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This post is written by Mariana de la Roche Wills, Lead Project Manager at the IOTA Foundation and Co-Chair of the Social Impact Group of INATBA

  • **The problem: **Inefficient and intransparent transactions of paper-based information have a corrosive effect on global supply chains, leading to delays and lost profits.
  • Why it matters: Markets such as East Africa, where the majority of exports are agricultural goods, are heavily dependent on efficient and timely supply chains.
  • The solution: Distributed Ledger Technology enables a secure, transparent and frictionless movement of information, making international trade more efficient.

On 26 July this year, a new digital trade corridor between the UK and Kenya was agreed upon in a Memorandum of Understanding signed by the UK’s Institute of Export & International Trade and TradeMark East Africa (TMEA), a development agency-funded organisation that aims to grow prosperity in East Africa.

Agreeing to increase trade efficiency by eliminating paperwork and increasing visibility across supply chains, the Kenya-UK agreement is the latest salvo in the battle against inefficiency in global trade, which causes delays and hurts business. This is particularly acute in the East Africa Community (EAC), including Kenya, where the majority of exports are perishable agricultural goods, such as coffee, cut flowers, tea, tobacco, fish and vegetables.

The memorandum focuses on a digital system called TLIP, the Trade Logistics Information Pipeline. TLIP is expected to improve trade between Kenya and the UK by reducing the administrative procedures and time to import and export by at least 30%, order turnaround times by up to 40%, and compliance costs by 20%. It is also expected to reduce duplication, thereby cutting steps in the trading process in half.

Established in 2020, TLIP harnesses distributed ledger technology to open up trade and make it more efficient. And it is this technology that promises to deliver a secure and seamless trade for the future.

Trade today: Costly, inefficient and inaccurate

International trade relies on the transmission of multiple documents. From air waybills to certificates of origin, insurance policies to packing lists, inspection certificates to bills of exchange, each stage of trade depends on the exchange of trusted, official information.

However, documents are open to abuse. Human error, corruption and lack of transparency relating to one single document can have a knock-on effect on the entire supply chain. And the lack of a cross-border integrated framework for information exchange means that goods and services in transit are impossible to track with pinpoint accuracy, leading to mistrust, comprehensive controls, inefficient planning and other issues that hamper the free flow of trade.

Furthermore, information is processed by third parties, often using manual documents that are vulnerable to fraud and loss, or are out of step with the movement of their respective goods or services.

These are the challenges that TLIP is designed to overcome.

TLIP

TLIP is developed by TMEA in collaboration with the IOTA Foundation, the Germany-based non-profit organisation behind the IOTA distributed ledger technology (DLT). DLT is the technological infrastructure and protocols behind blockchains and cryptocurrencies like Bitcoin, and it enables data and value to be shared immutably by devices without a centralized point of control.

Dating from March 2020, the partnership between TMEA and the IOTA Foundation is built on a shared vision for improving trade through technology. It creates initiatives to improve data management and collaboration along trade corridors, ensuring digital solutions benefit both large corporations as well as smaller traders. With an initial focus on the Kenyan flower industry (which exports roughly 180,000 tonnes of flowers annually), TLIP is built to be adopted by trade actors around the world and across all commodities.

TradeMark East Africa's Trade Logistics Information Platform Documentary

TLIP is funded by the Netherlands government, the UK’s Department for International Development and the United States Agency for International Development, and pilots are ongoing with actors such as the Kenya Revenue Authorities, Kenya Plant Health Inspectorate Service, the Horticultural Crops Directorate, and the Agriculture & Food Authority. But how does it plan to reconfigure the way data is shared in trade, and what role does blockchain play?

Here comes the science bit… concentrate!

Currently in test pilot, TLIP can be used by anybody who shares information that ensures goods move from A to B, including traders, border authorities, transporters and freight providers. By introducing a thin infrastructure on top of existing systems, which enables all systems to share data and grants access to users via remote PCs and mobile devices, it boasts cutting-edge security while not storing or controlling data centrally. These connections are automated to allow for border agencies to share information without introducing new work processes. The frontend allows all trade actors (agencies, traders, transporters etc.) to upload their documents; once uploaded, the documents are protected against loss and forgery, and can be easily shared with relevant parties.

The IOTA distributed ledger technology ensures that information processed by TLIP is shared securely and seamlessly. Digital documents shared via TLIP can be trusted to be authentic and cannot be tampered with at a later stage. Like a government stamp, TLIP ensures security and auditability of the countless certificates generated by a supply chain, while its distributed nature means that trade actors can interact without relying on a centralised platform, vulnerable to bottlenecks, hacking, or the creation of a monopoly actor, as has been seen with many centrally-controlled platforms.

As the underlying technology for TLIP, IOTA is highly scalable. Unlike other blockchains, IOTA processes transactions in parallel rather than a serial chain of blocks, meaning transactions are processed faster and require no fees. This helps ensure TLIP can be adapted to different markets, industries and trade actors.

IOTA is also the green alternative to other blockchains, which use energy-intensive miners to validate transactions rather than IOTA’s solution of having each transaction reference and approve two existing transactions (in fact, IOTA was recently named among the top environmentally aware blockchain and crypto projects by the International Business Times). This also serves to make TLIP adaptable to trade in ecologically sensitive markets.

What next?

Until mid 2022, TLIP will pilot with relevant government agencies, trade associations and traders across the EAC. Beyond that, different destination markets such as the UK, US, Pakistan and the EU, will be involved in accepting digital certificates for the commodities involved in TLIP.

To find out more, and how you can participate, visit the TLIP pages on the websites of TradeMark East Africa and of the IOTA Foundation. You can follow TradeMark East Africa on Twitter at @TradeMarkEastA and the IOTA Foundation on @iota. – Mariana de la Roche Wills

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