Incoterms Smart Contracts for World Trade

I would like to thank Marcos Torres from Marcos Torres Consulting for the thought provoking questions. I realized this needed to be addressed, although was hoping to advance this project with others, but his questions inspired me to work on it some more and advance this. It's getting interesting. If you need a consultant for smart contracts with Ethereum or in Financial Services (Banking and Insurance) perhaps you can contact him.

In your document, you wrote what does every business partner (e.g. insurer) use from the

dashboard for something. Yes, that is good, but there is no much description about the information

that has to be exchanged between e.g. the buyer&insurer or insurer&carrier or customs&carrier or

seller&consulates... or ...

And I don't expect that you describe such interactions in that document, because it is only a general

description of what the dashboard offers.

An end to end scenario about selling e.g cocoa would be something like this:

Let's start with the Incoterms Chart (standardized) for place to start and the start of the smart contracts involved. Let us use the terms Ex Works for the terms of sale per incoterms, as the smart contract, though this scenario can be played out a number of ways, per the incoterms smart contracts, and bear in mind, these terms are negotiable, and this one benefit of a dashboard in the process. But let us start with Ex Works. In this scenario, the import duties and taxes are paid by the seller. All other costs are paid by the buyer, as the chart indicates. This is the starting point.

1. seller Cocoa Ltd offers cocoa under XY conditions in the dashboard
   Terms of incoterms are Ex Works (as seen in dashboard and chart above)

1. buyer Lindt Ltd wants to trade with Cocoa Ltd
   It is agreed through the dashboard to use Ex Works smart contract.

2. Cocoa Ltd and Lindt Ltd agree in the buy/sell conditions
   Per Ex Works smart contract and both agree to utilize Oracalize (Ethereum) to arrive at specific requirements to be met for smart contract, and that entails certification of quality for cocoa, and that those requirements are met in advance of funds being transferred.

3. Lindt Ltd contacts UBS Ltd in order to manage the Letter of Credit required by the

buy/sell conditions
Lindt Ltd (buyer) contacts UBS Ltd in order to manage the letter of credit required by the buy/sell conditions, but the smart contracts in Ethereum will be the terms of sale and the smart contracts per incoterms. UBS Ltd. Initiates the hard currency financial services provided per between their client, Lindt Ltd (buyer) but the dashboard has clearly specified the terms of sale per incoterms, and it was arrived at Ex Works. UBS Ltd will be required to utilize the dashboard for their client for the purpose of the financial arrangement agreed upon between them and their client, in this case the buyer, Lindt. Ltd. Be it hard currency or credit terms, UBS Ltd will transfer into Ethereum per the contract terms (as specified) and utilize an “oracalized” establishment of price at an Exchange (Bittrex for all concerned purposes). The posted price at Bittrex is what is utilized and is tied to the smart contract. This is written into the smart contract as it requires an agreed upon spot price (Bittrex being the agreed spot price per contract, and if site is down, transaction will not go through, as it is thrown). UBS Ltd handles all financial services on the dashboard for the smart contract requirement and per client agreement.

1. Cocoa Ltd ask for an insurance police with AXA Ltd to insure the transport
   Cocoa Ltd asks for insurance policy with AXA Ltd to insure the transport, but the terms of sale dictate that the buyer (Lindt Ltd is responsible for the payment of insurance. The buyer doesn't have an insurance company in mind but respects the seller and agrees per Incoterms dashboard (smart contract) to utilize AXA Ltd as insurance company for this transaction, and the main reason was that AXA Ltd accepts Ethereum as payment. This scenario enters into a new smart contract with buyer and insurance, since the buyer is responsible per Ex Works smart contract terms of sale and payment is specified at a certain time and date per the smart contract.

2. Generalli Ltd ask Cocoa Ltd about a Quality Certification of the cocoa in order to

calculate the premium amount. At the same time, AXA Ltd says to Cocoa Ltd, that the

Bill of Lading have to be presented because the cocoa is only insured from the seaport

of Nigeria to the seaport of Hamburg (no other parts of the route are insured because

the damage risk is too high). At that point, the insurance premium has to be paid after

X days
Generalli Ltd asks Cocoa Ltd (seller) about a Quality Certification (which needs to be “oracalized”) and written into smart contract (and agreed upon specification or certification that must be met for transaction to be sent. If it is not, order is thrown. With this certification, this portion of the smart contract is met and since it is agreed upon in advance, this certification will then allow for an insurance premium to be arrived at as it is necessary given the arrival at the quality of the cocoa. Since AXA Ltd is the specified insurance company per smart contract and incoterms smart contract (Ex Works) they require the Bill of Lading be presented because the cocoa is only insured from the seaport of Nigeria to Hamburg. Per smart contract, the Quality Certification and the Bill of Lading must be sent with verifiable documents (again oraclized) via an agreed upon source (be it original document or digitized and legal document). Once conditions are met and premiums are paid per smart contract. Contracts must be written so as to indemnify both parties from legal costs or costs should entire conditions not be met and costs are incurred. While it the terms clearly specify the terms of sale and costs and liability associated with logistics and sale of cocoa, it must be drafted to clearly specify who is responsible for any costs associated, should smart contracts get thrown as specifications are not met, that could include any requirement to pay an insurance company or financial services fees should they be incurred if transactions cannot complete as conditions are not met.

1. Cocoa Ltd ask for an insurance policy to Zurich Insurance Ltd to cover the damage

risk from the port of Hamburg till Berlin because Lindt Ltd has the chocolate factory

there.
Cocoa Ltd asks for insurance policy from Zurich Insurance to cover damage risk from the port of Hamburg to Berlin because Lindt Ltd has a chocolate factory there. But Cocoa Ltd is the seller and Lindt Ltd (buyer) and is responsible per Ex Works. Again, Lindt Ltd respects and agrees to utilize Zurich Insurance to cover this damage risk from the port of Hamburg to Berlin and this is written and specified in the smart contracts, and all costs are paid by Lindt Ltd, but after discussion with the supplier who recommended Zurich Insurance and has a strong relationship with them.

1. As agreeded between buyer/seller, Cocoa Ltd pays the transport cost (CRF/CIF/...)

and therefore search in the dashboard for the best offer of all transport companies

which are visible in the dashboard. Fedex Ltd is selected and provides the route to

Cocoa Ltd and AXA Ltd.
By way of a routing order, and after further consideration, and a trial shipment in becoming the first importer in the world to utilize the Incoterms Dashboard, the actual agreement became Ex Works as the smart contract, as the terms of sale were negotiable per the dashboard. It was more cost beneficial to Lindt Ltd to change the terms of sale from the original offering from Cocoa Ltd, as the total cost calculator of the dashboard showed significant savings in taking control of the terms of sale and arrived at Ex Works. After the traffic department at Lindt Ltd in Berlin analyzed total costs associated with Cocoa Ltd, which entailed breaking down the rates they have with multiple suppliers, and the fact that Fedex published their rates on the dashboard, it became the specified carrier for the transport of goods and documents to the insurance carriers. These costs are paid by the buyer (Lindt Ltd) and (assuming Fedex accepts Ethereum) and these smart contracts are initiated. Lindt Ltd and the traffic department analyzed total costs and their rates with several airlines and freight forwarders and per the total cost calculator, arrived at significant savings in transacting through the dashboard.

1. After selecting and agreeding the transport conditions, Fedex ask for the quality

certification and the proof of origin of the cocoa because they are required by the

customs in Germany.
Terms are Ex Works and Lindt has chosen Fedex. It has already been oracalized that the original copy or digitized legal document are acceptable upon certain conditions. Per German import laws, Fedex must provide the quality certification and proof of origin which is already on the blockchain and is already being tracked and traced, with transaction number specific to the smart contract. It is still possible to preclear this shipment via EDI link, however, the potential to automate preclearance via blockchain is more efficient to preclearance and German customs, that the German government is considering blockchain technology for import regulation and efficiency.

1. After lading the cocoa in the truck and send it to the seaport, the customs of

Nigeria require to see the documents of the origin and quality (1) of the cocoa (in order

to calculate an export fee), the insurance documents (2) and the apostille of the german

consulate (3) that the cocoa can be imported in Germany according to german law.

This kind of description can be done in another way too, e.g. drawn. This was a way to explain to

you what I was asking for. Your document contains what the buyer can do, what the seller can do,

what the insurer wants, etc, but to understand how the business works in order to create the

dashboard, it is necessary to know what happens or can happen from the beginning to the end of

the trading activity in every step, which are the interactions between the different business

partners.
This is all prearranged with the oracalization of the required paperwork and proper documentation, which may entail hard copies and the necessity to air freight documents to meet the deadlines per smart contract.

Your User Story is like an index of a book (the description of the content of the book). For me, the

next step is to read the book because with the index I don't have enough details.

Is it the scenario above of the cocoa a real scenario? Or is it completely wrong? Have such kind of

scenarios to be covered by the dashboard or not?
I took a spin on the original scenario given, because I wish to illustrate that all things are negotiable in a decentralized world trade dashboard. It was studied and arrived at that Ex Works were more beneficial to the buyer in the end, all things and all costs considered. This is how the business decision was arrived at to be the first importer in the world to utilize the Incoterms dashboard. The scenario you described originally is a very likely real scenario. Such scenarios, or the one arrived at in my responses (Ex Works) have not been explained fully in detail to illustrate the complexity of the smart contracts and requirements and all the players involved. But as one can see with such a scenario, this is big business, which encompasses many institutions and the need for automation and ease of use are profitable ventures for those that illustrate the beauty of such a system, and therefore it is scenarios such as these that exemplify the potential markets. It also points to the opportunity for smart contract writing and the direction this will take logistics and import and export, and that entails air freight, ocean freight, maritime law, insurance, trucking, and customs (governments), while it also hints at solutions via blockchain technology as it relates to tracking and tracing (right in the dashboard) and even preclearance of goods and documents versus Electronic Data Interface. The efficiencies and automation across several institutions and the total cost savings from conversion of currencies, be it from hard currency to Ethereum, or from Ethereum to Bitcoin can be arrived at via the total cost calculator, in live time, so that conversion calculations and currency adjustment factor is taken into consideration, at least to the point that all terms are negotiable in all the world's trade, all via the dashboard.
Is the scenario above of the cocoa a possibility or not? Or do I have it completely wrong? Has such kind of dashboard been invented yet and have you ever heard of the Incoterms Dashboard anywhere else? This is an original idea and one that I believe has merit on the arena of world trade moving forward. This is a profitable venture waiting to happen, decentralized at that.

As you see, there are different scenarios/business cases. The case of buying/selling iron is different

to the case of buying/selling Uranium or different to the case of buying/selling eggs (dangerous

materials). For every case, e.g. the customs or the insurance ... needs different information/papers

in order to make able the trading without issues, and those cases should be covered by the

dashboard, right?
Yes, real threats, countries that are banned, or commodities that are banned, or hazardous materials all must be taken into consideration, it needs to be done responsibly for this very reason, to help protect society, environment, people, and animals, and to help protect against fraud or liability. There is a need to be responsible and there is a need for legal services, banking, insurance, and professional services. This is all part of the arena. The smart contracts must throw the contract and not transact and it all must be specified in advance, say specific countries, or commodities that are banned (consider species of wood from rain forests, or blood diamonds, or weaponry, etc.). Decentralization is a buzz word, but real threats exist and the safety of employees and complete countries are a necessity. It just needs to be done in a responsible manner, in advance, and well thought out in order to comply with regulations and industry standards. This is why it is necessary to partner with appropriate entities in order to build it responsibility with these things in mind, yet in a way that all can benefit given the innovation and technology and capabilities.

BitcoinMacroeconomics.com original