Project/Service

A. General Information

1. Title

CADENA, a blockchainsolution to share data about Authorized Economic Operators (AEO) among customs administrations

2. Status of the project/service
Operating ,Pilot
3. Implementation period of the project/service:
From
07/2018
To
12/2021
5. Geographical coverage
Regional: Latin America
6. Participating agencies/entities of the project/service:
a. Development stage
Lead agencies/entities
Inter-American Development Bank (IADB)conceptual lead, funder and advisory role in thedesign and implementation
Other participating agencies/entities
Customs AdministrationsfromMexico, Colombia, Chile, Peru, Ecuador, Bolivia, Costa Rica, and Guatemala- co-designers and implementers NTTData/Everis- designer and advisorytechnical role in the implementation
b. Operational stage
Lead agencies/entities (op)
Customs Administrations from Mexico, Colombia, Chile, Peru, Ecuador, Bolivia, Costa Rica, and Guatemala
Other participating agencies/entities (op)
Inter-American Development Bank (IADB)_advisory role
7. Main stakeholders/beneficiaries of the project/services
Customs
Other Government Agencies (OGAs)
AEO firms
8. Business process category of the project/service
Regulatory/official control

B. Lessons Learned

9. Summary description of the project/service
a. Objective(s)

CADENA is an application based on Blockchain technology that facilitates and secures international trade through the efficient and secure exchange of data between customs administrations and, potentially, amongst other government entities and the private sector.

CADENA emerged as a proof of concept in January 2018 promoted, facilitated, and financed by the Inter-American Development Bank (IDB) together with several customs administrations in the Latin American region. Its objective was to validate the use of blockchain technology to address a challenge; the exchange of cross-border data.

CADENA allows customs administrations that have signed a Mutual Recognition Arrangement (MRA) to share the status of their Authorized Economic Operator (AEO) certifications in real time and with thehighest standards of security, traceability, and confidentiality of the data. This facilitates customs ability to grant benefits to AEO certified companies.

Currently, the customs administrations of Mexico, Colombia, Chile, Peru, Ecuador, Bolivia, Costa Rica, and Guatemala.

b. Business need for the project/service (background)

The AEO is a voluntary program between customs administrations and private sector companies. AEO certified firms access a series of trade facilitation benefits that include, mainly, the reduction of physical and documentary controls and priority treatment if cargo is selected for inspection.

Customs administrations signMRAs to secure and facilitate their supply chains. As a result, AEO certified companies receive benefits both in the country of origin and in the country of destination of their exports operations.

The main challenge in the implementation of MRAs is the lack of asystem to exchange data from AEO certificates in real time and in an automated, standardized, secure way. 

c. Business process covered*

Focus on electronic exchange of AEO certificates between customs administrations.

d. Overall architecture and functionalities*

CADENA´s architecture  

CADENA´s architecture is based on open-source components. These are:

1. Application: it consists of a web application, developed with Angular -an open source tool. Through this solution, end users interact with CADENA in accordance with the roles defined by the customs administrations. It is a generic client that responds to a user-centered design and that can be personalized at each of the customs. The CADENA application includes business management and users management modules that must be authenticated according to roles established in the management of their AEO programs in order to access and generate transaction flows. This functionality is offered using a set of services available through an integration layer known as APIs[1]  mentioned below.

2. Back end: It has an API[2] component and a set of services that maintain the operation, storage, and monitoring of the application. Through the APIs, the security of the consumption of services housed in containers is managed. In turn, the containers are identified by functionality and their integration with the solution services.

  

3. LACCHAIN ​​node,wherethree main subcomponents coexist:

 

Hyperledger-Besu client[3]: This client allows the connection to the Blockchain network (LACCHAIN). CADENA's architecture is supported by the LACCHAIN ​​network which is based on the Ethereum infrastructure. Therefore, this client is required to connect to the network and request information on the status of the network (smart contracts, last blocks, etc.). Each node maintains a synchronized copy of the entire registry and functions as a repository for existing smart contracts. Each node relies on validators to validate transactions and generate new blocks through a consensus protocol.

Orion[4] - Private transaction manager: This service allows to establish a private channel between the customs of the countries that share an MRA. Through this channel, private transactions travel directly ("peer-to-peer") between pairs of customs that share a bilateral agreement.

Smart contracts: The secure process at the Blockchain level is orchestrated through a set of smart contracts that establish the logic that allows the establishmentand verification of MRAs by customs peers, with the use of sovereign identities[5]..Through the private channels between customs travels the encrypted data ensuring that only those authorized entities that are part of the MRA have access to the data to be shared through the exchange of the corresponding private keys. Through the public channel connected to LACChain travels the result of the “hash” of the transactions involved in the exchange of AEO data and the identity of the customs officer that issues it

CADENA´s infrastructure

LACCHAIN is the blockchain infrastructure where CADENA (the application) is deployed.

LACCHAIN ​​is promoted by the IDB Innovation Laboratory (IDB Lab) with the support of a global public-private alliance to develop a Blockchain ecosystem and network in Latin America and the Caribbean (www.LACCHAIN.net).

LACCHAINis a public permissioned blockchain based on universal standards, and in the Hyperledger besu protocol. LACCHAIN main characteristics areits open, public and decentralized nature, its low cost for the user -because it is not based on transactions cost-. It is not anonymous requiring users’ identification/authentication through sovereign identities. Therefore, it is bonded to laws and regulatory frameworks, and it is not based on the use of cryptocurrencies.

LACCHAIN ​​provides autonomy and sustainability to its participants and allows the scalability and interoperability of the applications deployed on the network. It provides the necessary Blockchain infrastructure to develop and strengthen the architecture of applications such as CADENA.

CADENA´s functionalities

Creation and authentication of users with different access levels and functions

Country A certifies an AEO company and upload its information in CADENA

CADENA notifies country B

Country B notifies its risk analysis system (RMS), or links CADENA with an API to its RMS

AEO company receives the MRA benefits in country B

 

[1]An API is a set of functions and procedures that perform one or many functions in order to be used by other software. The acronym API comes from the English Application Programming Interface.

[2]  API, Application Programming Interface

[3] https://www.hyperledger.org/use/besu 

[4]https://docs.orion.pegasys.tech/en/stable/

[5]Sovereign identity is nothing more than a form of digital identity in which the user has full control of their data. In addition to allowing you to manage who can access them and on what terms. 

e. Relevant document/figure
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10. Documents and data exchanged via the project/service
  1. AEO Certificates Data Set and documents as stated in SAFE Framework of Standards by WCO under Mutual Recognition Agreements
11. Data models/databases, proprietary solutions, hybrid approaches

CADENA data exchange is based in WCO Data Model. CADENA also uses the Trader Identification Number (TIN)

12. Main challenges faced during the project/service

Iterating with new technologies, such as blockchain,sets the ability to test, validate, and make improvements in subsequent phases. CADENA benefited from its iterative nature due to its two-phase development. For this reason, the evaluation of CADENA initiative requires a comprehensive approach that includes the two phases developed.

CADENA v.0, or first phase, served to successfully validate the properties and benefits of Blockchain technology for the exchange of data between customs. In this phase, four customs offices exchanged data of their AEO certified companies through the CADENA solution in an automated, secure, and real-time manner.

However, despite the success of CADENA v.0 some longer-term challenges were identified. These revolved, mainly, around the technological infrastructure design -a private Blockchain- which supported the application architecture. The challenges were related to lack of scalability, difficulties to establish a long-term governance and maintenance and data privacy concerns by the users.

CADENA v.1, or second phase, benefited from the fast evolution of the Blockchain technology itself. At that time, taking advantage of the synergies of LACCHAIN, CADENA v.1. was transformed and conceived using a different architecture based on a public permissioned Blockchaininfrastructure.

 In the table no. 1 the main differences between CADENA v.0 and v.1 can be compared.

13. Lessons learned from the project/service

2

14. Main benefit(s) of the project/service
Enhanced regulatory compliance*
Transaction Cost savings*
Transaction Time savings
Simplified process
14A. Elaborations/detailed description on benefits gained:

Point-to-point automation of data exchange through the digitization of AEO certificate status.

A secure, reliable, and traceable mechanism to exchange data associated with AEO certificates that makes it possible to maintain all the shared records related to each AEO certification over time (a historical record) in an unaltered manner

Data integrity and access control though authentication of customs officers tied to specific roles and authorizations.

Transparency in the data associated and exchanged.

Potential reduction of times and costs for trade operators by guaranteeing that the application of the benefits both at origin and at destination will be automatic from the moment they receive the AEO certification from customs administrations which have signed an MRA.

15. Technical/financial/capacity building/other assistance

One of the main objectives of the initiative was to create knowledge and capacity in new technologies in customs administrations, so they could maintain and evolve CADENA. The Inter-American Development Bank (IDB) played an important role leading the conceptualization of the project and its funding. At the same time the IDB provided input while supervising the technical implementation.

The IDB created an environment for customs officers both in the business and technology areasto work together from the early stages to design the CADENA application and to implement it. The IDB hired a technological provider to assist in the design and the implementation. Everything was documented and shared in a repository.

Every aspect of thedeployment of the infrastructure in LACCHAIN and the different versions of the application CADENA were done by custom officers with the virtual guidance of the technological provider and the IDB assistance. 

16. Future plan for expansion of the project and service

CADENA could be expanded to automate and manage the whole AEO certification process, promoting both efficiency and auditing traceability. It could also be integrated with other Customs systems, such as risk management applications through APIS, thereby alleviating a range of inefficiencies while spurring change and modernization within Customs.

- CADENA can be scaled to other countries to join and could also interoperate with other blockchains and entities, making it possible to leverage the single version of truth about AEO certified operators for insurance, tax and trade finance purposes.

17. Other information or relevant references on the project and service

https://www.LACCHAIN.net/projects/CADENA

18. Relevant document regarding the project/service
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C. Relevant Standards

20. Electronic message standard
20A. Electronic message standard supporting the project/service:
JSON:
20B. Type of standard for electronic message applied for the project/service
Industry-specific standard
Technical recommendations from international body(ies)
21. Technical communication standard
21A. Technical communication standard supporting the project/service
HTTP, SMTP, Telnet (TCP/IP), Websockets
21B. Type of technical communication standard applied for the project/service
International standard
Industry-specific standard
Project is based on Hyperledger Besublockchain technology
22. Security-related standards*
22A. Security-related standard supporting the project/service
TLS (Transport Layer Security) / SSL (Secure Socket Layer)
Payload (message) encryption (text security)
Digital signatures
22B. Type of security-related standard applied for the project/service
International standard
Industry-specific standard
23. Other Technical Information
23A. Interface developed for data exchange with an internal system
The project relies on the LACChain Blockchain Pro-Testnet which is built on Hyperledger Besu open-source technology. This allows the use of smart contracts to stablish the rules for the trusted exchange of information. A private channel allows for private information to be exchanged between customs nodes and the public ledger stores the cryptographic proofs for integrity.
23B. Other technical implementation information
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