security of the related digitised sists, see a lawyer! supply chain to stop. ing to time-honoured pro- standing excellent basis that they did they can be used. supply chain and re- trade practices, I Remember that some of cesses involving Letters of relationship with FTI not comply with the Although, in some duce costs and risks recommend consid- * Andrew Hudson is a the most recent crises in Credit supported by Bills Consulting. Banks terms of that unfair ways, blockchain is associated with the eration of the ICC trade lawyer at Rigby the supply chain with the of Lading (BL) effectively and finance corpo- contracts legislation. in its infancy, there supply chain. That publication entitled Cooke Lawyers Hanjin and GSS shipping giving title to the goods to issues arose from insolven- those holding the BL. cy of those entities. One of the crucial as- Further, the absence of pects of the supply chain finance and insurance is of- and its security and fund- ten a major cause of prob- ing is the reliance on these action and the possibility covered against the freight As the reported cases regarding their approach Linked in – the rise of Blockchain lems for SMEs and devel- original BL and, over time, of additional payments has forwarder for its “mislead- continue to arrive in re- to who was the “owner” of required to validate trans- issues where the identity oping economies. the adoption of digital been resolved. ing” conduct. spect of the PPS regime, it goods for the purposes of Alexis Cahalan* October 2008, the first digi- Photo: Ian Ackerman actions to enable a sub- of the underlying partici- Accordingly, it remains equivalents through pro- Problems also arise Securing the recovery of is important for the provid- liability to under pay duty in tal currency payment sys- sequent participant to do pants is masked. important for those in- cesses such as blockchain where there is a Letter of monies owing to providers ers of freight logistics ser- respect of those goods. THE transport sector is tem into financial markets. the same according to the In the trade economy, volved in the physical ele- and digital transactions Credit raised on non-tra- of freight and logistics ser- vices to properly embrace The result (in short) is known for the complexity Demystifying rules governing that par- much can depend on the ment of the logistics sup- which may offer a more ag- ditional banks in develop- vices has been complicated that regime to secure their that basically any party who of its contractual trans- blockchain ticular blockchain. development of a trust ply chain to consider these ile and secure option. ing countries which are not in recent years by the adop- interests both for their own is in the supply chain who actions. Sales contracts, Contrast this with the between the parties to a issues which have a vital One of the most regular honoured by other parties. tion of the Personal Proper- solvency and for the inter- has an interest in, control charterparties, bills of lad- A feature of block- role of the bank in the anal- transaction. There is an impact on the wider busi- sources of calls for legal as- The importance of BL in ty Securities (PPS) regime. ests of their own financiers. or possession of the goods, ing, letters of credit, com- chain technology is that ogy just described, which expectation that secure ness environment. Some sistance relates to dealings respect of the financing of This extinguished many can be treated as owner of mercial invoices, import it is a decentralised sys- controls the process from digital verification will gen- thoughts are set out below. with original BL, whether to the sale and purchase of of the older types of lien on Insurance issues the goods and can be liable and export documenta- tem for the management its own domain. erate a level of trust in the replace original BL which goods in the supply chain which providers of freight for customs duty which has tion are integral compo- of transactions. The presence (or ab- The language required blockchain environment. Finance issues have been lost or when an was demonstrated in the and logistics services had been unpaid or under paid nents of the international To explain this in more sence) of insurance is an- supply chain. to participate in the block- Therefore, the increased Every aspect of the fi- unscrupulous consignor or recent decision of the NSW relied to secure monies ow- in respect of those goods. practical terms, take the other vital part of the supply This regime has con- chain is encrypted and security brought about as nancing of the supply chain shipper refuses to release District Court which or- ing to them and required That could extend to analogy of paying an in- chain. There is very little that tinued to exist while the time and date stamped, a result of the repository is complex. those BL without payments dered significant damages those parties to adopt new service providers such as voice via a bank’s inter- moves without insurance. internet and eCommerce thereby giving security and for information and its en- Ownership of the physi- additional to those that against an Australian freight practices according to the freight forwarders and li- net platform. The role of Every change to regula- have become critically in- meaning to the descrip- cryption, has the potential cal assets has increasingly have already been made for forwarder whose “house” new regime. censed customs brokers. the bank sits at the heart tion and each natural di- tertwined in global trade. tion, digital ledger. to reduce fraudulent be- passed from public to pri- the goods. BL were issued and treated This included attempts Not only do such notices of this process. The bank, saster, terrorist or national It is not difficult, how- The emergence of any haviour and manipulation vate ownership which re- Difficulties also arise as original BL by a financier to require customers to ac- create uncertainty as to lia- as enabler of the trans- security event changes ever, to envisage how the type of disruptive solution of documentation. quires funding for the ac- when the original BL are as title for goods. knowledge that they grant- bility (not good in relation to action, is the key to ex- the risk profile to the sup- transfer of goods and as- present risks and well as Some legal and regu- quisition and then pushes in the hands of insolvency However, those BL did ed a form of interest over a revenue statute) but also ecuting complicated and ply chain and which has an sociated documentation opportunities. The perma- latory issues which also pressure on the acquirer of practitioners appointed to not then deliver title for the the goods being handled require parties to consider sometimes time-sensitive effect on the availability of could be transformed by nency of the data must need to be considered are: combination of interest at Maersk, teamed with IBM the assets to increase rev- a party to a commercial goods leaving the financier which would support regis- their insurance needs and and multiple international the insurance. seamless access to a de- inevitably result in cost • The level of identity a government and private in 2017 to conduct a proof enues and profits. transaction who is unwill- without the goods against tration of an interest on the whether insurances will ex- transactions. Likewise, its As risks increase, fi- centralised digital platform, efficiencies in terms of verification requiredstakeholder level. of concept trial in the con- For example, the recent ing to release those BL which it had already ad- PPS Register. tend to such liability. role as the middle-man nance becomes more ex- allowing contractual obli- speeding up the flow of in- and unknown suscep- The Australian govern- tainer industry tracking a release of the ACCC’s Con- until further extensive in- vanced funding. The fi- However, in many cases There are similar chal- can make it a visible target pensive and insurance also gations to be recorded and formation between parties tibility to cyber risk; ment has commissioned container of flowers from tainer Stevedoring Moni- quiries regarding the trans- nancier successfully re- the service providers omit- lenges from the increased for those who may wish to becomes expensive, even if in any one transaction. • Oversight over the in- the CSIRO to investi- Kenya to Rotterdam. ted to actually register their use of infringement notices. visible and for payments to breach the security of a available at all. The flip-side of this is, tellectual property in gate the plausible impli- Hong Kong based com- interest which adversely Changes to legislation, be securely exchanged. transaction (UKP&I Club, Those risks affected by is- that there is the potential software solutions; cations of Distributed Led- pany, 300cubits, is champi- affected them upon insol- regulation and practice need The shipping and logis- Safety4sea.com). sues such as the location of for lack of confidentiality. • The ability to cope with ger Technology. oning the concept of issuing vency of their customers or to be monitored carefully, tics industry is constantly If blockchain distributed the trade, the parties to the The data is publicly avail- high volume demands; Sweden, Brazil and crypto currency launched in a dispute with other par- the risks assessed, practic- on the alert for ways to ledger technology is im- transaction, the existence able to those with access • The lack of internation- Georgia, for example, are on Ethereum, a blockchain ties over who they had reg- es reviewed and appropriate improve efficiencies along plemented, the bank’s role of sanctions or other restric- rights to the blockchain al regulation and the investigating the use of platform to secure con- istered their interests. insurance engaged. the global supply chain. changes from being the tions on trade, the nature of lack thereof especially blockchain for centralising tainer bookings (Maritime I continue to review The take-up of Block- focus of the transaction to and the permanency of the goods and the manner of across jurisdictions; land registry information. Executive 02.08.17). standard terms and con- So, how to deal with chain as a trusted open da- one of many participants the data means that it can- transport of those goods. • What mechanisms Other uses have been It is not difficult to imag- ditions of trade for these these issues tabase has the potential to in the life of a transaction. not be erased or amended Ultimately, insurance is exist for the resolu- touted in the finance, in- ine there could be costs service providers to ensure deliver efficiencies across Triggers for events without the consensus of driven by the value of the Unsurprisingly, there is tion of disputes; surance, health care and savings to be had by that the relevant PPS inter- the transport sector. tailored to a transaction other users. assets being conveyed and no one clear and simple an- • Whether data input agricultural sectors. the reduced processing ests are created and rec- Blockchain is built upon enable a transaction to One of the key features the nature of the risks be- swer to all of this. There is a would be regulated to Melbourne University times, real-time updates, ommend practices to those the premise of recording be progressed down the of blockchain is that data ing covered and the size of limit to what can be done by minimise inaccuracies is trialling blockchain to replacing and automating service providers to ensure and verifying transactions line rather than remaining is stored in an encrypted those risks. the private supply chain to or whether it has the store student records and traditional paper-based that those interests are reg- between two or more par- within the purview of the fashion. While the trans- It is fair to say that even guard against events of war, potential to perpetu- make them available to exchanges by embracing istered and administered. ties in a permanent way. main facilitator, such as a actions on the blockchain with the best due dili- catastrophic natural disas- ate errors; and third parties for verification blockchain across juris- However, even then, dif- In other words, it is a financier who may in fact itself are readable to en- gence by private parties, ters or terrorist events. • The potential discon- purposes. (Financial Re- dictions and parties in the ficulties arise as many large platform for providing con- be a bottleneck for facili- able the transactions to be changes in legislation or All these have an imme- nect for participants view, 27.04.17). global supply chain. customers do not allow sensus in a transaction as tating transactions. How verified, the participants regulation by government diate and significant effect in the global economy Chinese state-owned How soon blockchain their service providers to well as providing a digi- is this so? are not so readily identi- agencies can have an ef- on the movement of goods who are unable to ac- enterprises such as the becomes a practical real- have such security inter- tal history throughout the Blockchain technology fied because a crucial fect on the risks of a busi- through the supply chain cess digital platforms. Bank of China and private- ity will depend on the ap- ests as it interferes with the course of a transaction. creates a chronological component of the system ness and increase the de- and the risks of that sup- ly-owned companies in- petite of the transport in- customers’ external finan- It was inspired by a digital ledger of transac- is the use of private cryp- Blockchain in the mands for insurance. ply chain and therefore ad- tions enabling all partici- cluding Ali Baba, the large dustry to invest and trust ciers who want priority of method of special mathe- tographic keys to identify By way of one very re- versely affect the availabil- matics known as “cryptog- pants in the transaction users and control access global supply chain online retailer, are invest- in this technology. interest over the goods for cent example, the Depart- ity of finance or insurance. raphy” developed by Sa- to have visibility over the (Data61, CSIRO, 2017). Like any innovative tech- ing in the development of which they have provided ment of Immigration and So, the focus turns to how toshi Nakamoto, which led digital ledger itself. This creates a level of nology, the development of blockchain technology. *Alexis Cahalan is a Prin- finance. That requires a Border Protection and the to manage them. to the introduction of the In a sense, it creates privacy and confidential- blockchain requires con- In so far as the ship- cipal Lawyer at Thomas separate negotiation on se- Australian Border Force Bitcoin payment system in a chain of users who are ity, but also can create siderable investment and a ping sector is concerned, Miller Law curity for money owing. recently issued a notice continued on page 13