How an Ecosystem of Trust can become a shield of protection against international threats

Global Trade 2.0 series, chapter III

The future is international trade is based on building ecosystems of trust. These ecosystems of trust and the development of trust-based trade superhighways linking global trading hubs will benefit the global trading community and society as a whole with compliant and trusted members of the trading community acting as a bulwark against the threat of international organized crime. Trusted traders will enjoy lower costs and the faster and more predictable movement of goods in return for keeping their supply chains compliant and clean from interference by organized crime. This, in turn, allows customs and law enforcement to devote their limited resources to the weaker links and vulnerabilities in global supply chains that are targeted by organized crime and, within an ecosystem of trust stretching along entire supply chains, coordinate with law enforcement in other jurisdictions.

While historically customs and other border agencies often viewed the international trading community - and even other domestic and international border agencies - with a mixture of suspicion and distrust, new platforms have emerged in recent decades that have created the basis for relationships founded on trust. Digitalization is now acting as an accelerant and driver of ecosystems of trust and trust-based trade superhighways. The availability of large volumes of data, new technologies, and increased transparency have created the conditions for greater levels of trust between customs and the trading community and can act as a safeguard against the threats posed by increasingly sophisticated and internationalized organized crime.

To be able to better shield our societies from the effects of transnational crime, the speed at which ecosystems of trust are developed must be increased. Initiatives such as the United Kingdom ‘Ecosystem of Trust’ pilot in which Maersk is a lead participant provides an example of how the increased availability of data can benefit the trading community and society by creating ecosystems of trust for compliant and trusted traders.

Building trust-based super highways

Until recently, the experience for most businesses moving goods across borders was not positive. Customs and other border agencies tended to treat each and every trader, consignment, and transporter as a risk. This not only made navigating border processes slow and uncertain but created an atmosphere of suspicion that cut both ways: traders that had strong track records of compliance resented being treated as if they were potential criminals and border agencies used that resentment as confirmation that everyone was a risk. While supply chains for a long time has been optimized, adding alternative sourcing and routing strategies to optimize resilience, the border has been a ‘black-box’ with lack of coordination. This is about of change as a result of various Governments modernizing their border management strategies to implement Single Trade Windows and Coordinated Border Management models., ???

This traditional approach made life simple for organized crime. Customs and law enforcement agencies had no way of knowing which participants in a supply chain had strong compliance records and internal controls in place to minimize risks and due to this could be proven low risk trusted traders. Resources to tackle illicit trade, smuggling and other cross border crime were consequently spread thinly, allowing criminal networks to easily flood markets. They would have to count on some goods being seized, but there was no way all smuggled goods could be stopped. Even where the risks for smuggling were highest, the absence of trust across entire supply chains meant that the damage was generally limited to only one country.

The one-size-fits-all approach to border management began to break down in the late 1980s and early 1990s with the first trusted trader programs, such as Sweden’s Stairway concept. These programs took the logical approach that those businesses trading goods across borders that could demonstrate a record of customs compliance should benefit from their investment and that border agency resources were better directed at those traders that could not or would not be compliant. The 9/11 terrorist attacks accelerated this trust based process and added security as an important feature of compliance. These changes resulted in the World Customs Organization SAFE Framework of Standards which provided an international basis for the Trusted Trader programs and the concept of Authorized Economic Operators – business formally recognized by customs as fulfilling requirements to be a trusted trader. These rusted traders received benefits such as faster border processing times and deferred duty payments.

Trusted trader programs also provided clear incentives for participants in global supply chains to become compliant traders. There were advantages in making investments that ensured traders – and their upstream and downstream partners – kept supply and value chains clear of interference and that they met or went beyond basic compliance requirements.

This also meant it became more difficult for organized crime to penetrate supply chains as part of their global smuggling operations. While it may once have been possible to piggy-back off some of the best functioning global supply chains to smuggle drugs, weapons or tobacco, it now became much harder. Customs and law enforcement could now target resources at supply chain participants that were not trusted traders, raising the costs and risks of doing business for international crime syndicates as more smuggled goods were seized and more criminal networks eliminated.

There are now more than one hundred thousand Authorized Economic Operators in hundreds of trusted trader programs operated by different governments around the world. Trusted trader programs often extend to all supply chain participants, including transporters, traders, freight forwarders, and customs brokers and agents. Free Trade Zones, through the World Free Trade Zones Organization’s ‘Safe Zones’ initiative, are now also important participants in creating compliant international trade.

Through Mutual Recognition Agreements between countries, Authorized Economic Operators can be recognized in different jurisdictions, allowing trusted supply and value chains to operate faster and more cost-effectively along highways of trust linked by Free Trade Zone ‘Safe Zones’ that act as trusted hubs for international trade. Creating these ‘trusted’ highways – and Mutual Recognition Agreements in particular - also created the conditions for law enforcement agencies to not only identify compliant traders in a supply chain, but to be able to target and share information on non-compliant supply chain participants regardless of where in the world they were located.

The digital transformation

Digitalization has led to the availability of and demand for vast amounts of data about international trade and changed the dynamics about how trust is defined and managed. The data that is now available covers everything from the tracking individual consignments, the temperature in reefer container, the identification of optimal transport routes, through to the identification and acquisition of supply and value chain partners.

Digitalization has coincided with an increasingly complex trading environment. Compliant companies must deal with a web of sanctions regimes, trade wars, we well as the opportunities presented by new free trade agreements and trade groupings. Organized crime has also looked to take advantage of this growing complexity by targeting vulnerabilities in global supply chains.

Much of the data made available by digitalization is on open platforms and the use of distributed ledgers such has blockchain has meant that data can also be stored and shared securely, removing risks that data is manipulated and creating an immutable record of transactions and participants along a supply chain. This has created new levels of transparency and trust as the secure data being generated is being supplied and accessed by all supply chain participants, whether they are a global shipping business or a local freight forwarder based in Ghana. Secure data from open platforms can be objectively analyzed and individual supply chain participants can now easily collaborate to reduce costs and make the movement of goods faster and more predictable.

In addition, the emergence and use of new technologies associated with the Internet of Things, Artificial Intelligence, Smart Containers, Smart Contracts, and Robotic Process Automation provides new sources of data on the how, where and who of international trade that adds to the quality of the data available.

The challenge is that customs and other border agencies have until now largely cut off from the data available from compliant and trusted traders. This has not only trapped trusted and highly compliant traders in a traditional ‘analogue’ and manual system of trust – information is provided to government agencies and government agencies act on the information – but created increased risks in the face of growing and increasingly sophisticated organized crime syndicates. The World Customs Organization in its Study Report on Disruptive Technologies recognized how new technologies and data can used to overcome the risks of a lack of trust in complex supply chains[1].

The threat of transnational crime

The ability to identify trusted traders along supply chains and have access to data through open and secure sources and platforms means that already stretched customs and law enforcement resources can be used to target increasingly sophisticated modes of operation for organized crime. Data from open platforms can also be shared and used by customs and law enforcement as part of their risk management processes to attack illegal supply chains.

Transnational organized crime syndicates have become more innovative in how and where they operate. The traditional crimes of drugs, weapons, tobacco and alcohol smuggling have grown to now include sophisticated human trafficking, money laundering, cyber crime and fake medicines. New crimes against the environment are also emerging, such as the illegal dumping of waste. To commit these crimes usually requires a sophisticated knowledge of the international trading environment and an understanding of the current capabilities and limitations faced by customs and other law enforcement agencies.

These new crimes in particular benefit from the fact that customs and law enforcement agencies do not have access to data. They are also able to exploit their knowledge that there is a lack of harmonization and standardization in how different agencies cooperate and coordinate their operations both domestically and internationally. Organized crime syndicates operate often safe in the knowledge that even though their digital fingerprints are visible, law enforcement cannot access the data to see them or, if it does, doesn’t have the frameworks in place – the ecosystems of trust – to be able to act on the information outside their jurisdiction. More access to supply chain data and knowledge in several dimensions is the game changer, since illicit trade flows operate with the same logic as legitimate trade, namely with the same four process elements of; who (buyer/seller), what (commodity), when (data/information) and the money involved (the payment stream). When these elements are available enforcement is easier and more efficient. Today we have AI driven pattern recognition models that can find early warning signals in these data- and goodsflows when things are not following the expected logic. ?????

Ecosystems of trust are a shield against organized crime

Building on existing trusted trader schemes, Authorized Economic Operator (AEO) concepts and Mutual Recognition Agreements, there is now an opportunity to leverage the secure and open data made available by digitalization to attack international organized crime by creating ecosystems of trust. The UK government’s ‘Ecosystem of Trust’ pilot, which is currently under evaluation, is an example of how future ecosystems of trust can operate.

In outlining the Ecosystem of Trust pilot, the UK government envisaged a future where trusted traders provide a defined set of securely generated data. Tracking across the supply chain could be done through the use of digital trackers, seals and sensors, and many shippers and transport companies today use intelligent containers (smart containers) measuring a number of different parameters 24/7. This would reduce the administrative burden on supply chain participants and governments. As insiders in the ecosystem of trust, trusted traders would benefit from the expedited movement of goods, increased self-assessments, and potentially the elimination of some processes entirely. As the is explicitly acknowledged, this approach allows resources that would otherwise be used on traders that are known to be compliant to instead be used against higher-risk targets.

UK Ecosystem of Trust pilots – testing the digital trusted trader lanes of the future (an example)

The frictionless borders of the future will be built on trust. By testing new ways to use data and technology, it is possible to understand what is required to make future supply chains faster, more predictable, and more secure. The bold Ecosystem of Trust pilots recently concluded in the UK has demonstrated how these frictionless borders of the future might operate. UK Government decided in a commendable way to approach the professional private sector in the ambition to create the best border in the world in line with the adopted ‘UK Border Strategy 2025’.

Instead of starting this exciting journey in isolation, which sometimes has been the case in other countries, UK Cabinet Office and border agencies decided to explore if and how existing innovative industry systems, standards and best practices could contribute to a better end result for all stakeholders involved, building a new partnership paradigm – an Ecosystem of Trust (EOT). Out of many consortium clusters submitted, UK Government selected six EOT pilots to be executed in cooperation during 2023 to test new and innovative ways forward.? ????

Maersk and IBM Consulting led one of these EOT pilots that tested a ‘Trusted Trader Lane and Digital Trade Corridor’. The consortium also included Hutchison Ports Port of Felixstowe, Maritime Cargo Processing, Pure Electric, Quantexa, Westbridge Foods, WM Morrison Supermarkets, and other industry partners – and eleven UK border agencies, including HMRC, Border Force and Defra.

To test the Trusted Trader Lane and Digital Trade Corridor, the consortium provided pre-arrival information for more than 700,000 transactions using readily available data. This data was provided by sources including Smart Container data from Maersk’s Remote Container Management system (Captain Peter) giving 24/7 supervision, and supply chain visibility data from the MyMaerskSupplychain platform. The pilot was based on stakeholders being trusted traders with AEO status managed by the Maersk digital AEO and trade compliance monitoring tool (CAM). The consortium also made use of new technologies to preserve the physical integrity of goods and for providing data to the UK government.

The Trusted Trader Lane and Digital Trade Corridor piloted how the voluntary information provided, as early pre-arrival information, can improve the risk management process to make border management faster, more predictable, safe and secure, testing how a digitally supervised trusted trade lane can facilitate the border for Trusted Traders and make supply chains more resilient, performing necessary controls before and after than (rather at the border) in combination with self-assessment performed by low risk operators.

Data-led border compliance a win-win

The UK is a leader in seeking to understand how trade compliance and border processes can move from being transaction-based to being data-led. This change will transform the border experience for businesses managing complex global supply chains. The Ecosystem of Trust pilots were an important step on this journey.

Baroness Neville-Rolfe, UK Minister of State at the Cabinet Office, said about the Ecosystem of Trust pilots, “Modernising the border is a key goal for UK government. The Ecosystem of Trust is a world leading and bold innovation experiment to see what can be achieved at the border. A frictionless border can be a win-win for all when designing the best border in the world.”

Lower costs and faster processing for businesses

One of the major findings from the Ecosystem of Trust pilots was that the use of business documentation for customs declarations alone can potentially reduce business data collection costs by 40%. An evaluation of the Ecosystem of Trust pilots also found that models tested can eliminate up to 62% of delays on imported goods that are subject to plant, animal or health controls. Reducing delays increases the predictability of supply chains, enabling further optimization and cost reduction, including the reduction of inventory carrying costs.

In addition to industry benefits, access to supply chain data improved government frontline targeting teams’ confidence in their decision-making, helping them assess risk more accurately and target their resources more effectively.

Trusted Traders

Businesses that can demonstrate a track record of compliance through, for example, participating in the UK Trusted Trader programme, stand to gain the most benefit in the data-led border environment.

Oliver St John, Deputy Director Border Strategy, Governance and Innovation, UK Cabinet Office, said about the results of the Ecosystem of Trust pilots, “On the use of Trusted Trader concepts we have seen that the more of Trusted Trader self-assessment, the better.”

The Ecosystem of Trust Evaluation Report also noted that by creating a frictionless experience for compliant and Trusted Traders, controls can be focused on traders deemed to be of higher risk. This increases safety and security at the border and will form a major part of creating frictionless trade for Trusted Traders.

Future models built on data – and trust, powered by AI

Continuing to drive the digitalization of global supply chains will be important for businesses wanting to benefit from frictionless borders. Businesses will need to be able to provide supply chain data at scale and in usable formats. Success will require a focus on interoperability, adoption of digital trade document standards, investment in global industry platforms for supply chain data, and suitable analytics that empower governments to leverage data.

The UK EOT report recognizes the government has not yet adequately determined the most effective ways to use the data it receives. In addition, the report states to be truly transformational, the government must work to define and provide border facilitations that encourage participation. To benefit from the border facilitations and participate in data sharing, businesses will need to be able to demonstrate a track record of compliance.

In our continued development work with the concept tested in UK, we have added new AI capacity using supply chain mapping to de-risk the entire supply chain, and its stakeholders, form arrange of risk perspectives. This is also necessary not only from a general illicit trade prevention, security and risk management perspective but also from a strong customer need in relation to many new ESG regulations in multiple geographies, demanding supply chain visibility, end-to-end tier supervision, reporting and mitigation. ??

We call our new platform ‘Maersk Atlas powered by Altana AI’. Even though as a thought-leader strongly believe that we are a head of the curve, we see other supply chain stakeholders working towards the same type of end-to-end integrated visionary supply chain solutions. Our next pilots and trials will be on Trusted Supply Chains. ?????

The Ecosystem of Trust pilots have shown a willingness from government and business to explore how trade data can be used for mutual benefit – a foundation for trust that will be the basis of future frictionless supply chains, and how industry best practices, standards and systems can be utilized for multi-purposes.

To tackle the increasing sophistication of international organized crime - while meeting the challenges of a volatile, complicated world of trade getting more complex by the day - the global trading community, governments, and international institutions need to accelerate the creation of ecosystems of trust that reduce friction for trusted traders and trading hubs and allow resources to be targeted where they are needed.

An alliance of good fighting the bad

These ecosystems of trust need to include business-to-government as well as government-to-government and make use of existing trusted trader programs and Mutual Recognition Agreements to look beyond national borders. New data sources and technologies have provided the opportunity to look deeper into global supply chains from packing in the country of export to arrival in the country of import, allowing levels of compliance to be continually and objectively assessed.

We need to shape a new 'alliance of good', a partnership of the willing, to fight the threats posed by international transborder crime. The good news is that we now have the infrastructure, the data and the drive to build supply chain visibility for a range of different reasons as argued and demonstrated in this article. If we can do it, we must do it - for the greater good of all.

As new ecosystems of trust develop, they will also act as a spur for innovation. New ways of identifying compliance and non-compliance will emerge that can quickly be absorbed into the international trading system, reducing the burden on trusted traders and increasing the risks and costs for international organized crime.

With the frameworks and technologies in place, it is now time to move to the next level of trust in international trade to spur growth and protect our society.

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Lars Karlsson Global Head of Trade and Customs Consulting, Maersk

[1] World Customs Organization (2019, 2021, 2022), World Customs Organization (wcoomd.org)

You can find the UK Ecosystem of Trust Evaluation Report, here: Ecosystem_of_Trust_Evaluation_Report_August_2023.pdf (publishing.service.gov.uk)