FINANCIAL TECHNOLOGY AND OTHER RELATING ISSUES
4. Solutions to promote the application of traceability in Vietnam
Without a doubt, traceability is a trend that Vietnam will have to apply whether it likes it or not. Therefore, it is necessary to have solutions to help enterprises realize the importance and be encouraged to execute it to their production and business, or their products and goods.
Firstly, the Government needs to have policies to promote, facilitate and support enterprises, especially SMEs. These companies have limited resources and insufficient facilities to be able to build and deploy their traceability system. Hence, the Government's policies need to create incentives and encourage companies to use this technology methodically and strictly.
Secondly, the central State management agency needs to have specific regulations on traceability. They need to check regularly to ensure companies have enough capacity to build traceability solutions, and they precisely follow the rules. Next, there must be specific regulations on organizations' capability of testing and evaluating traceability. The traceability activities are meaningful if the rules are mandatory for enterprises. And it is supervised by state agencies. The products will be valuable high due to proven quality. It creates the brand name of Vietnamese goods for export, creating the trust of consumers. Local state management agencies must understand the regulations and requirements on traceability to
support local companies. Enterprises also need to build links with stakeholders in the chain.
Standards are not only a barrier but also a catalyst for enterprises in the industry to develop.
National standards on traceability need to be compared with and based on international standards. However, it should be strict enough but appropriate for the general Vietnamese enterprises' development. So, products and goods that meet the requirements of this national standard can be qualified to import into fastidious markets. A specific national standard for traceability will allow companies a particular orientation, and the standards' requirements are moderate to implement. Enterprises have insufficient resource will be in trouble when they try to meet international strict standards and policies. So, the national traceability standard helps companies orienting moderately to carry out their traceability activities. Also, implementing this traceability standard help create uniformity and consistency in the national scope.
Third, local management agencies and companies need to be trained methodically on traceability activities. On the part of local management agencies, they must need the education to have stricter management of registration and use of QR codes, to avoid fake and low-quality goods having the opportunity to mix. On the side of enterprises, it is necessary to have trained how to manage traceability stamps through IT. Also, they need training on related skills and how to record also update traceability information fluently, accurately, and quickly. At the same time, traceability policies and regulations from countries where the local products and goods exported need to be regularly updated. Hence, both the local management agencies and local enterprises can grasp the new aspects and changes to approach this technology flexibly and timely.
Fourth, traceability activities need to be associated with state management activities to improve transparency and clarity about product origin also stakeholders in the product value chain. Along with it, the system will promote the effectiveness of traceability. Since there, the new information retrieved is correct and complete, and at the same time strengthens the responsibility of the parties involved in the creating process of those products and goods. A product or goods guaranteed to provide all necessary information related to traceability need to show information as the parties directly involved in the production process, the supplier, input materials, the transportation process, distribution to consumers, along with information certified by state management agencies, etc. Each organization related to products and goods must show in the retrieval information, especially information related to the state's checking and certification.
Fifth, on the side of traceability service providers, need to do research and improve products and service provision processes. So, to meet customer requirements in terms of quality, price, transparency, security, and ease of use. Along with ensuring the requests of state management and law for its operations.
References
European Commission. (2021). FLIS Tool (Food Labelling Information System). Brussles:
Electronic.
European Parliament & Council. (2002). Regulation EC No. 178/2002. European.
GS1. (2017). GS1 Global Traceability Standard (GTS). Brussles: International not-for-profit Association (GS1).
ISO. (2015). ISO 9000:2015- Quality Management System- Foundations and Vocabulary.
ISO Publication.
Lam Huu Danh & CS. (2020). Assess the needs of enterprises and consumers for a traceability tool that applies code and barcode technology. Industry and Trade Magazine.
Ministry of Agriculture and Rural Development. (2018). Consolidated document No.
01/VBHN-B
Ministry of Industry and Trade. (2020). Summary of import and export activities in the period 2016-2020. Hanoi: Ministry of Industry and Trade's Database.
Ministry of Industry and Trade. (2021). Summary of import and export activities the first quarter of 2021. Hanoi: Ministry of Industry and Trade.
Ministry of Science and Technology. (2019). Draft guidance on traceability according to GS1 Global traceability standard. Hanoi: Ministry of Science and Technology.
NNPTNT in traceability the unclean food. Hanoi: Ministry of Agriculture and Rural Development.
TCVN. (2019). TCVN 12850:2019 - Traceability - General requirements for traceability systems. Hanoi: Vietnam Institute of Standards and Quality.
Thu Huong. (2020). Standardizing the traceability of goods. People (Electronic). Hanoi, Vietnam.
Traceverified. (2019). Application of 4.0 technology in Traceability. Hanoi, Vietnam:
(Electronic).
United States. (2011). Food Safety Modernization Act – FSMA.
BLOCKCHAIN BILL OF LADING:
THE FUTURE OF LEGAL REGULATION IN VIETNAM
Bui Nguyen Tra My
University of Economics and Law, VNU Ho Chi Minh City Abstract
The international shipping industry is responsible for the carriage of around 90%
of world trade. Currently, technology and blockchain, including Blockchain bill of lading are gradually changing the face of this long-standing traditional industry. Vietnam is a developing country but is quite responsive to technological change. But has the Vietnamese law created favorable conditions for blockchain bill of lading to develop yet? In this research paper, we will answer two research questions including (1) whether the Vietnamese legal framework is enough to encourage the development of electronic bills of lading on the Blockchain platform and (2) how to improve the legal framework. The research methodology is legal analysis and synthetic method.
Keywords: blockchain, blockchain bill of lading, electronic bill of lading, security, maritime law.
1. Introduction
Blockchain is considered to be the "key" of the Industrial Revolution 4.0 and the foundation of future information technology. Currently, the keyword phrase “Blockchain” or
“Bitcoin” is one of the most searched words in the world. However, Bitcoin is only a small part of Blockchain technology. Blockchain technology has many more applications than Bitcoin, such as smart contracts or other applications for different fields, including the maritime sector.
In 1990, CMI (The Comité Maritime International - International Maritime Commission) accepted the electronic bill of lading (BL) to replace the traditional paper bill of lading and issued the principle of electronic bill of lading (The Comité Maritime International, 1990). This principle is optional, not mandatory, but it is the basis for the parties of the contract of carriage to agree to use the electronic bill of lading. This rule does not interfere with the Hague-Visby Rules, Hamburg Rules because it stipulates that “the contract of carriage shall be subject to any international convention or national law which would have been compulsorily applicable if a paper bill of lading had been issued” (The Comité Maritime International, 1990, article 6). Thereby opening up opportunities for the maritime industry to develop electronic bill of lading to replace paper bill of lading.
Blockchain bill of lading helps to limit the weaknesses of paper BL and is more interested in the context of the COVID pandemic.
Some platforms that currently use Blockchain BL have emerged such as TradeLens, CargoSmart (GSBN), Wave, and CargoX. Within the scope of the study, we will only mention the terms of the contract provided to users of the CargoX and Wave platform, which provide Blockchain solutions for electronic bills of lading, approved by the P&I Club, as reference cases in practice.
Vietnam's law does not clearly stipulate electronic bills of lading, but there is no ban on electronic bills of lading. In accordance with the article 148 Vietnam Maritime Code 2015,
“Transport document includes bill of lading, through bill of lading, sea waybill, and other transport documents”. Thus, whether it is a paper bill of lading or an electronic bill of lading, it is a transport document that ensures the three main statutory functions of a bill of lading: a receipt, evidence of a contract of carriage, and a document of title.
However, the issues are (1) whether the Vietnamese legal framework is enough to encourage the development of electronic bills of lading on the Blockchain platform and (2) how to ỉmprove it. Two issues will be presented in the paper.
2. Literature review
There have been many research papers on blockchain and its application in the maritime sector, which must be mentioned the article in 2018 named “The Use of Authentication Technology Blockchain Platform for the Marine Industry” written by co- authors Mamunts, DG, Marley, VE, Kulakov, LS, Pastushok, EM, & Makshanov, AV. The paper analyzes the use of blockchain technology in the shipping industry: its issues related to digital identity, authentication and confirmation of access rights issues; documents of technical inspections of ships and oil installations. The authors outline Russian legal regulations on blockchain technology, specifically cryptocurrencies, but do not specify how other blockchain technologies are controlled by the government.
There have also been some research papers on Blockchain BL such as Chapter 6 of the book “Big Data and Global Trade Law” about “Blockchain’s Practical and Legal Implications for Global Trade and Global Trade Law” written by Emmanuelle Ganne (in 2021); a paper (in 2021) written by Wang, F. entitled “Blockchain Bills of Lading and Their Future Regulation”.
Both papers analyze the development of the Blockchain BL in the maritime sector, legal challenges of using the Blockchain BL, and provide measures to promote the development of the Blockchain BL. While for the former, the role of the WTO is emphasized, for the latter, the role of self-regulatory entities and instruments of the maritime industry is appreciated.
Another paper named "The Bill of Lading on the Blockchain: An Analysis of its Compatibility with International Rules on Commercial Transactions" (in 2021) of Shope, M.
L. analyzes the international legal aspects of the bill of lading on the blockchain, including the Conventions international on Bill of lading and the Model Law on Electronic Commerce, Electronic Signatures, and Electronic Transferable Records to answer the question whether a blockchain bill of lading is compatible with international commercial instruments. The new point of the article is that the article is the first study in Vietnam to study blockchain bill of
lading, opportunities, and challenges for Vietnam to receive this new technology. The article points out that the current legal regulations are not enough to regulate this field and need further study to form a safe legal framework for platform users and the state could manage this sector. While waiting for new legal regulations, users can protect themselves when participating in the system by some solutions presented in the research paper.
The qualitative research method is the method of analysis and synthesis. The analysis method is used to analyze legal regulations on bills of lading, electronic bills of lading, and blockchain bill of lading. The analysis clarifies the current state of economic regulations to show the positive and negative aspects of regulating blockchain bill of lading. The synthesis method is used to synthesize the analysis of legal provisions to have a basis for proposing solutions and recommendations to improve the law.
2.1. Overview of Blockchain
Traditional databases are maintained by a governing organization. This organization has the right to control and interfere with the data. However, the fact that data is managed by an organization will sometimes be unsafe for users and for the organization itself because the intervention was assigned to only one subject (Mamunts et al., 2018).
Blockchain is a decentralized database based on the peer-to-peer (p2p) network, the public registry, and the cryptography of the public and private key. Entering the blockchain network, the user connects to other computers on the network in order to exchange data with them: blocks and records. This is a way of storing data or a digital register of transactions, transactions, contracts (Casino et al., 2019). A blockchain, as a database, contains the history of all the exchanges between its users since its creation. It is shared by its various users, without intermediaries, which allows each one to check the validity of the channel.
Figure 1: Structure of traditional centralized processing network (a),
decentralized processing network (b), and blockchain technology processing network (c)
Source: (Baran, 1964) Blockchain implementations can be either public (public Blockchain) or private (private Blockchain).
Public blockchain means anyone can read, use it to make transactions, and can take part in the consensus, for example, public blockchain platform Ethereum. The Ethereum has
“transactions”. Transactions contain the recipient of the message, a signature identifying the sender, the amount of ether and the data to send, as well as two values called STARTGAS
and GASPRICE (Shrestha et al., 2020). This is a fully decentralized network system, with no centralized registration, and no trusted third parties. In addition, public blockchain does not have any regulations that the nodes have to follow. Bitcoin is an example of a public blockchain and currently, bitcoin is not considered a legal means of payment in Vietnam (according to Official Letter 5747/NHNN-PC of the State Bank of Vietnam dated July 21, 2017, sent to government office). Currently, both Wave and CargoX platforms claim to use public blockchain (Ethereum) (The UK P&I Club, n.d.) but with the data currently provided by the two companies, there is no guarantee that the two blockchain systems have all the benefits of a public blockchain (Wang, 2021). The advantage of these two platforms is the unlimited number of participants, facilitating transactions in international trade.
In contrast, for a private blockchain, the consensus process can only be achieved by a limited and predefined number of participants. A private blockchain is not fully decentralized like a public blockchain platform (Wang, 2021) because an organization to have authority over the network, i.e. not open for the public people to join in, read permissions can be public or limited (Guegan, 2017). Therefore, in the case of participating in the private blockchain, a user may have to accept the regulations that the system offers, the number of participants will be limited. The private blockchain is currently being applied quite a lot in the company's internal network or in several areas that need high privacy and management, which can be classified into 3 types: (1) Applications for the transfer of assets ( 2) Applications of the blockchain as a register (3) Smart contracts (Guegan, 2017). Currently, the platforms using private blockchain in the field of bills of lading are TradeLens and CargoSmart (GSBN)...
2.2. Overview of Blockchain bill of lading
A Blockchain BL is an electronic bill of lading, sent through the Platform for Blockchain. It could be negotiable and the new owner could claim legally ownership rights.
However, cryptographic techniques, for example, using hashing, will help ensure the security of the transfer and possession of the BL, helping to maintain the uniqueness of the BL like paper BL. The decentralized nature of blockchain will distinguish blockchain bills of lading from former eBL systems such as Bolero (Wang, 2021)
With Blockchain BL, multiple parties will keep copies of recorded transactions, including the transfer and possession of the bill of lading, so the information cannot be changed. If a part of the nodes fails, the network can still operate normally because other computers and nodes will continue to work to protect information. The information is expanded in real-time. The confirmation of information is automatic and does not need intermediaries. Blockchain technology attracts investors because of its transparency and security. Thanks to the online ledger, all information must be transparent (Mathis, 2016). That leads to the reduction of risks and fraud.
Some of the advantages of applying BL blockchain to international commercial transactions are listed as follows: First, it helps to speed up transactions. Modern technology has increased the speed of ships, possibly even faster than sending a paper BL. There are
cases where the goods have arrived at the port of destination but the consignee has not yet received the original bill of lading to release the goods. This hinders trade activities, increases demurrage, detention charges, and a number of other operating costs. Sending a blockchain BL normally takes only a few seconds (see more on Cargo X and Wave BL websites) instead of days like traditional paper BL. Second, it helps to avoid the situation of losing the original bill of lading (Shope, 2021, tr.186). Losing the bill of lading will lead to many complicated consequences. Usually, when the consignee or shipper loses the original bill of lading, the carrier will ask for a bank guarantee or a letter of indemnity or a mortgage for a period of time, about 2-5 years, of the same or higher value of the consignment. Either way, the consignee or shipper still has to pay a fee to the bank or carrier or accept a freeze of money as security for the release of the goods. Third, it saves costs. The cost of sending a bill of lading by post represents an expensive expense, not to mention the costs if the bill of lading arrives later than the freight ship also leads to many additional costs related to warehousing, ports, and transportation costs. other act. Fourth, cryptographic techniques such as “hashing” will help secure information, secure the transfer and ownership of bills of lading, making the BL blockchain unique like paper BL. The owner of Blockchain BL is clearly shown and the parties in this process can clearly understand who is the owner of the BL and has the right to take delivery. And fifth, two BL blockchain platforms, Wave and Cargo, have been accepted by the P&I Club, thereby facilitating the protection of the interests of ship owners and their vessels. This can also be the basis for later acceptance by courts and arbitrators.
However, this application incurs the following disadvantages: Firstly, because of the decentralization of the blockchain, there are two possible problems. The first is the threat of attack from a person or group of people who control more than 51% of the computer power, specifically more than 50% of the network's mining hash rate, creating a “51% attack.” (Ye, C., Li, G., Cai, H., Gu, Y., & Fukuda, 2018). Furthermore, there is no central authority that controls and is responsible for maintaining the system or for updating the software operating on the computers or the availability or security of a particular blockchain network (Salmon &
Myers, 2019, p.3), especially for public blockchain, the responsibility of real controllers of the platform is a challenge to the conventional legal regime (Wang, 2021). In case of the malfunction of the platform, who will be responsible for damages and compensate users. For the public blockchain, technically, nobody will. Cargo X also put an exclusion clause in its contracts with blockchain users: “Cargo X does not represent or warrant that its website will be error-free, free of viruses or other harmful components (viruses, trojan horses, worms, time-bombs, keystroke loggers, spyware, adware or any other technologically harmful programs, phishing, data or code.), or that defects will be corrected or that it will always be accessible” (article 13.2 of the CargoX Blockchain Based Smart Bill of Lading Solutions Special Terms and Conditions). And the P&I Club will not cover cyber risks related to blockchain platforms that are not approved (The UK P&I Club, 2018). Another problem is