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Blockchain Coming to African Customs Clearance in 2018

Blockchain Coming African Customs Clearance 2018
photo credit: Google Images

The Common Market for Eastern and Southern Africa (COMESA) is set to roll out a digital free trade area—the first in Africa—modelled along the Malaysian Free Trade Zone, where parties to a transaction are connected through blockchain technology that allows them to share a web of ledgers in real time that are secure.

The application also supports generation of an electronic certificate of origin that can be verified using national information technology systems. This differs from the current practice which involves manual applications and physical presentation of documents to tax bodies and other government agencies that cause businesses delays.

Piloting of the digital FTA is expected to start in 15 of its 19 member states, enabling large and small enterprises alike to trade using their smartphones and tablets.

Businesses within COMESA could save up to $450 million in clearance documentation once the bloc adopts blockchain technology for clearing imports.

The digital program is part of COMESA’s theme, “Towards Digital Economic Integration,” that already includes trade facilitation applications that have been developed. They include the COMESA Virtual Trade Facilitation System, an online platform for trade facilitation instruments and a regional customs bonds, and Regional Customs Guarantee Scheme that involves an electronic Certificate of Origin (of goods for export).

The Secretary General of COMESA, Sindiso Ngwenya, said in a recent bulletin that “Gone are the days when we have had documents being presented physically at the border posts because with the digital economy you can do that from the country of export irrespective of where it is. The long queues that we see at the borders are needless.”

[Read more about Blockchain: Maersk and IBM Forming Blockchain Joint Venture to Digitize Supply Chains and Improve Trade Flow]

He said millions of dollars are paid to banks for merely signing letters of credit because businesses do not trust one another, a situation he said that will be remedied as the business community embraces the digital economy.

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“We are rolling out the Digital FTA in 2018, beginning with willing member states on the basis of the principle of variable geometry,” said a COMESA spokesman. “The e-certificate of origin is a good practice around the world, but COMESA will be the first regional economic bloc in Africa to have it as a regional FTA instrument.”

The participating countries are Kenya, Uganda, Rwanda, Burundi, Democratic Republic of Congo, Sudan, Ethiopia, Egypt, Seychelles, Malawi, Mauritius, Madagascar, Swaziland, Zambia and Zimbabwe, and Ethipoia has indicated it is interesting in joining in the program.

Blockchain is quickly becoming a must-have technology in global trade, with groups like ocean carriers such as Maersk and commercial ground and transportation giants like UPS creating or joining initiatives.