Blockchain-Based Trade Data Sharing Platform

BLOCKCHAIN-BASED TRADE DATA SHARING PLATFORM

May 2019

© 2018 NTT DATA Corporation AGENDA I. About NTT Data II. NTT Data initiatives for blockchain-based trade data sharing platform III. Proof of concept with Thailand IV. To the launch of business services V. Document format VI. Legal aspect VII. Conclusion

NTT DATA is a leading IT innovator headquartered in Japan, and part of NTT Group, one of the largest telecommunication companies in the world.

■ Name: ■ Fiscal Year: NTT DATA Corporation April 1 to March 31 of the following year ■ Head Office: ■ Business Areas: Toyosu Center Building, 3-3, Toyosu 3-chome, - System integration - Networking system services Koto-ku, Tokyo 135-6033, Japan - Other business activities related ■ Established: to the above May 23, 1988 ■ URL: ■ Common Stock: http://www.nttdata.com ¥142,520 million (as of March 31, 2017)

■ Overview of NTT DATA History 1988 NTT DATA Communications Systems Corporation spun 2007 Achieved consolidated net sales of ¥1 trillion off into a separate company from NTT 2008 20th anniversary of establishment 1995 Listed on the Second Section of the Tokyo Stock Exchange 2013 25th anniversary of establishment 1996 Changed English name to NTT DATA Corporation 2015 Achieved consolidated net sales of ¥1.5 trillion Listed on the First Section of the Tokyo Stock Exchange 2016 Start of three-year Medium-Term Management Policy (covering the period to March 31, 2019)

We have been expanding our global business on a worldwide scale with strong presence in the local and regional markets. Global Coverage of NTT DATA

US EMEA APAC Japan 18,000 21,000 21,000 33,000

51 210 110,000+ economies cities professionals

We, as a solo primary developer, have been engaged in the development and maintenance service of NACCS for 40 years from the beginning.

History of NACCS (Customs Clearance and National Single Window System in Japan) 2010 2017 2001 1993 Air Air NACCS 1985 Air NACCS Air NACCS NACCS (ver. 6) 1978 Air NACCS Air NACCS (ver. 4) (ver. 5) (ver. 2) (ver. 3) Air NACCS (ver. 1) Added Export Expanded Import procedures procedures applicable area Integrated system Sea NACCS Sea NACCS Sea Sea NACCS (ver. 1) (ver. 2)

Customs Added cargo clearance management Sea NACCS 1991 (ver. 3)

1999 2008

Leveraging our experience and expertise on IT infrastructure development, we aim to contribute to member economies continuously.

Rollout of experience and expertise to member economies

NACCS

Viet Nam Myanmar

Central bank of Myanmar: Start operation in Jan. 2016

NTT DATA Group has developed many blockchain applications and conducted Proof of Concepts (POCs) with customers around the world.

Some of Implemented Use Cases

【UK, Germany】【Japan】【the US】 • Identity Management • International Trade • Insurance • Know Your Customer (KYC) • Insurance Claim • Healthcare, etc. • ALASTRIA Consortium • JBA PoC Platform • Food Traceability, etc. • Digital Securities (Densai), etc.

USER Finance USER USER USER USER USER USER USER USER Enterp Finance Public HQ rise Finance Public USER USER USER CoE CoE Public USER USER CoE (Japan) (US) Public (Europe) ・Finance・ Enterp USER USER USER Enterprise rise USER PublicPublic・・ Financ Finance Enterp e USER USER USER rise Financ Enterpr USER USER USER e ise USER USER Public Public Finance USER USER USER USER USER USER USER USER USER USER legend USER USER Client： USER Business ： Domain CoE： CoE

© 2019 NTT DATA Corporation 8 Current Issues and Future Solutions of Trade Business We aim to build a “Trade Platform” that connects stakeholders in order to improve the efficiency and convenience of trade procedures. AS IS TO BE Exporter Service Bureau/ Importer Exporter Importer country Provider country country country Trade

ProviderＡ Blockchain

Bank … Certification Platform Certification Bank Authority Authority

Not connected Contract

Insurance API API Bank Bank L/C P/L Company ProviderＢ SWIFT I/V SWB ProviderＣ Cargo Insurance Paper S/I B/L Owner Company Cargo Cargo Owner ProviderＡ

Owner … Not connected Blockchain ProviderＢ Cargo × Owner Logistic Logistic API Logistic ProviderＣ Company ProviderＤ Company Logistic Company Company ProviderＤ • Each industry does its own digitalization •Trade platform that connects stakeholders independently •Cross industry platform does not exist •Integration with existing systems by API* •Massive manual operations •Efficiency and convenience *API(Application Programming Interface) specifies the rules and interface specifications for how software components should interact. By utilizing the API technology, it is expected to improve the accessibility of services.

From “Bitcoin” to “Distributed Ledger Technology” Although Blockchain was originally born to implement Bitcoin, its usage has been expanding to business. Proof of Concept to implement blockchain technology in other areas has been conducted around the world.

2015 - present

Blockchain

Cryptocurrency 2008 - 2014 Trade Bitcoin

Bitcoin Bond, Supply chain…

Blockchain Blockchain expands in broader use as general Blockchain was originally platform born to implement Bitcoin

From the results of several Proof of Concepts, we reached the conclusion that Blockchain Technology is best-suited to Trade Platform.

Requirements of Trade Platform Characteristics of Blockchain

Equal standing of all participants Decentralized system operation

Possession of the same Transparency and traceability transaction data by participants

Gradual participation of System Scalability multiple trade stakeholders

Management of transaction Information sharing on a real-time status and work flow basis

High level of reliability Prevention of data tampering

In August 2017 NTT DATA launched a consortium with 14 leading companies from “diverse industries”, unique member-composition of this kind. As of March 2019, the participants has grown to 18 companies.

Participating Companies (as of March. 2019) Cross-Industry Discussion Scene MUFG Bank, Ltd. Banks Sumitomo Mitsui Banking Corporation Mizuho Financial Group, Inc./Mizuho Bank, Ltd. Tokio Marine & Nichido Fire Insurance Co., Ltd. Insurance Sompo Japan Nipponkoa Insurance Inc. Companies Mitsui Sumitomo Insurance Company, Ltd. Sumitomo Corporation Sojitz Corporation Toyota Tsusho Corporation Cargo Marubeni Corporation Owners Itochu Corporation Kanematsu Corporation Mitsui & Co., Ltd. Kawasaki Kisen Kaisha, Ltd. Mitsui O.S.K. Lines, Ltd. Carriers / Logistics Nippon Express Co., Ltd. Companies Nippon Yusen Kabushiki Kaisha Ocean Network Express Pte. Ltd.

Discussion with trade consortium members to tackle business problems and to develop the best one-for-all trade platform.

• Busines s Flow

Services and API specifications

& More..

One of the POCs covered wide range of information flow of trade procedures, not only exchange of trade documents but also trade finance and issue of cargo insurance policy.

Correspondent Bank Issuing Bank ③L/Cs

⑩Negotiating Documents ⑪Payment Information

⑩Negotiating④Insurance ⑫Shipping ③L/Cs ②Request Documents Application Documents L/Cs

⑤Insurance Insurance Company Policy ①Sales Agreement ⑨Shipping Notice ⑥Shipping Request Exporter Cargo Importer

⑦B/Ls ⑬B/Ls

Transport Company Transport Company Cargo /Customs Broker /Customs Broker Export Entry Import Entry /Permission /Permission ⑧Customs Entry ⑭Customs Entry /Permission /Permission

Trade Control Office Customs Customs Verified Scope of PoC Trade Control Office

Importer Blockchain-based Trade Platform ⑪shipment ②Open L/C document, B/E Scenario of PoC Exceptional L/C issuing bank Share information ③L/C ⑩Shipment ⑩Settlement (MT700) document, B/E

①I/V Negotiation bank

⑨ ③L/C Shipment document （L/C ,I/V ,P/L ,B/L or L/C I/V P/L ④Insurance apply SWB, I/P）, B/E B/L （copy of L/C,I/V) ⑥’C/O apply I/P S/I Certificate SWB Insurance company Exporter Issuing system API ⑤I/P ⑦’C/O E/P B/E C/O

L/C: Letter of Credit ⑥ Blockchain I/V: Invoice ⑧B/L or SWB I/V ⑦E/P P/L: Packing list P/L S/I: Shipping Instructions S/I I/P: Insurance Policy C/O: Certificate of Origin E/D: Export Declaration E/P: Export Permission Forwarder Shipper CLP: Container Load Plan ⑦I/V,E/D D/R: Dock Receipt D/R E/P B/L: Bill of Landing SWB: Sea Waybill ⑦E/P CLP D/R B/E: Bill of Exchange Customs Container yard

For future full-systemized BtoBtoG process between Thailand and Japan. NTT DATA and MUFG have conducted 2 PoCs with trade stakeholders in Thailand. Japan (Export) Thailand (Import)

Customs system National Single Window Japan National Single Window Gateway service providers

PoC2 Application service providers

Trade Platform I/V I/V SWB SWB PoC1 P/O P/O

Insurance Maritime Cargo Bank Maritime Cargo Bank company company owner company owner /FWD /FWD

Cost saving in creating trade docs

For Exporter: • Able to create documents (P/L, S/I, SWB, C/O, D/N, I/P) by using finished P/O and I/V data.

For Importer / Forwarder: • Able to create import declaration docs by using I/V, SWB, C/O and other data completed by exporter. About 50% data inputted digitally from the exporter side can be reused by the importer side for the import procedures, resulting about 50 - 70% cut off of manual operations.

• The electronic collaboration of C/O data enables labor saving through system check in the elimination of items targeted by the Economic Partnership Agreement.

Hearing of value-added services that can be used with the accompanying effects

• Compliance through procedures transparency. • EDI Management cost reduction. • Optimize IT investment.

Requests of services to be added to trade platform: • Use data on platform to prevent money laundering. • Status check for each process. • Provide EPA/FTA information on trade platform

Trade platform has vision to be a platform that provide digitalized trade documents where data originality are guaranteed per transaction. Only certain users with the right authority are able to access data securely and easily, then to utilize those data to support timely decision making.

Issuing Insurance Correspondent Insurance Importer Bank Company Third Party Bank Company Third Party Exporter Country Country

Importer Country’s node Exporter Country’s node Secure Importer Exporter Digitized document Distributed ledger Distributed ledger Guarantee documents’ originality

Logistic Ship Customs Logistic Ship Customs company company & control company company & control agency agency Increase of trade volume, Increase of trade volume, acquisition of foreign currency acquisition of foreign currency

To accelerate international trade transactions amongst countries with the maximum utilization of EPA/FTA

The concept is to build the platform continuously. …….

In the first stage when it goes live, the main Stage 4 Continuous service is to provide data transmission platform of services for electronic documents that ensure originality. In enrichment the latter stage, enrichment of services are to be introduced one after another by cooperation with Stage 3 e-CO services, SMEs business partners and third party. involvement etc.

Stage 2 Bilateral platform connection

Stage 1 Data exchange platform for e-docs that ensure originality

The goals of the trade platform is to combine the basic and Value Added Services. In addition, open the platform to 3rd party, for unlimited new services expansion.

Value Added Services(*1) Storage services Prevention of TBML(*2) Machine execution to Self management of create and check docs Statistical data EPA・TPP・FTA analysis Etc. History mgt. in Finance and transaction unit Supply Chain Open platform to 3rd party (vendor, Basic Services participants etc.)

Electronic The collaboration of paperless trade documents Guarantee documents originality

Blockchain

(*1) Examples, subject to change anytime without prior notice (*2) Trade Based Money Laundering

The future image is to build a multi national platform network together, amongst ASEAN region to accelerate global trade and the development of economies.

: blockchain platform

1. Standardization

2. Originality

NTT Data’s Trade Platform has 2 types of document formats.

Electronic documents Attachment files

Some representatives of types of Other optional files documents: Invoice Insurance Policy Packing List Debit Note Shipping Instruction RIDER Sea Way Bill Bill of Exchange ……

Electronic format in the Trade Platform is built by combining formats from various sources.

In invoice and packing list, the document Each company’s format format is built with these 3 process:

Each 1. From UN/CEFACT format, pick common company’s items which are also included in NACCS format UN/CEFACT format and each company’s format. format UN/CEFACT 2. Add items which are necessary for customs format procedure in Japan from NACCS format (in accordance with PAA standard), but not NACCS format included in UN/CEFACT’s. 3. Add common items from each company’s Trade Platform format format, which are not included in process 1 and 2, but are practically necessary. NACCS format

TRADE UN/CEFACT NACCS Each company’s format PLATFORM format format format

What is the UTN? An industry initiative focused on: NTT Data participates in the UTN consortium to tackle key technical activities needed to • Facilitating interoperability between trading catalyze the creation and promotion of open parties and their networks, systems, & platforms standards and protocol. • Creating and promoting the adoption of open Issues to be discussed in the technical standards and protocols activities: • Enabling the creation of a global “network of • Data formats networks” for trade • Identities • Transaction validation • Network protocols

Efforts to standardize trade EDI have been conducted in the past, but there are a number of obstacles and adoption that cause the progressing not so well at present. We aim to solve the problems that have been a hindrance to such past efforts by using the AI (Ontology) that have been developed in recent years. Problem in standardization： How do you handle different document formats and terminologies between companies? Laying on foundation of the standardization of items, can we eliminate the obstacles with new technology?

Conventional approach Additional solution proposed by NTT DATA

Collaboration of UN/CEFACT,ICC UTN Standardization of items Semantic AI(Ontology) Automatically interpret and convert information according to the and the use of common request of the reference side items →Association by semantic technology

The function to assist human in creating and checking trade documents by using machine execution which results in a high amount of time reduction.

Different docs format & Manual check terminology Machine execution Form A

L/C

Exporter Morphological analysis AI Suggestion trade documents AI Form B

L/C

Teacher data Form C

Bank International law

Since Bill of Landing is a negotiable document, electric handling is more complicated than non- negotiable documents, such as a sea-waybill. Blockchain fulfills technical requirements, but in business, we need legal framework to support.

It is not sufficient to take a paper bill of lading, make a PDF image of it and then transmit it down the chain

It must guarantee that there is only a single holder of the document at any one time

The development of blockchain technology Transmission of a document by email is both can solve these issues, however, it remains a quick and cheap, but not secure significant outstanding question of how legal rights and liabilities will be passed between parties to the transaction.

Various efforts are being made to digitize negotiable trade documents.

Primarily address the legal relationship between carriers and cargo-owners. The first ever that allows for more e- 2008 Rotterdam Rules commerce and approves more forms of electronic documentation.

Under United Nations, The Model Law on Electronic 2017 UNCITRAL Model Law Transferable Records (MLETR) was formed. Bahrain has enacted this law.

Under European Commission, a proposal for a regulation 2018 European Commission on electronic freight transport information was formed.

Under International Chamber of Commerce, the legal 2018 ICC Report: Legal Status system on the bill of lading securities in several countries Electronic Bills lading was researched and summarized into a report.

UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW

The Model Law on Electronic Transferable Records (MLETR) aims to enable the legal use of electronic transferable records both domestically and across borders. The MLETR provides guidance on assessing the The MLETR is not a law. Individual states reliability of the method used to manage an will have to decide whether to adopt it electronic transferable record and on change of into their own law. medium among other things. It aims to facilitate the cross border use of electronic transferable records by supporting the principle of non discrimination against the foreign origin or use abroad of an electronic transferable record.

“The legal rights associated with traditional paper of trade documents are well established. However, the legal status of electronic documents is not fully established yet. “ 2018 ICC Report

NTT Data thinks that the introduction of Model Law by UNCITRAL is a big movement towards the legal status of electronic documents, to be applied not only domestically but also in cross border transactions.

Like this, step by step movement to establish a strong legal foundation for electronic trade documents can be seen. We as private companies must promote the use of electronic documents in trade.

In order to promote electric contract, a legal framework for electronic identification and recognition of electronic signatures is essential.

Electronic Identification and Trust Services Regulation (eIDAS) : A single standardized rule applicable to all EU Member States that provides a consistent legal framework for electronic identification and recognition of electronic signatures

An expert panel of the Internal Affairs and Communications Ministry has begun discussions on the establishment of a public system to provide electronic authentication services, such as the "Timestamp" to prove that electronic documents have not been tampered with.

How is the situation in ASEAN region?

Solving business issues with technology is not that difficult. You can procure any IT vendor and consultant to create the best technology to solve your issues.

However, this practice might not necessarily applicable when you have plan to connect with your technology with other system. The interoperability issue, for example, can be a serious issue when connecting trade platform across border.

Cross border organizations and consortiums that tackle this matter are necessary. At the moment, we have UTN (Universal Trade Network) that trying to facilitate this matter.

One more aspect that we can not ignore is the legal aspect. No matter how advanced a technology is, it will be useless if there is no legal framework that support it. Approaches and promotions to governments are inevitable in order to realize this.

Only when the combination of technology with cross border interoperability that supported by legal framework is realized, we can achieve a 100 % full electronic documents in international trade.

Yoshiharu Akahane (Mr.) Senior Manager Digital Strategy Section, Business Strategy Department, NTT DATA Email : [email protected]