The Use Of Blockchain As A Resource For Combating Corruption In Global Shipping: An Interpretive Case Study

Figures & data

Table 1. Interviews conducted by role and year

Role	2012	2013	2014	2015	2016	2017	2018	2019	2020
Influencers	3 nonprofit organization	1 director of association	1 director of association	1 nonprofit organization and 2 governmental officers	3 governmental officers	2 governmental officers	3 governmental officers	4 nonprofit organization	1 nonprofit organization
Shipping line	2 CIOs and 4 innovation team members	8 top managers including the CEO, CFO, SO, CIO, and 4 innovation leaders	2 top managers and 5 local managers	3 top managers and 5 local managers	11 top managers	2 top managers	1 top manager	2 top managers and 2 managers	5 managers
Traders/Shippers		4 traders	26 traders	45 traders	19 traders	5 traders	2 traders	1 trader
Authorities		6 customs officers	9 customs officers	16 customs officers and 15 port of authority officers	12 customs officers and port of authority officers	7 customs officers and port of authority officers	6 customs officers		3 customs officers
Service providers		16 terminal operators and service providers	6 service providers	19 service providers	16 service providers	8 service providers	2 service providers	2 service providers
Total	9	29	49	108	58	22	11	9	9

Table 2. Corruption possibilities

Code	Corruption Event	Description
	Process-related corruption
Pa1	Gating in to port, prioritization	To avoid extensive waiting time for trucks and containers at the port gates, paying a surcharge allows one to be prioritized and to bypass the queue of waiting container vessels.
Pa2	Port opening hours	Getting in to the port outside normal operating hours is possible by paying a fee.
Pa3	Certificate of origin, processing	The certificate of origin establishing the provenance of goods needs to be physically stamped before loading on a ship for export. Fees may need to be paid to enable and speed up processing.
Pa4	Veterinary certificate, processing	The veterinary certificate establishes that the producers of the goods have been subject to the relevant veterinary inspection. Fees may need to be paid to enable or speed up processing.
Pa5	Phytosanitary certificate, processing	The phytosanitary certificate establishes that the goods meet relevant health considerations (i.e., concerning the use of pesticides). Fees may need to be paid to enable or speed up processing.
Pa6	Export declaration, processing	The export declaration establishes that the goods are being exported and are not subject to export taxation rules. Fees may need to be paid to enable or speed up processing.
Pa7	Ship departure slots	Ship departure slots from ports are allocated manually. Fees may need to be paid to obtain a slot and/or reduce waiting time when the ship is ready for departure.
Pa8	Passage through Suez Canal	Gifts or direct payment of fees may be needed to grant passage through the controlled channel.
Pa9	Use of import service	Using consultants with extensive process knowledge and personal networks may resolve the issue and speed up processing, e.g., of imported goods at the destination country.
Pa10	Overlooked control task	Customs agents overlook inspection duties, allowing for smuggling of illegal goods.
	Documentation-related corruption
Pb1	Certificate of origin, issuing	The incorrect issuing or approval of this certificate containing fraudulent information.
Pb2	Veterinary certificate, issuing	The incorrect issuing of this certificate containing fraudulent information.
Pb3	Phytosanitary certificate, issuing	The incorrect issuing or approval of this certificate containing fraudulent information.
Pb4	Export declaration, approval	The incorrect approval of an export declaration stating incorrect information.
Pb5	Import declaration	The incorrect lodging and approval of an import declaration specifying product details that determine import duties.
Pb6	Tax declaration	The incorrect lodging and approval of a product’s categorization or of the country of origin to reduce or avoid taxation.
Pb7	Pro forma invoices	Falsified invoices not matching real shipments or the actual contained goods to reduce taxes.
Pb8	Fake organizations	Use of nonexistent or storefront organizations for tax evasion.

Figure 1. Points of corruption during the shipping of AGRI_PRODs from AFCT to EUCT

Table 3. The Institutional field of corruption in the global shipping case and the four eras

Key Concepts	Era 1 (approx. 1985-2000)	Era 2 (approx. 2000-2015)	Era 3 (approx. 2015-2020)	Era 4 (approx. 2020-2030)
Identity	Fragmented identity related to corruption Fragmented between efficiency-at-all-costs mindset, service-provider-for-a-price (status quo), and emergence of anti-corruption identities of social actors	Disjointed identity related to corruption Anti-corruption identity starts to strengthen, though competing logics among social actors and lack of widespread buy-in of the “corruption-as-a-societal-ill” framing exists	Emergent Identity against corruption Anti-corruption identity becoming dominant	Unified and normalized identity against corruption Anti-corruption identity is expected to be seen taken-for-granted, with the identities condoning or supporting corruption being the rare exception.
Social actors	Defenders of status quo are in large proportion, if not dominant. Majority of actors indifferent to the issue of corruption, seeking to run business with efficiency and expediency. New realization among a key actor (SHIPCo) that it has a responsibility to prevent corruption that is harmful to society. No serious institutional entrepreneurship.	Institutional entrepreneurs gaining in momentum, forming alliances through anti-corruption interest organizations. With the laws catching up, passive actors or defenders of status quo are challenged in their use of corruption as a natural part of business. In some cases (though rare), corruption can lead to heavy fines and prosecution of individuals.	Anti-corruption institutional entrepreneurial actors are becoming dominant as defenders of the anti-corruption institutional order. Passive actors are being coopted or coerced into accepting this order as business rationale favors enactment of anti-corrupt schemas and routines.	Anti-corruption is the norm and anti-corruption actors are engaged in defending the new institutional order. Actors not conforming to the order is systematically excluded from participation in trade processes.
Schemas and routines	Corruption is a natural part of doing business Corruption not having any stigma, and seen as “gifts for services” or “lubrication” Special accounts for corruption—deductible operating costs Using paper-based and cash-based transactions—easy to hide corrupt payments	Corruption as sometimes a necessary evil Coexistence of paper and cash-based process with digital processes Slush-funds and pocket money to be used to grease palms for the sake of efficiency. Use of local service providers to make payments, thereby circumventing internal policies (outsourcing of corruption). Physical papers are mirrored in IT, allowing for some degree of authenticity checking of documents	Moral commitment to eradicating corruption Digitalization of trade and use of blockchain-enabled process for transparency and secure trade document exchange in select locations Removal of cash from trade process making bribery very difficult. Management action to minimize their legal exposure, from being seen as aiding/abetting corruption.	Digitalization of trade and use of blockchain-enabled process for transparency and secure trade document exchange Automation through smart contracts
Resources (including digital)	Very limited initially but introduction of an official anti-corruption policy by one actor and an intraorganizational transaction systems that made bribes and payments visible within organizations	Policy of limited number of companies and strong judicial systems with anti-corruption laws Interorganizational transaction systems seen as resolving some documentation validation issues	Blockchain for complete transparency of process to hold actors accountable Strengthened coalition of anti-corruption supporting actors	Access to blockchain becomes key resource for business operations, enabling voluntary compliance
Framing	No effective framing	Competing frames with respect to policies and technologies for interorganizational systems but traders express longing to go back to “good old paper-days”	Moral imperative to remove corruption from the shipping process Blockchain touted as “neutral ground” for business to digitize shipping, framed as trade-enabling for all actors Blockchain seen by senior managers as a tool to avoid personal prosecution due to staff actions found to be related to corruption	Blockchain seen as an integral part of conducting efficient and corruption-free trade
Practices	Presentation of false documents to authorities/customs at destination Payment of facilitation fees, directly or indirectly, in response to new accounting practices and internal controls Articulation of anti-corruption policy by one actor but only partial cooptation of other actors Rationalization by corrupt actors	Possible manipulation/falsification of documents electronically Institutional entrepreneurs draw on company policy and strong judicial systems with anti-corruption laws Limited rationalization by corrupt actors	Cooptation and coercion of defenders of corrupt order by institutional entrepreneurs Dealing with implementation complexities of blockchain in particular integration to existing legacy systems	Dealing with interoperability between blockchain solutions Encouraging participation in the blockchain application for access to business network and for greater efficiency; de-risking based on data available in blockchain
Nature of corruption addressed	Limited impact. Decreasing level of direct corruption by some actors due to: a) articulation of an uncorrupt policy by a key actor; and b) implementation of accounting practices and internal transaction control	Some level of validation of certificates and documents, though no guarantees Removes (or separates spatially) human-to-human transactions. Institutional entrepreneurs framing corruption as a societal ill; this is to resist direct corruption based on their collective economic and political powers.	Immutability of events on the blockchain makes falsification of certificates and declarations largely disappear Move to remove human involvement, thus fewer possibilities to deliberately stall or delay processes Transparency provided by the blockchain’s distributed ledger technology prevents, for instance stalling	Prevention rather than detection (and subsequent prosecution) of corruption as risk of exposure and accountability is getting known
			Improved retrospective accountability about any sort of bribery or facilitation payments or receipt
Resolved corruption	Please see Table 4

Table 4. Corruption possibilities and impact of digital and other resources

Type of Corruption	Corruption Event	Impact of Policies, Laws, and Digital Technologies (Including Blockchain)
		Era 1	Era 2	Era 3	Era 4*
Process-related corruption	Gating in to port, prioritization (Pa1)
	Port opening hours (Pa2)
	Certificate of origin, processing (Pa3)	Partially resolved		Resolved
	Veterinary certificate, processing (Pa4)	Partially resolved			Expectation
	Physio sanitary certificate, processing (Pa5)	Partially resolved			Expectation
	Export declaration, processing (Pa6)	Partially resolved	Resolved
	Ship departure slots (Pa7)		Resolved
	Passage through Suez channel (Pa8)		Resolved
	Use of import service (Pa9)				Expectation
	Overlooked control task (Pa10)			Partially resolved
Documentation-related corruption	Certificate of origin, issuing (Pb1)
	Veterinary certificate, issuing (Pb2)
	Physio sanitary certificate, issuing (Pb3)
	Export declaration, approval (Pb4)			Partially resolved
	Import declaration (Pb5)			Resolved
	Tax declaration (Pb6)			Resolved
	Proforma invoices (Pb7)				Expectation
	Fake organizations (Pb8)				Expectation

Note: * Expectation: Expert assessment that the behavior can be detected or largely prevented.

Figure 2. A framework depicting how corruption is reproduced, resisted, and eradicated, based on [62]

Misangyi, V.F.; Weaver, G.R.; and Elms, H. Ending corruption: The interplay among institutional logics, resources, and institutional entrepreneurs. Academy of Management Review, 33, 3 (2008), 750–770.

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