ComChain Brochure Design

CONTENTS 1 EXECUTIVE SUMMARY 2 BACKGROUND What’s the Situation?

An Over-Reliance on Trust

4 THE COMCHAIN SOLUTION How it Works

Payment Structure Use Cases Regulation & Compliance

6 ABOUT THE TEAM 8 KEY FEATURES User Authentication

Single Window Online Payment Secure Messaging Provenance & IoT

10 KEY SERVICES Chain of Custody

Transfer of Funds & Documents

Data Harmonisation End-to-end Visibility

18 USER JOURNEY Personas

Transaction Process

21 ADVANCED BENEFITS & CONSEQUENCES Shipping Party

Non-Shipping Party Logistics Provider Customs & Border Control

23 TECHNICAL BRIEF Intro to Blockchain

Security in Decentralisation Model for Integration Technical Feasibility Study Intellectual Property

A Caduceus in Greek Mythology is the symbol that represents the protector of merchants. The ComChain logo is based on the oldest known representation, found on coins over 2000 years old from the Mauryan Empire.

The Mauryans were the first Indian Dynasty to connect all provinces in a trading network, and by doing so generated great wealth and prosperity across the subcontinent.

Comchain reinvokes the Caduceus as an international symbol of trust and protection for traders.

26 ROAD MAP Optionality Security Solutions Time-Line

30 MARKETING STRATEGY Target Markets Implementation SWOT Anticipated Demand

38 APPENDICES Glossary Bibliography

ComChain Ltd is a UK Registered company

COMMUNICATION COMMERCE COMMODITIES

COMMUNICATION

COMMERCE

A direct exchange of verified information will connect users in a secure decentralised network

Users will trade with each other directly and securely without depending on third parties

COMMODITIES The ID of goods will be known to all parties in a custody chain for the life-span of the transaction

MISSION London-based ComChain is inspired by the Mauryans and by Britain’s unique trading legacy to create a modern day global trading network, using the latest technology in decentralised systems. Cross-border traders will handle transactions with each other directly and autonomously in a secure online environment. This will create visibility, harmonisation and overall confidence amongst trading partners and their regulatory bodies.

ComChain has brought together UK leading experts in distributed ledger technology and large-scale security systems to create a high-level design, and is now looking for £200,000 investment to build a Minimum Viable Product (MVP).

COMCHAIN’S FOUR PRINCIPLES FOR GLOBAL FREE TRADE: Sovereignty

Zero Bureaucracy

Private corporations can trade with each other in alignment with the state without depending on third parties. Better information, choice and affordability empower consumers to determine the production of goods and services.

Paperless trade reduces bureaucratic procedures and excessive paperwork. This leads to the lowering of costs, and in turn better working practices, R&D and innovation.

Optimum Resource Allocation

Fulfilment of Demand

Confidence between parties mean resources can be better allocated and distributed. As consumers are willing to pay for a product, producers will pay to acquire capital assets and raw materials.

Market demands act as signals for producers until supply and demand reach a state of equilibrium. A level playing field enables entrepreneurs to go out in search of opportunities, and take risks to make a profit.

BACKGROUND “Every extra day required to ready goods for import or export decreases trade by around 4.5%.”

OECD 2011

WHAT’S THE SITUATION? Over the past 30 years, the Internet has connected the world and globalised economies. Global trade in this period has increased dramatically (see graphs), which has reduced the cost and increased the variety of imported goods and services.

Although the Internet has been able to connect cross-border traders in a way never seen before, these connections have remained insecure and dependent on third parties. A safe, direct and fully visible means to trade and manage global supply chains has yet to be implemented.

In 2017, GEODIS performed a worldwide survey of companies operating supply chains, with 623 participants in 17 countries. 70% of survey respondents said their supply chain was “very or extremely complex”. In the same year, the National Bureau of Economic Research published a working paper, which concluded that while more than 80% of international trade is carried by the global shipping industry, there are “major inefficiencies due to a lack of visibility and communication between carriers and shippers.”

These issues are at play in a time of increasing global demand and geopolitical instability – as the volume of world trade grows, tensions and disagreements are also growing in number and complexity. These have erupted as trade wars between the USA, China and Russia, and major uncertainties in Europe, particularly regarding Brexit. The UK imports 30% of its food from the EU, and yet the British Retail Consortium has most recently said in a letter to MPs, “While we have been working closely with our suppliers on contingency plans, it is not possible to mitigate all the risks to our supply chains, and we fear significant disruption as a result if there is no Brexit deal.”

“Research has shown that data inaccuracy among the UK’s top five retailers and their suppliers is costing as much as £1.4billion a year.”

David Hesketh, HMRC

The value of global exports

Value of exported goods as share of GDP

Source: Our World in Data

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MODELS FOR DATA TRANSFER

ORGANISATION

A

ORGANISATION

B

ORGANISATION

C

ONE STEP UP - ONE STEP DOWN The parties keep the data in their own local system and information requests are exchanged between immediate trading partners upstream or downstream.

ComChain has identified four specific issues with global supply chains: 1 The ID of goods in transit is not always known, or easily accessible, to the right parties at the right times. This causes inefficiencies, distrust between parties, delays and friction at borders; 2 Different models for data transfer mean each party in the chain has to manage and adapt their working procedures. This can lead to bureaucracy, a waste of time and capital, and a lack of visibility; 3 Communication and the transfer of information do not pass through a secure network, leaving supply chains open to fraudulent activity;

CENTRALISED The parties share the data in a central repository and send their information requests to it.

4 Transactions are not collateralised, and sellers rely on letters of credit in lieu of upfront payment. This system can lead to late or unfulfilled payments, and disputes between traders and their banks.

AN OVER-RELIANCE ON TRUST

NETWORKED The parties keep the data in their own local system and stage it in a way that enables all supply chain partners to query the data.

ONE STEP UP - ONE STEP DOWN A push method where data is systematically enhanced and pushed forward to the next party in the chain, enabling the sharing of data with parties further downstream, but not the opposite.

DECENTRALISED - THE COMCHAIN MODEL COMCHAIN uses blockchain to create a combination of the cumulative and networked scenarios, where data is systematically enhanced and all supply chain partners involved in the network keep a local copy of all data.

Source: GS1

In a simulation by the NBER, where carriers and exporters could communicate and exchange data in real time, economists found that global trade increased by a world average of 23%.

ComChain believes that trust between individuals is a virtue, but an over-reliance between profitmaking entities can allow for predation, and a stunted or irregular flow of capital. Reducing the need for trust between parties in supply chains would allow for a more free flowing and organic distribution of trade, driven more precisely by free market forces of supply and demand.

Decentralised systems and smart contracts will be key to solving this over-reliance on trust in the corporate landscape. Blockchain builds on the Internet to provide a trustless environment, where corporations or individuals can interact with each other electronically in a safe and structured way. These technologies will open up bold new opportunities for trade, and lead to greater global prosperity through the creation of fairer and freer markets.

THE COMCHAIN SOLUTION

ComChain is the first decentralised trade facilitation system, with a minimum viable product (MVP) focussing on a Buy-Ship-Pay model for B2B container shipping. Distributed ledger technology will connect parties in a chain of custody to a secure network, which will allow them to interact and handle transactions autonomously with each other across borders in a safe online environment.

A Web Portal and Decentralised Application (dApp) will provide users with key features in the areas of User Authentication, Secure Messaging, Single-Window Interfaces, Online Payment Solutions, Provenance of Goods and Data, and Internet of Things. These technologies will provide users with the tools to secure, verify, execute and record each stage of the transaction process.

The Web Portal will enable parties to interact with each other directly, set up smart contracts, and manage payments and all other elements regarding transactions, from point of order to final delivery. Users will have full control over confidential information, as data will be logged on the blockchain, stored locally, and shared directly between portals.

The dApp will maintain connectivity between the goods and users’ web portals, by scanning QR codes integrated with blockchain technology. Scans will provide information to the blockchain that can trigger at certain times the start and end of transactions, handovers, payments, a time and location log, and the exchange of messages or files.

HOW IT WORKS

“It is more important than ever to achieve trade facilitation to enhance administrative efficiency and effectiveness, reduce costs and time to markets, and increase predictability in global trade.”

UNECE Trade Facilitation Guide

Buyer and seller have their ID and insurance policies verified by ComChain to become users. They can then confirm the terms of transactions between themselves and verified logistics providers using smart contracts set according to internationally recognised Incoterms, which will secure the agreement in code. Payments will be sent to a deposit account, and a QR code for the transaction is then generated at origin by the seller, which is scanned by each partner in the transaction using the dApp to accept custody and record key tracking events on to the blockchain. Data and documents regarding the transaction will be authenticated, held immutably, and transferred securely in real-time. The transaction (including payment) will be concluded when the QR code is scanned by the agreed final party. The provenance of the goods and information relating to its journey will be secured in one place, and a consolidated copy of verified information can be made easily accessible to external parties, such as customs and final consumers.

ComChain will provide its users with four unique trading solutions:

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•

A seamless and continuous chain of custody;

•

A secure transfer of information and payment;

•

End-to-end visibility over the transaction life-span; and

•

The harmonisation of data and of int/ext business practices.

DATA FLOW SECURE & VERIFIED

PAYMENT STRUCTURE Setting up all parties to the ComChain network will be free – users will pay a small deposit as part of the verification process, but there will be no registration or monthly charges. Instead, ComChain will charge a commission, capped at 1% and tapered according to monthly transactions. This will be automatically charged to the buyer, but for buyer to seller payments a feature can also be set to share the cost (not applicable for payments to logistics providers). ComChain will maintain both £ sterling and Euro joint accounts in order to ensure a swift transfer of international funds, and a reduction in bank charges for end users.

CURRENT SITUATION FOR GOVERNMENT AND TRADERS

CUSTOMS

BANKS ELECTRONIC

USER

USE CASES CONTAINER SHIPPING RECYCLING/SCRAP METAL ROLL-ON/ROLL-OFF SHIPPING FOOD SERVICES LIQUID/DRY BULK SHIPPING PROCUREMENT

INSURANCE PAPER

RETAIL DISTRIBUTION DIRECT B2C

LOGISTICS

OTHER TRADERS

REGULATION & COMPLIANCE World Trade Organisation (WTO) – ComChain will fully comply with and help adoption of the standards set out in the WTO Trade Facilitation Agreement (TFA), which obligates member states to make best efforts to implement Single Window systems.

COMCHAIN: A SINGLE WINDOW ENVIRONMENT

United Nations (UN) – Implementation of the Buy-Ship-Pay Data Reference Model and Data Pipeline principles, developed by the UN/CEFACT (The United Nations Centre for Trade Facilitation and Electronic Business), will ensure the adoption of international level standards, the reduction of supply chain complexity, and standardisation for all users. ComChain will ensure full compliance with the Rotterdam Rules, and by encoding Incoterms in to smart contracts, the UN Convention of Contracts for the International Sale of Goods (CISG).

European Union (EU) – ComChain will follow all EU customs procedures and duties, including the requirement by default of correct documentation for all goods passing through EU borders. It will also comply with the EU Regulation on Online Dispute Resolution, and adopt the EBA’s Regulatory Technical Standards on strong customer authentication and secure communication under PSD2 (SCA-RTS).

This will be “key to achieving the objective of the PSD2 of enhancing consumer protection, promoting innovation and improving the security of payment services across the EU.” EBA

LOGISTICS

CUSTOMS

BANKS

USER

INSURANCE

OTHER TRADERS

HM Revenue & Customs (HMRC) – ComChain will ensure full compliance with customs procedures for goods passing in and out of UK borders. All data and documentation will be verified and available in a consolidated format for customs control, helping to promote strategic objectives such as frictionless trade.

A more detailed brief of the advantages to UK Customs are laid out later in the document.

Financial Conduct Authority (FCA) – ComChain will follow all regulation set out in the FCA’s Client Assets Handbook. Application will be made to become a regulated e-money institution (EMI), which will help give confidence to its users.

GS1 – Maintains global standards for business communication. ComChain will adopt a GS1 level system for traceability, and will adopt their reference models for all product identification and bar-coding.

THE UN’S FOUR PILLARS FOR TRADE FACILITATION

Source: UN

ABOUT THE TEAM

ABOUT THE TEAM CEO - Andy Wicks Andy started ComChain in 2018, and is the sole share-holder. He will run day to day operations, and is in charge of all recruitment.

He has had a varied career as a pro tennis player and coach, business-owner, commodities trader, and import agent. Andy has run several businesses involved in tennis, including private clubs and an online platform managing tennis services for local authorities. Andy then worked as a futures trader for a proprietary trading house in London, and subsequently traded his own account, operating mainly in the commodity markets.

He has also worked as a commercial agent, helping to connect Colombian fruit producers with importers in the UK. Andy has always been interested in what makes the world go round, the impact of globalisation on our societies, and how technology, such as blockchain, can provide innovative solutions to global problems.

Andy has travelled extensively, lived in several different countries, and speaks fluent Spanish and French. He was born and currently lives in London.

Technical Consultant - Johnathan Turrall Johnathan was the lead consultant on a technical feasilbility study for ComChain, and will oversee the development process and system deployment.

He is the founder and CEO of Cryptonomy, a team of expert consultants, computer scientists and development architects, specialising in blockchain and DLT, who seek to deliver socially beneficial innovation to the world.

Over the last decade, Johnathan has worked on a number of security and emergency services projects. His area of speciality is in complexity management for large system deployments, and he has been designing blockchain based systems since 2012. Clients include The Royal Mint, Ethereum, Cardano Foundation, IOHK and Ledger Wallet.

Lead Architect - Stefano Paluello Stefano was the main researcher on ComChain’s technical feasibility study, and will be the lead architect directing the development process on a day to day basis.

He is a highly experienced technical manager and architect, specialising in blockchain and functional languages. Stefano has worked for large multinational companies, such as Microsoft and Shell, and is an international speaker on blockchain and functional programming. He has also worked for innovative earlystage start-ups as well as creating his own, and has won several hackathon events.

Financial Director - Simon Michaels Simon and his team are working with ComChain to create a financial plan for the business, and will assist with its back office set-up and financial compliance.

Simon is Managing Partner at HW Fisher and CEO of FisherE, its online accounting and back-office services.

HW Fisher & Co is a top 30 UK chartered accountancy firm with a reputation grounded in quality, delivering premium advisory services efficiently and cost-effectively. It is a commercially astute organisation with a personal partner-led service aimed at entrepreneurial small, medium enterprises (SMEs), large corporates and high-net worth individuals.

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Legal (General) - Michael Buckworth Michael has advised ComChain on its early-stage development and financing pathways, and will submit ComChain’s application for SEIS status.

He is the Managing Director of Buckworths, a leading legal team of experts with unique experience advising cutting edge innovative and high growth businesses, including several involved in blockchain. Michael has a huge breadth of experience advising both large multi-national companies, as well as early stage start-ups and high growth companies. Named as “Corporate Lawyer of the Year” for the past three years, he spends much of his time advising clients on corporate and commercial strategy as well as dealing with other issues facing their businesses.

Legal (ODR) - Graham Ross Graham is advising ComChain on matters regarding its online payment and dispute resolution solutions, and will perform a legal review of the business plan.

He is a UK lawyer and accredited mediator with over 30 years experience in IT and the law. Graham is the leading UK expert in the field of ODR (Online Dispute Resolution). He co-founded the UK’s first ODR service, a blind bidding service called We Can Settle in 2000, and two years later the online mediation service The Mediation Room. Graham maintains a keen interest in blockchain technology and how smart controls can help solve online disputes.

Legal (IP) - Paul Harman Paul is ComChain’s IP attorney, advising on matters relating to the protection of their intellectual property. He has secured the ComChain trademark in three classes.

He is Director of London IP, a professional body of expert UK and European patent and trademark attorneys based in London. Paul has experience across the mechanical and electrical engineering fields, softwareimplemented inventions and business method fields, with significant experience protecting ‘difficult to patent’ inventions.

Business Consultant - Liam Hickey Liam is helping ComChain with financing and networking opportunities, by assisting with grant applications and introducing ComChain to other related businesses and networks.

He is a Senior Business Advisor at Newable, of which ComChain is a client. Newable supports London companies to increase their trade through connections with over 60 countries as part of the Enterprise Europe Network. Liam provides support to start-up and existing businesses, and specialises in business mentoring and advice, marketing and sales, raising finance, and internationalisation.

Design - David Clare David is ComChain’s Design Consultant, assisting in all areas of their company design and branding.

He is the founder and lead designer at Exposed Design Consultants, a team of award winning graphic designers specialising in retail and corporate branding, based in London. David has been an expert in the industry for over 30 years and has led the design team behind many successful businesses.

K E Y F E AT U R E S

USER AUTHENTICATION SECURE USER

Companies using ComChain will first need to become Verified Users. This will involve a verification of their company ID and insurance policies, with hashes logged on the blockchain and all information stored privately on their web portals. Each user will have a unique ID and digital signature with which they can maintain connectivity with the blockchain.

This will provide a secure means to communicate externally or internally, maintain ID access to the goods if necessary, and for the identity of all access-holders to be verified and entered in to the supply chain. The terms and ownership of authenticated files can also be agreed using these signatures and transferred securely between web portals using blockchain technology. A decentralised model means information uploaded to web portals can be shared securely between trading partners with full autonomy – all files will be stored locally, other than basic company information and any licenses or certificates that they wish to be shown to final consumers.

ComChain will fulfil the EBA’s “Security Measures for the Application of Strong Customer Authentication” as set out in SCA-RTS.

SINGLE WINDOW SINGLE WINDOW

Blockchain technology allows for the creation of a single window data pipeline, which will enable cross-border traders to lodge and extract standardised information with a single entry/exit point to fulfil import, export, and transit-related requirements.

Data and documents will be stored locally and can be then shared electronically through a single portal. This will enable individual elements to be submitted only once and confirmed as legitimate, improving the alignment of documents and trust between all parties. ComChain will sit below each user’s internal business infrastructure and record, verify, sort and filter all information relating to transactions, route them to targeted recipients, and return the response to the user. Data and documents will be confirmed as genuine, and one unique copy held immutably within the system, which can be exchanged between parties securely in real time.

This system has strong benefits not only for traders, but also for logistics providers, governments, and the banking and insurance communities, in providing them with authenticated, consolidated and timely information. It will comply with WTO and UN standards regarding trade facilitation and single window systems.

ESCROW

ONLINE PAYMENT Unlike other trade payment solutions that rely on collaboration with banks to provide proof of credit, ComChain will provide a simpler method by enabling direct payment between buyer and seller via a deposit account. The buyer makes the payment to ComChain, which holds it first in escrow until the transaction is completed, and the buyer then authorises the payment to be completed themself.

When a deal is made and a smart contract created, the buyer sends

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the funds from their own secure banking environment to ComChain, along with instructions that dictate how, when and why the funds can be released. They can then authorise the release of payments along the chain of custody at exactly the right time when roles have been completed, and in accordance with the terms of the smart contract. ComChain will make payment and delivery during transactions simultaneous, which will provide security and facilitate trade without depending on verification from banks – also eliminating the need for Letters of Credit. ComChain will follow FCA and EBA regulation to ensure client money is always safe, and will refer to an Online Dispute Resolution (ODR) service where disputes arise.

SECURE MESSAGING SECURE MESSAGING

ComChain will provide verified users with a blockchain-encrypted messaging service that will allow all parties to communicate with each other in complete confidence via the web portal or dApp. Clear communication along supply chains is vital, especially across borders. Whether it is to interact with other users, disclose confidential information or documents (including photos), report details of an incident or an abnormality with the product, communication via ComChain will be direct and confidential, as messages will not be passed through central servers but instead logged decentrally on the blockchain. This will greatly help to reduce the risk of fraud, as the identity of the sender and recipient(s) will always be verified and the content secure and authenticated. It will not be possible to edit or delete messages, or to deny that they have been received. This service will be available for verified users on the web portal or dApp as part of an internal and external network, and will comply with SCA-RTS and the EBA’s “Common and Secure Open Standards of Communication.”

PROVENANCE & IOT PROVENANCE

ComChain will ensure connectivity between the blockchain and the goods in transit by integrating QR codes with IoT (Internet of Things). Up-to-date live information will be picked up when the dApp scans the QR code, which will be logged to the blockchain and can update the smart contract. QR codes will be generated and scanned at origin to confirm the goods are ready for export and to start the chain. Subsequent scans can quickly build up an accurate picture of the GPS history, which is all logged on the blockchain. Scans made when goods change hands will mark the beginning and end of contractual obligations, and can trigger the release of documents and payment. Once the QR code has been scanned by the end party, the goods will be ‘ComChain Verified’ - logged on the blockchain from origin to final destination by a network of verified industry professionals. The full and immutable history - data and documentation - for each transaction will be accessible on users’ web portals. Parties external to the network, such as final consumers, will be able to scan a final QR code to view information about the product, including the route of origin, and other certificates such as Fair Trade. ComChain QR codes will meet international GS1 standards for full interoperability.

KEY SERVICES

CHAIN OF CUSTODY It is first important to distinguish between a tracking service and a chain-of-custody system. Most multi-modal transport operators (MTOs) will be able to provide a tracking service, but are custodians themselves so cannot also provide a custody service.

A true chain of custody involves the independent verification of the movement and location of physical evidence from the time it “Having a Chain of Custody solution is invaluable.

It simultaneously makes the supply chain more transparent and trading partners more accountable.”

Nigel Duckworth, Marketing Strategist at One Network Enterprises

is obtained until the time it is presented at delivery.

ComChain will ensure that: • Each party is insured and their identity verified before each transaction; • There is a secure custody chain for all documents released along the chain; • Every scan of the QR code will independently log the time and location of the goods using GPS; • Details of handovers, including the time and location, and the identities of the persons in contract with the goods, can be verified and logged; • There is verification of continuous possession; • Each transaction is collateralised with payment held in escrow; • Digital signatures can provide ID access to the goods; • Information sent between parties will be authenticated and securely transferred; • A secure line of communication will be maintained at all times.

ComChain will confirm that all parties are insured throughout the life of the custody chain and for the duration of the transaction. After funds are allocated, the QR code can be generated by the seller and then scanned by each custodian using the dApp and their own unique digital signature.

This will provide updates to the blockchain, which can then re-route the information to other verified parties.

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Release of documentation

SELLER

CARRIER A

INTERMEDIARY

Time location log

CARRIER B

BUYER

ComChain will provide a custody chain for goods and related documentation, from point of origin to final destination.

Here is a common example of a custody chain, with five parties involved in handling goods:

Seller > Carrier A > Intermediary > Carrier B > Buyer As goods are passed down the chain the following events occur: 1 The Seller initiates the transaction by generating and scanning a QR code to confirm the goods are ready for shipment.

2 Carrier A accepts custody for the goods from the Seller by scanning the QR code to confirm they have been received in good order. This logs the time and location of the handover, triggers the release of documents to relevant parties and payment to the Seller (FOBo option);

“People look at supply chain in pieces and it has to be looked at holistically. The way to truly analyse supply chain is point of order to point of fulfilment and doing that in as lean a way as possible.”

Karl Glassman, Chief Operating Officer, Leggett & Platt

3 The Intermediary accepts custody for the goods from Carrier A by scanning the QR code to confirm they have been received in good order. This logs the time and location of the handover, triggers the release of documents to relevant parties and payment to Carrier A; 4 Carrier B accepts custody for the goods from the Intermediary by scanning the QR code to confirm they have been received in good order. This logs the time and location of the handover, triggers the release of documents to relevant parties and payment to the Intermediary; 5 The Buyer accepts custody and receipt of the goods from the Carrier B by scanning the QR code to confirm they have been received in good order. This logs the details of the handover, triggers the release of documents to relevant parties and can release payment to Carrier B and the Seller (FOBd option).

If the above happy path is interrupted during the shipping process because an incident has occurred - such as the goods not arriving at the port of origin, the container falling in the ocean, the items found to be counterfeit, or an accident on the motorway - the incident can be logged by the responsible party, payment refunded fully or partially, and insurance companies updated with all information verified by ComChain.

KEY SERVICES

TRANSFER OF FUNDS & DOCUMENTS “It is estimated that up to 80 % of [Letters of Credit] contain discrepancies upon first presentation to the bank.

Mark Hayward, Managing Director at MJ Hayward Associates

“There have been attempts to both standardise and create central utilities in trade finance. Shared ledgers offer some unique advantages.”

UK Gov Chief Scientific Advisor

“Transforming what was traditionally a paper-based documentation system into an electronic format can speed up trade and ease the cost of doing business in today’s interconnected world.“ UNECE White Paper on Paperless Trading

SELLER

Payments for container shipments are most often facilitated using letters of credit, which involve banks having to verify that the terms of a transaction have been met before they will release funds to the seller. Meanwhile, information regarding transactions is often sent in different formats, and via insecure networks, such as email.

These exchange systems are plagued by inefficiencies, and are open to fraud and a breakdown in trust between parties in the supply chain.

This can often lead to legal disputes, which are difficult to settle across international borders.

Incoterms as Transaction Types In a ComChain transaction, custody will pass continuously down the chain, but the transfer of funds and documentation will occur when specific terms have been met - dictated by the smart contract. Smart contracts will be set according to Incoterms, globally recognised terms for international shipping, offered by ComChain as payment and delivery options. These will dictate details such as the relevant insurance policies, the timing of payments and the release of information to relevant parties.

As a Buy-Ship-Pay model, the MVP will offer FOBd and FOBo types(terms in glossary). If an FOBd option is selected, the funds will be released from the escrow to the seller and to the carrier when the QR code is scanned by the buyer on delivery. In an FOBo arrangement, the funds will be released to the seller as soon as the carrier has confirmed that the goods have been shipped, and to the carrier when the goods are received and the QR code scanned by the buyer on delivery.

FOBo Sale

FOBd Sale

LOGISTICS PROVIDER

BUYER

The sale will be concluded at a specific point, set according to the Incoterm and agreed in the smart contract. FOBd and FOBo payment options are shown here.

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Online Payment Solution ComChain will provide a secure exchange by holding all funds relating to the transaction in escrow. The system will be built to both collateralise and execute transactions - distributed ledger technology will allow for the transfer of funds and/or documents to occur only when the buyer (or other designated party) has confirmed that the goods have been received (in good order).

On confirmation from the carrier and then the buyer that the goods have been received, the buyer can authorise payment directly to the seller and carrier.

BUYER

AT I

PAYMENT

T

EN

YM PA

CONFIRMATION

ON

Product flow

M

LOGISTICS PROVIDER

FIR

Product flow

CO N

SELLER

COMCHAIN ESCROW

Funds will be sent to a ComChain deposit account from the buyer’s own secure banking environment before a QR code can then be generated to initiate the transaction. Payments can be authorised from the web portal when confirmations are received from the dApp that the goods have arrived at their destination. If confirmation can not be given, funds are withheld, details logged, and relevant parties informed. All information regarding the transaction up to that point will have been logged to the blockchain and visible to all relevant parties - helping to stop disputes from occurring.

Electronic Documentation Files uploaded to the web portal will be authenticated as originating from the verified and insured user, and an immutable copy can then be passed directly between users in real time. These can be made in to legally binding agreements quickly and with no risk of disputes as to the signatories, terms or jurisdiction. Each time users sign with their digital signature, a hash representing the signature and the file will be logged on the blockchain.

Ownership (of eg. bills of lading) can then be transferred with a simple confirmation from both the sending and receiving parties.

Legally binding agreements can be created by multiple parties in multiple jurisdictions using a three step process:

Signed - The document is created electronically and signed digitally by all verified signatories; Sealed - The document is time and location stamped and a hash is logged on the blockchain; Delivered - The signed contract is sent to all signatories’ web portals.

At certain key moments along the chain, users will upload and release several documents and data submissions relating to the transaction. Key documents will include Requests for Quotations, Packing Lists, Commercial Invoices, Bills of Lading, and Customs Import Declarations. Other documents can be uploaded to the web portal if required and a hash of them sent to the blockchain, also holding them immutable and transparent.

KEY SERVICES

DATA HARMONISATION The UN/CEFACT defines data harmonisation as an iterative process of capturing, defining, analysing and reconciling government information requirements, and data standardisation as the mapping of this simplified data to international standards.

“A Single Window can be an important trade facilitation tool.

For economic operators, such as traders: faster clearance times, a more transparent and predictable process and less bureaucracy.”

-UNECE

Throughout a cross-border trade transaction, traders and logistics providers have to provide information, such as details of the goods in transit, the buyer and the seller, to regulatory agencies and other partners along the supply chain.

When data requirements are not harmonised and standardised, each agency and document may contain differing specifications. Data is understood in various ways, and may not always have the same representation. This increases the complexity of managing information requirements and increases the likelihood of errors. Differences in data sets also inhibit exchange across custody chains, so that the same information often has to be submitted several times.

As a blockchain-enabled single window system, ComChain will ensure data harmonisation and regulatory compliance.

LOGISTICS PROVIDER

SELLER

Exchange of data and documents

Record. Verify. Sort. Filter

Detailed capture

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SECURE DATA FLOW

BUYER

Confirmation of sale and payment

Sitting below each user’s infrastructure, ComChain will provide interoperability and end-to-end visibility over the entire transaction process.

PRODUCT FLOW

Single Window Solutions As a single window system, ComChain will simplify the input and output of trade data and documentary requirements - an important aspect for the migration to paperless trade, and for document alignment. Data used in trade documents will be aligned with international standards, which will ensure data interoperability among the parties involved in transactions, and will contribute significantly to the reduction of time and costs. This harmonised data will be channelled through an electronic ‘data pipeline’ facility, where all trade-related documents and data will be submitted and extracted only once, so that repetitive keying of the same data can be reduced.ComChain will provide data harmonisation and document alignment for its users by: • Only permitting verified and insured users to submit documentation accessible to other parties; • Documents and data will be prompted for, and can then be uploaded to the web portal, authenticated and logged on the blockchain. Access can then be granted to other verified users (and to external providers) based on their requirements; “When you have a single source of truth that is updated either regularly or in real time, there is no need to spend time verifying, re-hashing, and tracking down multiple sources of data. The information is there, and you can decide upon it. This will make your company more agile and responsive to market changes.

Data Harmonization significantly decreases the time to create and access Business Intelligence insights while also lowering the total cost of data analysis.”

- Anil Kaul, CEO of Absolutdata

• Documents will be immutable as unique hashes of them will be logged on the blockchain, which cannot be altered or duplicated in any way; • Reducing information requirements by eliminating purchase orders, letters of credit, emails, certain invoices, receipts, redundancies and duplications to reduce paperwork, and allow for easier and quicker submission; • Facilitate improved data quality, reduction of errors and automation for the receiving, processing and checking of information, and the exchange of data; • Ensuring interoperability by adopting models and formats in line with international standards, such as the UN/CEFACT Reference Data Models (RDMs), and Data Pipeline principles; • Ensuring further interoperability by complying with the GS1 system of standards, including identification keys, Digital Link Standards and Global Traceability Standards; • Allowing for integration with other services that offer further supply chain harmonisation and electronic documentation services, such as Vendor Managed Inventory (VMI) and Edge CTP.

By holding this system on the blockchain, ComChain will enable nondisruptive adoption and interoperability between it and each user’s own IT infrastructure. It can then allow the user to make adaptations, by their own hand and in their own interest, to further streamline their business and administrative procedures.

Critical Tracking Event

Key in Data Element DIAGRAM 7 ComChain will provide a traceability system that will ensure data can flow both ComChain will provide a traceability network to GS1 standards

Product(CTEs) flow directions (upstream and downstream), and recored, verify, sort and filter critical tracking events Secure data flow and key data elements (KDEs) - Who, What, Where, When, Why - route them to the tartgeted recipients (other users/agencies/banks etc.) in the proper sequence/flow - and return the response to the user:

GOODS & DATA

PROCESSES WITHIN AN ORGANISATION RECEIVING SHIPPING PROCESSING

INPUTS

OUTPUTS

Each user will manage their own traceability data by consolidating critical tracking events from the dApp or their own tracking systems in to a shareable format as key data elements.

ORGANISATION

ORGANISATION

A

ORGANISATION

B

C

In order to ensure end-to-end traceability, users are connected in a network so that data can be accessed and combined

CTE

CTE

CTE

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

KDE: Who, What, When, Where, Why

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

CTE CTE

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

KDE: Who, What, When, Where, Why

CTE

CTE

CTE

CTE

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

KDE: Who, What, When, Where, Why

USER CTE

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

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CTE

CTE

CTE

CTE

CTE

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

KDE: Who, What, When, Where, Why

KDE: Who, What, When, Where, Why

UPSTREAM

INTERNAL

DOWNSTREAM

Data can flow in two directions (upstream and downstream), KDEs - Who, What, Where, When, Why – routed to their targeted recipients (other users/agencies/banks etc.) in the proper sequence, COMCHAIN ©2019 and the response returned to the user

CTE

CTE

CTE

KDE: Who, What, When, Where, Why

Source: GS1

END-TO-END VISIBILITY (E2EV)

“Obtaining real-time visibility across all tiers in the supply chain can significantly increase speed to market, reduce capital expenditures and manage risk… moving toward a demand-driven supply chain is probably the single most important step a global manufacturer can take today.”

Jeff Dobbs, Global Sector Chair, Diversified Industrials and Partner, KPMG

“The aim of end-to-end supply chain visibility is to provide controlled access and transparency to accurate, timely and complete events and data - transactions, content and relevant supply chain information - within and across organizations and services operating supply chains.”

Gartner Research Paper

Within a free-flowing supply chain, flow of product to the end customer and from the furthest upstream supplier needs to be synchronized to provide a smooth and efficient flow of material. If all relevant parties are aware of what is happening at all times, the supply chain is then responsive to variations in demand.

ComChain will enable all parties the ability at any point in the transaction process to view up-to-date events and data for live transactions, logged on the blockchain by each custodian. Parties external to the system, such as final consumers, can scan QR codes to view a verified route of origin for the goods and any certificates from the producer/seller. Customs agents will be able to check goods passing through borders electronically in a complete and consolidated format.

A Traceability Network End-to-end traceability, or a ‘traceability network’, refers to the ability to track and trace an object through its entire life cycle and through all parties involved in its production, custody, trade and use. Traceability needs to extend upstream (producers and suppliers) and downstream (distributors and retailers). If parties can always keep track of the custody of goods and communicate with each other effectively along their supply chain, issues such as the spread of disease and product recalls, can be dealt with much quicker and more efficiently.

A traceability network can: • Reduce business and supply chain risk; • Improve lead times and performance; and • Identify shortage and quality problems along the chain.

ComChain will provide its users with a GS1-standard traceability system by identifying, automatically capturing and recording critical tracking events (CTEs), and then sharing key data elements (KDEs) between parties handling transactions:

Identification – All users will be verified to confirm their identity and 77% of firms said they had “no visibility or a restricted view”, 62% said they had “limited visibility” or visibility 1 to 2 steps from production, and only 6% said they had “complete visibility”.

GEODIS Survey

insurance policy. Their details will be logged to the blockchain, resulting in a much lower risk of identity fraud. Interface with the goods via QR codes will allow access-holders to be identified, as well as CTEs, which will be logged and shared in real time as KDEs;

Automatic Capture – The first time a new party in the chain scans the QR code with their unique ID, it will capture the transfer of the goods from the custody of the previous verified party to theirs. Subsequent scans will log the time and location of CTEs, creating a detailed provenance of the goods in transit.

Recording and Sharing of Data – KDEs regarding each transaction will have their authenticity verified, and all data and files shared from the web portal or the dApp will be executed decentrally, allowing information to be sent directly and not via servers. All recorded data will be immutable, and verified copies can be made available to other users/agencies.

USER JOURNEY

PERSONAS COMPANY A – THE SELLER Spanish Oranges What They Do: Spanish Oranges are orange growers and packers, based near Valencia, Spain. They produce several varieties of oranges based on the season, and have a capacity output between November and July of 20 TEUs (Twenty-foot Equivalent Units) a week. They work on FOBo and FOBd arrangements - paid on shipment or delivery - and have their own trucks to transport their produce in pallets to the port’s CFS (Container Freight Station). They export to 30 countries in and out of the EU.

Requirements: This exporter requires a strong relationship and constant line of communication with its buyers and logistics providers. This is done mostly by phone and email. An internal computerised management system is used to keep track of their produce, which is harvested, packed and shipped on a daily basis. They maintain certifications with the Internation Featured Standards (IFS), GlobalGap, Global Standard for Food Safety (BRC) and Comunitat Valenciana (certified Organic).

Quality Objectives: • To improve visibility over their supply chains from harvest to delivery.

• To reduce disputes and counterparty risk by 10% each year; • To improve customer relations, including to provide more detailed and up-to-date information regarding products and shipments; • To increase production and output efficiency by 5% each year; • To migrate completely to paperless trade by 2020; • To ensure collection of payment within 10 days of delivery.

COMPANY B – THE BUYER GB Fruit What They Do: GB Fruit are distributors and suppliers of fresh fruit and vegetables based in Spalding, UK. They supply all sectors of the UK Market, including retail, food service, food manufacturing, and wholesale. They import mostly from Europe, but also North and South America, Africa and Australia, and approximately 10,000 TEUs a year pass through their warehouses. Their model is FOBd, so payments are made to company A and C on delivery.

Requirements: This importer needs to maintain a strong relationship with their suppliers and logistics providers. They communicate and share information with these trading partners on a daily basis by phone and

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email. They hold BRC accreditation and use a computerised management system to scan and keep track of all produce stored in their warehouses.

50% of their supplier relationships are managed by commercial agents, to whom they pay a 2% commission.

Quality Objectives: • To improve visibility over their supply chain from point of origin to delivery; • To provide more detailed information about their products to customers; • To reduce disputes and counterparty risk by 10% each year; • To migrate completely to paperless trade by 2020; • To reduce inefficiencies and save administrative costs by 5% each year; • To reduce the reliance on external agents by 50% in EU countries and by 20% in non-EU by 2025.

COMPANY C – THE LOGISTICS PROVIDER Europa Logistics What They Do: Europa Logistics is a Multimodal Transport Operator (MTO), operating shipping and freight forwarding between continental Europe and the UK. They ship and forward approximately 200,000 TEUs a year along these trade routes, and aim to provide a timely and efficient service. They are paid on delivery for their services, and run a line of credit to pay their sub-carriers.

Requirements: This carrier requires at certain times for the shipping party to provide genuine data and documentation on time and in a consolidated format. They will receive and share information with both parties at point of order, as goods pass in and out of their custody, and at point of delivery. This is currently done by email and paper.

Quality Objectives: • To improve the efficiency of loading and discharge rates by 5% every year for respective cargo; • To clear consignments within 5 working days after the full set of documents and container land at the port of discharge; • To effect shipment and release Bills of Lading within 5 clear working days after the full set of document and cargo arrive at CFS; • To ensure collection of payment within 15 overdue days from the agreed credit limit period; • To submit an offer to the client within 7 days of RFQ.

USER JOURNEY

TRANSACTION PROCESS (for FOBd)

1 Companies A, B and C (Seller, Buyer and Logistics Provider) become verified users. To do this they will have their company ID and insurance policies verified by ComChain. Copies will be stored privately by each user; 2 The Buyer fills out a Request for Quotation (RFQ) form and sends it directly to the Seller. They can negotiate final terms using the secure messaging service, or externally. A quote is returned to the Buyer within the platform, which if accepted, is confirmed and a hash logged on the blockchain; 3 The Buyer sends an RFQ to the Logistics Provider, who returns a quote. The quote is selected and confirmed, and a hash is logged on the blockchain; 4 A smart contract with “if-then” statements set according to the Incoterm, is signed digitally. Payment details are confirmed on the web portal, and the Buyer sends sends payment for the Seller and Logistics Provider to ComChain; 5 When funds are allocated and the goods ready to ship, the Seller generates and scans a QR code using the ComChain dApp on a mobile device. Documentation is logged on the blockchain and shared with the Buyer and Logistics Provider; 6 Upon receipt of the goods, the Logistics Provider checks they are in good order. If they are, the QR code is scanned to transfer custody and update the time and location data. When the goods leave their custody still in good order, documentation is uploaded and logged on the blockchain; 7 Goods not in good order are scanned in a different way to flag them. All details will be logged on the blockchain, and all parties alerted. Revised documents can be issued and old ones invalidated. Payment can be held temporarily or refunded; 8 The goods are delivered to the Buyer, who confirms they have been received in good order by scanning the QR code. This confirms the conclusion of the transaction, triggers the release of documentation and releases (with the buyer’s authorisation) payment to the Seller and Logistics Provider. If goods are not in good order, step 7 can be repeated.

Optionally, • The Buyer can set a feature that allows the final recipient of the goods (e.g. a shopper buying bananas in a supermarket) to scan a QR code that will take them to a ComChain web page, which will show the journey the item has taken and any certificates it may have, such as Fair Trade.

• The Seller or Buyer can make a ‘Locate’ request to the custodian of the goods, who can either scan the QR code using the mobile device or upload their own tracking data. This will be logged to the blockchain and routed directly and confidentially to the requesting party.

• All parties can extract verified data and documentation from their web portals, which they can send in a consolidated format to customs, banks, insurance providers, and other external agencies as required.

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COMCHAIN ©2019

BUYER

This party will arrange logistics directly with a verified provider using ComChain, and this information will be fed in to the smart contract. They will manage transactions with all counterparties directly in one place. The shipping party (who for MVP will also be the buyer of goods) will benefit from: • RFQs and quotes securely exchanged in one place; • Payment sent from own secure banking environment, securely held in deposit and authorised autonomously - with immediate information regarding the status of payments; • Confirmation and electronic certification of proper cargo and quantity leaving facility; • Control of access and entry into the container; • World-wide tracking and location of container for security and asset management; • Identifying and placing into the supply chain the identity of the company employee who certifies contents of container at sealing at origin and opening at destination; • Expedited entry of cargo and faster through-port time; • Knowledge of departures and arrivals; • Faster and enhanced payment and transmission of electronic data to Customs, such as Intrastat in the UK; • Lower insurance costs; • Data-based intelligence identifying weak points/delays/security risk areas in the supply chain; • Verification of compliance with Incoterms, and UN Convention of Contracts for the International Sale of Goods (CISG), specifically Articles mandating accurate cargo and quantities to be shipped under contract.

NON-SHIPPING PARTY SELLER

This party will manage transactions directly with the shipping party, and verify that they have dispatched/received goods by logging key tracking events and exchanging key data elements directly with the shipper and logistics provider. The non-shipping party will benefit from: • RFQs received and returned in a standardised format; • Payment for services credited automatically on completion with Proof of Delivery (POD) – no late payments; • Cargo identification and quantity verification with electronic certification at stuffing; • Knowledge of departures and arrivals; • ID of container throughout the supply chain; • Knowledge of opening or surreptitious access into container; • Third-party verification of all supply chain data elements, events and reports; • Lower insurance costs; • Enhanced knowledge of shipper and carrier performance; • Verifications of Compliance with CISG provisions.

A D VA N C E D B E N E F I T S & C O N S E Q U E N C E S

SHIPPING PARTY

A D VA N C E D B E N E F I T S & C O N S E Q U E N C E S

LOGISTICS PROVIDER

LOGISTICS PROVIDER The carrier will maintain a direct exchange with both shipping and non-shipping party for communication and sharing of key data elementelements, and payment will be arranged directly with the shipper. The logistics provider will benefit from: • RFQs received and returned in a standardised format; • Payment for services credited automatically on completion with Proof of Delivery (POD) – no late payments; • Custom integration in to existing operating systems; • Access control into container and knowledge of container location; • Certification and verification of identity of shipper and contents; • Protection against claims by shippers that unauthorised contents were the results of carrier action; • Marketing and sales tool to increase market share in providing secure containers to shippers, added value services, and revenue stream from commissions; • Data-based intelligence identifying weak points/delays/security risk areas in supply chain; • Automatic transmission to customs of container data - for instance, in the US data can be used in electronic filings for the Automated Commercial Environment (ACE) system; • Compliance with and protection within the Rotterdam Rules impacting vessel carriers; • All elements within the custody chain can be logged and available for law enforcement and company officials in evaluating a potential criminal act or merely the competency of the individual verifying the cargo; • Can provide direct internal line with sub-carriers.

CUSTOMS & BORDER CONTROL Customs will receive authentic and timely information for goods crossing through their borders in a consolidated format. Customs and Border Control authorities will benefit from: • Verification of the route of origin of all goods and ID of all access-holders; • Evidence of removal; • Faster and enhanced payment and transmi1ssion of electronic data into their systems; • Knowledge of which containers need no inspection, improving man-power efficiency; • Enhanced knowledge of actual container contents from an identified supervisory employee who certifies shipment contents and quantity at stuffing; • Identification of suspect containers based on real-time or close to real time electronic reports of authorised access, presence of WMD or other dangerous or illegal cargo inserted or present in the container - signalled by a break in the chain; • Elimination of third-party reporting of trade data (i.e. Motor Carriers and Border Customs brokers); • Evidentiary data for potential legal action.

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COMCHAIN ©2019

scratch using the latest distributed ledger and decentralised technologies. For the MVP, integration to the blockchain will only require the writing of hashes to verify files, and search functions to recall events recorded to it. Later, it will include more complex operations, live functionality provided by IoT, and will move to a cloud native solution. This will enable ComChain to improve its speed, scalability and margin.

INTRO TO BLOCKCHAIN A distributed ledger or blockchain is a growing list of records, where each page in a ledger of transactions forms a block. That block links securely to the next using cryptographic hashing - unique secure codes - which tie each block together to create a chain. The system is decentralised if transactions are validated (blocks are mined) by a global, rather than internal, network of computers.

Blockchain has been best known for its applications for peer-to-peer money transfer (eg. Bitcoin). But with the advent of smart contracts enabling much greater functionality, there are now many innovative and varied ways to apply the technology. According to Deloitte’s 2018 global blockchain survey, “Momentum is shifting from a focus on learning and exploring the potential of the technology to identifying and building practical business applications.”

SECURITY IN DECENTRALISATION

“Smart contracts… guarantee a very, very specific set of outcomes.

There’s never any confusion and there’s never any need for litigation.”

Jeff Garzik, CEO of Bloq

Recent advancements have enabled ComChain to design a fully decentralised system, which relies on no central point of control for the authorisation of transactions, making the system fairer and considerably more secure for all users.

ComChain will utilise innovative consensus protocols across a network of nodes, to validate transactions and record data in a manner that is incorruptible, honest and accurate. Since execution is managed automatically by the network rather than by individuals, unnecessary intermediaries are eliminated, as is the risk of tampering or manipulation.

TECHNICAL BRIEF

ComChain will build a minimum viable product (MVP) from

BLOCKCHAIN AS AN INTERNAL SYSTEM In this model, blockchain will secure each parties internal systems, but will not provide security or visibilitybetween parties

BLOCKCHAIN

BLOCKCHAIN

BLOCKCHAIN

LOGISTICS BUYER

SELLER

BLOCKCHAIN

EXTERNAL AGENCIES

INSECURE NETWORK

SECURE NETWORK

BLOCKCHAIN AS AN EXTERNAL NETWORK ComChain will adopt the model of facilitator, or night-watchman

VERIFICATION OF DATA & DOCUMENTS

VISIBILE; ORGANISED; SECURE; EFFICIENT

SELLER

LOGISTICS

VERIFIED DATA & DOCUMENTS

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EXTERNAL AGENCIES

BUYER

MODEL FOR

TECHNICAL FEASIBILITY STUDY

INTEGRATION

ComChain has selected a leading team of UK blockchain experts called Cryptonomy as its technical development team, based on their experience building security systems for major clients such as the Bank of England and the security and emergency services. ComChain commissioned Cryptonomy to carry out a technical study for a minimum viable product (MVP), with particular emphasis on security, functionality and scalability.

According to Deloitte’s survey, only 34% of companies had initiated some sort of blockchain deployment, yet 74% saw a “compelling business case” for its use. 41% also say they expect to implement blockchain technology in the next two years.

These statistics suggest that many business are now looking to deploy the technology, but yet for many a compelling application has not yet been presented to them.

ComChain believes that blockchain technology is most effectively implemented in to supply chains as an external network, rather than as a system of record. This will create consensus and interoperability between trading partners, avoid interruption and encourage streamlining of internal working processes. The distributed ledger will be the engine underpinning each party’s own infrastructure, by verifying each piece of information exchanged between it and other parties, and holding each one to a mutually agreed and beneficial set of conditions.

The brief of the research project was: • To research appropriate technologies; • To provide detailed research on selected technologies; and • To design a high-level technical architecture.

The following conclusions have been gathered: • A detailed study was undertaken of suitable technologies to build and deploy an MVP, as well as later developments. Based on this, a shortlist of technologies was selected; • The short-list was scrutinised, and deep research of the selected tech confirmed the viability of ComChain’s technical specification, as well as its process, security and scalability requirements; • A minimum viable architecture for the MVP was designed, providing a high-level structure for the ComChain system that will be used to help direct the development process.

• A development path was laid out that will lead to the rapid implementation of cloud native applications; • A time-line for MVP development was created. The build will take a technical project manager, a cloud developer and a mobile app developer, six months to complete; • Technical Architect Stefano Paluello will be ComChain’s Project Manager, and Cryptonomy CEO Johnathan Turrall will oversee development and assist with further recruitment and deployment.

ComChain is confident that it has a complete technological solution that is secure, scalable and will allow for further developments (see Road Map).

INTELLECTUAL PROPERTY ComChain will not rely on off-the-shelf products, but will instead be built from scratch using innovative and new-to-market technologies and patentable processes. As such, it is vital that IP is well protected during and after development. However, as long as the innovations most vital to the business case remain well protected, ComChain is committed to providing all non-critical software open-source.

Trademarks for ComChain and COMCHAIN have been secured for UK IPO classes 36, 38 and 42, and application for WIPO classification will be submitted when appropriate to secure international protection. Several website domains and social media usernames have also been obtained.

ROAD MAP

ComChain will first bring to market its MVP, but has also planned further innovative services to continue to improve its service to users and increase its user-base, which can be developed and introduced at key moments.

MVP

LATER PHASES

Request For Quotations (RFQ) for Buy-Ship-Pay model Incoterms offered: FOBo and FOBd

Request For Proposals (RFP) for more complex supply chain operations A maximum of 11 Incoterms can be offered, allowing for the targetting of other industries Enhanced tracking capabilities using IoT Info built up in data ‘snippets’ instead of docs to provide easier and better quality of exchange and data records Automatic verification of insurance - can partner with insurance alliances such as B3i Enhanced cash flow management and trading facilities Ability to alter destination and/or final buyer Custom derivatives offered for hedging goods in transit DevOps approach to develop cloud-native solutions

‘Locate’ requests sent to carrier eDocs verified and exchanged securely Insurance policies held on web portals Payments sent to ComChain in advance Single seller to buyer transactions Protection against counterparty risk Platform dependent

OPTIONALITY Increased user adoption will provide liquidity, and an ever faster and more streamlined exchange of information between shippers and their carriers. This environment will enable ComChain to introduce further services to its users, such as improved cash flow management, and alterations to shipping details while goods are in transit, including their re-sale to other users.

As ComChain increases the number of Incoterms offered for payment and delivery, its potential use cases will also increase, allowing it to target different industries. FOB is the most commonly used Incoterm for container shipping, but the introduction of others will enable its use in other industries, such as roll-on/roll-off and bulk shipping, or direct B2B or B2C e-commerce.

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SECURITY SOLUTIONS Aside from letters of credit, other forms of protection currently available to traders are futures contracts to hedge exposure to market volatility, and credit default swaps to protect against non-payment.

Futures Contracts offer good protection up until contracts expire, which for WTI crude oil for instance, is a month before delivery. But this leaves a significant period of time that buyers are left exposed during the delivery process to counterparty risk, a lack of optionality and short-term price fluctuations. This is itself a contributing factor for price volatility in futures markets when contracts approach expiry, as from that point in time traders are left with liability for the physical goods.

“Lack of transparency about rules and regulations, redundant and lengthy clearance processes, and multiple documents requirements in different formats and with different data elements, increase the costs and time of doing trade. Today these obstacles are seen as posing greater barriers to trade than tariffs and quotas do. They are “thickening” the border of countries (Wilson, Norbert 2007).”

- UNECE Trade Facilitation Guide

Credit Default Swaps protect the trader against non-payment by effectively swapping the risk with a bank. However, this transferral of risk to an outside party with no insurable interest in the goods is inherently unstable, and the CDS markets are largely dying since they were blamed for the financial crisis of 2008.

ComChain’s MVP will completely protect its users against counterparty risk by holding payment securely for the duration of the transaction, and allowing it to be released simultaneously with delivery. In later phases, it will provide further optional security features:

Phase 1 - Payments held in escrow to eliminate counterparty risk - MVP; Phase 2 - Optionality for buyers to alter shipping details and sell goods in transit on to other users; It is currently possible to alter bills of lading if they are of a negotiable type, and most carriers will accept this up until a few working days before goods arrive in port. However, it is a complicated procedure as all new information needs to be checked and signed, insurance companies informed, and old sets invalidated. As ComChain will allow for much easier and quicker exchange of verified information, these alterations can be done in a much more secure and cost-effective manner. This optionality will provide great added benefit and protection to shippers, as well as ease administrative procedures for the carrier.

Phase 3 - Custom derivatives to provide short-term hedging.

The smart contract will be a series of verified instructions for the transfer of goods and the allocation of funds held in escrow. These instruments, representing goods in transit, will hold a strike price and delivery date, and with sufficient liquidity could be traded as asset-backed securities.

This would provide users with a secure, cost-effective way to hedge their purchases against short-term risks directly with other users, without the need for outside parties.

ComChain has confirmed the technical feasibility of phases 1-3, and is confident that it will be able to provide a complete, cost-effective security solution by phase 3 to protect users against all three identified risks – nonpayment, lack of optionality, and market forces.

ROAD MAP

TIME-LINE Pre-Launch (2019) Development of an MVP will be completed by late autumn. Further investment will be sought through VC and grant applications, and the product will be pitched to UK logistics providers and SME importers. Staffing requirements: Technical Project Manager, Cloud Developer, App Developer.

Phase 1 (2020) The MVP will launch in the UK and EU. Initial focus will be on imports to the UK from the EU using multi-modal transport operators (MTOs). Additional staffing requirements: Back-end Developer, DevOps Developer, Sales Manager, Customer Liaison Officer, Verification Officer and Marketing Agency.

Phase 2 (2022) ComChain will further increase its user-base by introducing a service for non-EU imports to the UK, RFPs and additional Incoterms, for more varied and complex use-cases. Improved functionality and cloud-native applications will provide increased speed, automation and security for all users.

Phase 3 (2025) Global launch in non-EU Europe and Mediterranean, the Americas, Asia and Africa. Enhanced cash flow management and custom derivatives are introduced, enabling ComChain to target larger companies with greater volumes of transactions. Traders across the world can now connect using ComChain.

Phase 4 (2030) World-wide service in 10 languages, and all 11 Incoterms offered, to provide a full spectrum of uses for import/export. Users will benefit from enhanced optionality and risk protection. ComChain will be a world leader in providing secure cloud native blockchain solutions for supply chain management.

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M A R K E T I N G S T R AT E G Y 30 |

TARGET MARKETS

COMCHAIN ©2019

Introducing new Incoterms at key moments will allow ComChain to control the expansion of its user-base.

INCOTERM

TARGET MARKET EXAMPLES

FOB, CIF

fruit/veg, textiles, electrical goods

CPT, EXW

cars, buses, trailers, e-commerce (B2B and B2C)

DAP

medical devices, courier services

FAS

Ore, cole, agricultural products, oil

ComChain has identified several industries it can target, and believes that in time can be offered as a service to traders across the world. However, it also recognises the importance of a strong initial focus, and the target market until Phase 2 will be container shipping between the EU and the UK using FOBo and FOBd Incoterms. This will suit a Buy-Ship-Pay model, which will be recognised by buyers, sellers and logistics providers alike.

Container Shipping ComChain believes that container shipping provides an ideal market to entry, for the following reasons: • According to Statista, global demand for container shipping between 2016-19 has grown at its highest rate in the past ten years.

• Containerisation as a method of shipment is becoming ever more popular. Statista shows that global container shipping has been increasing steadily for the past 40 years, with nearly 2 billion tons carried in 2017 compared to a little over 100 million in 1980; • Containers are treated as units with all contents easily documentable, allowing them to pass quicker across borders and on to their final destinations. Standardised units will help simplify transactions and allow for easier analysis; • Container shipping is considered relatively environmentally friendly, with a much lower carbon footprint than air-freight;

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32 |

COMCHAIN ©2019

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The UK-EU Market Trade with the EU has grown steadily over the last few years and it continues to be the UK’s largest trading partner, with 207.6 million tonnes exchanged between the two in 2017. This represents three times that of any other UK trading partner, and 71% of main freight traffic through UK ports.

By providing a services for EU-UK trade first, ComChain is confident that it will be targetting the UK’s largest and most buoyant market, in which it can establish itself and grow.

Unitised shipping between the UK and the EU is also a growing market - In 2000, EU main freight traffic was at 6 million units and in 2017 it hit a record 8.5 million units, 6.5 million of which were TEUs. The UK

trades more TEUs with the EU than any other trading block except for Asia, which trades only slightly more.

Within the EU, the Netherlands is the UK’s largest trading partner, with over 30 million tonnes and 1 million TEUs traded in 2017.

ComChain will look to target the UK’s two largest trading partners

in the EU – the Netherlands and France, and the fourth largest but ZLWK WKH (XURSHDQ 8QLRQ

closest in proximity - the Irish Republic, as initial export markets.

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M A R K E T I N G S T R AT E G Y

IMPLEMENTATION

34 |

Alongside targetting EU to UK importers, ComChain will direct the majority of its initial marketing towards EU to UK multi-modal transport operators (MTOs). As the key facilitators between buyers and sellers, this party will be required to confirm custody of the goods, send/receive data and documentation, and accept orders and payment using the ComChain system.

Key benefits for these logistics providers are detailed earlier in the document, which ComChain believes will help them achieve their quality objectives, and position themselves as industry innovators. In exchange, ComChain will receive a direct marketing channel to a section of its target audience. It will look to further attract these key partners in the following ways: 1 Full service free of charge; 2 A free marketing tool - ComChain will promote their company; 3 Commission on transactions of goods carried by them.

By attracting these key facilitators between buyers and sellers, ComChain believes that its adoption as a preferred system will grow organically. To become a verified buyer, seller or transporter will be free and simple to do, which will further encourage its adoption. In order to exploit its growth potential as a professional network, ComChain will also look to methods that successful social media networks have implemented to quickly and efficiently expand their user-base.

COMCHAIN ©2019

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To target UK transporters most effectively, ComChain has researched 7(8 WZHQW\ IRRW where there is most movement of TEUsHTXLYDOHQW XQLWV LV D in the UK, and discovered that )HOL[VWRZH FRQWLQXHV WR KDQGOH WKH ODUJHVW DPRXQW RI FRQWDLQHULVHG WUDI¿F Felixstowe, Southampton and London are its three busiest ports - Felixstowe VWDQGDUGLVHG PHDVXUH WR LQ WKH 8. KDQGOLQJ RI DOO 8. FRQWDLQHUV LQ ERWK GLUHFWLRQV LQ DQGOH WKH ODUJHVW DPRXQW RI FRQWDLQHULVHG WUDI¿F port handles 41% of all UK containers at just over 4 million TEUs in 2017.

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M A R K E T I N G S T R AT E G Y

SWOT Strengths 1 First to market – The first commercial trade facilitation system of its kind in the UK. 2 Development team – Experts in building and deploying large-scale security systems.

3 Innovative – Built from scratch using blockchain technology.

Weaknesses 1 Lack of capital – Will need start-up funds from loans, grants and investors.

2 Lack of reputation – The business hasn’t been established yet and is offering an unknown product.

3 Small team – Will have to employ a team of full-time staff for launch.

Opportunities 1 Controlled expansion - Will seek to capitalise early to gain maximum market share.

2 Continued innovation – cloud-based solutions and improved functionality will attract and retain users.

3 Post-Brexit – Can be used as a tool to connect with new trading partners.

Threats 1 Market readiness – Some not ready to trust new technology still in its infancy.

2 Large competitors – Big players in supply chain and e-commerce looking to blockchain solutions.

Trade facilitation: “The simplification, standardisation and harmonisation of procedures and associated information flows required to move goods from seller to buyer and to make payment.”

UN/CEFACT definition

3 Imitation - Will lose market purchase if IP isn’t protected and roll-out not strategic.

ANTICIPATED DEMAND The UK Chief Scientific Advisor has said that distributed ledger technology “could prove to have the capacity to deliver a new kind of trust to a wide range of services.” Three-quarters of respondents to a recent Cognizant blockchain study said they believe blockchain will be either very important or important to the future of their industry, and 84% expect annual cost savings of over 2.5% by applying blockchain in their organisation.

There are still uncertainties, and over half (56%) of the survey said that “understanding blockchain use cases was a top internal barrier to adoption.” But ComChain believes that if it communicates its business case well, by its launch in 2020 the market will have gained sufficient knowledge of the technology to have confidence in its product.

There is certainly a strong push at an international level for trade facilitation. According to the UN, these systems will enable traders to “gain

36 |

COMCHAIN ©2019

in terms of higher predictability, speed of operations and lower transaction costs, resulting in more competitive exports on global markets.” The WTO also mentioned in relation to single window systems that “removing the administrative bottlenecks can have powerful effects on reducing trade costs.” It is clear that the regulatory bodies believe there will be key efficiencies and cost savings to these new systems for all parties, most of all for traders themselves, and that they expect them to be implemented in the short term.

Here are some final statistics from the recent GEODIS study, which show a strong willingness to invest in supply chain solutions, and proven success for those companies that do: • 66% of firms dedicate between 5% and 15% of their turnover to supply chain spends; • 62% of organisations have implemented “problem solving & continuous improvements” as a core practice in their supply chain. Organisations investing more heavily in this optimisation have a higher EBIT and see the impact on top line results; • Investment leads to top line growth, with higher EBIT for organisations with Heads of Supply Chain in C-Level, and for those that saw their supply chain as a competitive advantage; • To “improve end-to-end supply chain visibility” was ranked #3 goal for respondents.

SINGLE WINDOW SAVINGS “The Kenya TradeNet System enables traders who depend on East Africa’s economic gateway seaport of Mombasa, and the country’s airports and land borders to track, clear and move their goods across borders much faster, easier and cheaper through a simplified cargo clearance process. The potential benefits of the Kenya TradeNet System to the economy based on the present volume of goods imported and transited through Kenya as a result of streamlined procedures will result in annual savings to the Kenyan economy ranging between USD 150 million and USD 250 million during the first three years.

This is expected to increase to between USD 300 million and USD 450 million annually in subsequent years.” Kenya Revenue Authority “With a budget of USD 3.5 million staggered over four phases between 2010 and 2014, the Rwanda Electronic SingleWindow project already reports results in reducing the time taken to clear goods to 23 hours in 2014 from two days and ten hours in 2010. The resulting estimated total cost of a declaration for an authorised economic operator has gone down from USD 350.0 to USD 64.5. It is estimated that return on investment based on savings is USD 18 million per year”. TradeMark East Africa “Since 2008, the government of Tajikistan has been developing with the support of development partners a single window facility to reduce the costs associated with exports and imports and improve trade facilitation conditions in the country. The single window programme stipulates a phased approach.

The first phase focuses on standardising, simplifying and automating the exchange of information and documentary requirements associated with customs clearance, thereby setting the context for including other agencies, such as logistics service providers, during a subsequent second phase.” Tajikistan“ The single window is part of our strategy to attract more international trade, reinforce the local economy and improve our position in the World Bank’s competitive index in its Doing Business report. A particularly innovative billing system lies at the heart of the new Togolese single window: all payments and transactions are listed on one single document, enabling costs and taxes to be monitored more efficiently.” Togo Source: WTO Secretariat research

GLOSSARY

Distributed Ledger Technology - A ledger of transactions or contracts maintained in decentralised form across different locations and people, eliminating the need of a central authority to keep a check against manipulation. All the information on it is securely and accurately stored using cryptography and can be accessed using keys and cryptographic signatures.

Blockchain – The blockchain keeps a record of all data exchanges on the ledger, with each one counted as a transaction. A distributed system is utilised to verify each transaction, which is added to the ledger as a block. New transactions are continually added to the blockchain and can not be altered or reversed.

Decentralised Application (dApp) - An application run by many users on a P2P decentralised network with trustless protocols. dApps connect users directly even when on the move, while still designed to avoid any single point of failure.

Smart Contract – A computer code running on top of a blockchain containing a set of rules under which the parties to that smart contract agree to interact with each other. If and when the predefined rules are met, the agreement is automatically enforced. The smart contract code facilitates, verifies, and enforces the negotiation or performance of an agreement or transaction.

Cryptographic Hash Function - A mathematical equation that enables many everyday forms of encryption, by securely mapping data of arbitrary size onto data of a fixed size. This includes everything from the HTTPS protocol to payments made on e-commerce websites, and its use essential in blockchain technology.

QR Code - A machine-readable code consisting of an array of black and white squares, typically used for storing URLs or other information for reading by the camera on a smartphone. QR codes can be blockchain-enabled, which allows them a greater number of applicable purposes.

Digital Signature - Digital signatures are like electronic “fingerprints.” In the form of a coded message, the digital signature securely associates a signer with a document in a recorded transaction. ComChain will use a standard, accepted format, called Public Key Infrastructure (PKI), to provide the highest levels of security and universal acceptance.

Internet of Things (IoT) – An ever-growing network of physical objects that feature internet connectivity, and the communication that occurs between these objects and other Internet-enabled devices and systems. This extends connectivity beyond traditional devices to a diverse range of everyday things that utilise embedded technology to communicate and interact with the external environment.

Critical Tracking Event (CTE) – According to GS1, “these are the actual events that occur to the traceable objects during their lifecycle, such as receiving, transforming, packing, shipping, transporting.”

Key Data Element (KDE) - According to GS1, “these are the pieces of data that describe the actual instances of the CTEs. The data will commonly cover the five dimensions of Who, What, Where, When and Why.”

Open-source - A decentralised software development model that encourages open collaboration. A main principle of open-source software development is peer production, with products such as source code, blueprints, and documentation freely available to the public.

Cloud-native - An approach to building and running applications that exploits the advantages of the cloud computing delivery model to vastly improve how applications are created and deployed. It offers nearly limitless computing power, on-demand, along with modern data and application services.

DevOps (Development and Operations) - An enterprise software development phrase

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used to mean a type of agile relationship between development and IT operations., which aims to create a culture and an environment where building, testing and releasing software happens rapidly, frequently, and consistently. It is a key characteristic of cloud-native organisations.

Incoterms - A set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. They are published by the International Chamber of Commerce (ICC) and are widely used in commercial transactions. The 11 types, last updated in 2010, are explained in the table on page 26 – and the two that will be used for ComChain’s MVP are explained below.

FOBo - The seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays the cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination. The title of the goods is transferred from the seller to the buyer (the sale) at the seller’s shipping dock.

FOBd - The seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays the cost of marine freight transport, insurance, unloading, and transportation from the arrival port to the final destination. The title of the goods is passed from the seller to the buyer (the sale) at the buyer’s receiving dock.

Request for Quotation (RFQ) - A standard type of procurement solicitation in which a company asks outside vendors to submit a quote for the completion of a specific task or project. It provides comprehensive information to the bidder concerning the project’s requirements, and in return requires an itemised costing.

Multi-modal Transport Operator (MTO) – This carrier takes liability for the multimodal transportation of the goods on behalf of the buyer ( in an FOB model) under a single contract. They are legally responsible for the entire carriage, even though it is performed by at least two different forms of transport.

Container Freight Station (CFS) – A container freight station is a facility where freight shipments are consolidated or de-consolidated, and staged between transport legs. A CFS is typically located in proximity to an ocean, port, or airport where cargo containers are transported to and from.

Buy-Ship-Pay Model

Source: UN

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F O R M O R E I N F O R M AT I O N

info@comchain.uk