Executive Summary
Under Article VI of the Chemical Weapons Convention (CWC), States Parties are required to declare annually to the Organisation for the Prohibition of Chemical Weapons (OPCW) the quantities of dual-use chemicals they import and export – chemicals that have both legitimate industrial and household use as well as potential application in the development of chemical weapons. The OPCW’s Technical Secretariat works to match the quantities of these declared international chemical transfers as part of its efforts to prevent the re-emergence of chemical weapons. However, the complexities of global chemical trade, uneven national implementation of the Convention, and lack of harmonization in industry reporting on chemical transfers has resulted in an increasing number of discrepancies in States Parties’ declarations. These discrepancies challenge the ability of States Parties’ national authorities to track dual-use chemicals and identify which discrepancies are of greatest concern.
Distributed ledger technology (DLT), also known as blockchain technology, has seen increased use for commercial and government initiatives focused on the technology’s potential to improve supply chain provenance, track physical goods, and enhance logistics. However, DLT may also present a novel technological solution to strengthen CWC implementation by enabling diverse stakeholders, such as chemical industry and national authorities, to share information on chemical transfers in a secure, transparent, and immutable manner using a shared, distributed, digital ledger.
The Challenge of Tracking Global Chemical Trade
Chemical weapons precursors are identified in the Convention’s Annex on Chemicals and organized into three schedules, or categories. Schedule 1 chemicals are subject to the most stringent controls, as most have limited utility beyond the creation of chemical warfare agents. Schedule 2A and 2A* chemicals are not typically produced in large quantities and have relatively few peaceful applications. Schedule 2B and 3 chemicals, however, make up the majority of international trade in scheduled chemicals and have a variety of applications in the manufacture of peaceful commodities, from cosmetic products and medicines to textiles and flame retardants. The Convention’s Verification Annex assigns each chemical Schedule with different quantity thresholds, above which States Parties must declare the international transfer of a scheduled chemical. All 193 States Parties to the Convention are obligated to submit an Annual Declaration on Past Activities (ADPA) each year, including the aggregate quantities of scheduled chemicals exported and imported above the prescribed thresholds. The OPCW Technical Secretariat then uses these declarations to match declared exports and imports between States Parties.
When the declared quantity of a scheduled chemical exported by one State Party does not match the import declaration of another, or a member state does not declare, the Technical Secretariat works with States Parties’ national CWC authorities to reconcile these transfer discrepancies. However, due to the complex nature of international chemical trade and a number of regulatory challenges, the occurrence of discrepancies in annual declarations submitted to the OPCW remains high and has increased steadily in recent years. According to the Annual Report of the Twenty-sixth Conference of the States Parties, ADPAs for 2019 declared 817 transfers of Schedule 2 and Schedule 3 chemicals between States Parties with quantities above the thresholds for declarations, of which 581 (71%), involving 92 States Parties, showed discrepancies.1Note: OPCW, “Report of the OPCW on the Implementation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction in 2020,” p. 13: https://www.opcw.org/sites/default/files/documents/2021/12/c2603%28e%29.pdf. ADPAs for 2018 and 2017 similarly showed discrepancies in 69% and 66% of transfers, respectively.2Note: 2018 figures from: OPCW, “Report of the OPCW on the Implementation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction in 2019,” p. 16: https://www.opcw.org/sites/default/files/documents/2021/04/c2504%28e%29.pdf. 2017 figures from: OPCW, “Report of the OPCW on the Implementation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction in 2018,” p. 8: https://www.opcw.org/sites/default/files/documents/2019/12/c2404%28e%29.pdf.
From complex issues, such as tracking chemical transfers through customs unions, to common clerical errors, the accuracy of ADPAs largely suffers from the lack of harmonization between different States Parties’ implementation of CWC legislation and regulation of chemical transfers. Regardless of the cause, however, discrepancies in States Parties’ annual declarations ultimately represent the risk that quantities of dual-use chemicals are unaccounted for and could potentially have been diverted for use as chemical weapons.
Causes of Transfer Discrepancies
National CWC authorities use industry declarations to aggregate the quantities of scheduled chemicals imported and exported in their annual declarations to the OPCW. Simple typos, such as misplaced decimal points, incorrectly added or missing zeros, or mis-recorded units of measurement can easily result in the quantities of transferred chemicals declared by one chemical company differing significantly from the declarations of its foreign trade partners.3Note: Declarations Handbook 2013 for the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction (Revised Version 3.0). 1 January 2022. OPCW. Section B, paragraph 2.1.4, Common Problems in Declaring AND. Page 32. https://www.opcw.org/resources/declarations/declarations-handbook. Smaller discrepancies in the reported trade of chemicals between companies are magnified when aggregated by national authorities, potentially leading to more significant discrepancies in each country’s annual declarations. In the cases of some commonly traded Schedule 2 and Schedule 3 chemicals, the quantities declared by States Parties may have been aggregated from numerous different declarations by industrial and commercial entities. National CWC authorities are often unaware of potential discrepancies until they are notified by the Technical Secretariat that the quantities of transferred chemicals declared do not match those recorded in the annual declarations of other States Parties. Retroactively uncovering discrepancies in industry declarations is currently a difficult and time-consuming process for national CWC authorities.
Another significant factor contributing to the occurrence of transfer discrepancies is the lack of harmonization across the national CWC implementing legislation of the Convention’s 193 States Parties. Differences between each State Party’s national legislation implementing the Convention include different regulatory requirements and thresholds for industry declarations, and the different methods by which chemical companies and industries collect and share data on chemical transfers with their national authorities present a significant challenge to the accuracy of the chemical transfer data received by national authorities. The Blockchain in Practice program’s research into the CWC implementing legislation of over 30 countries that transfer significant quantities of Schedule 2 and Schedule 3 chemicals indicates that a majority impose the same thresholds for industry declarations as are required under the Convention for ADPAs. However, some States Parties choose to enforce lower thresholds. Canada’s CWC National Authority, for example, requires industry declarations on all transfers of Schedule 3 chemicals, regardless of quantity.4Note: Declarations Regulations (Chemical Weapons Convention), Chemical Weapons Convention Implementation Act. 11 March 2010. Part 4: Schedule 3 Chemicals, Declarations Regarding Imports and Exports, section 19. Page 16. https://www.opcw.org/sites/default/files/documents/LAO/article_VII/legislation_database/CAN-05a_decl_regs.pdf. The German regulation to implement the Convention, meanwhile, requires industry declarations for all exports or imports of Schedule 3 chemicals in quantities exceeding one ton.5Note: Regulation Implementing the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and On Their Destruction (Regulation Implementing the Chemical Weapons Convention). 20 November 1996. Section 6: Obligation to Submit Declarations on Imports and Exports. Page 7. https://www.bafa.de/EN/Foreign_Trade/Chemical_Weapons_Convention/chemical_weapons_convention_node.html. These lower thresholds for industry declarations enforced by States Parties like Canada and Germany assist national authorities in tracking transfers of scheduled chemicals and more accurately reporting on transfers in their ADPAs. However, a State Party which implements lower thresholds for industry declarations may include greater quantities of scheduled chemicals in its ADPA, resulting in discrepancies between its declaration and those of other States Parties that do not capture as much data on smaller quantities of transferred chemicals. Unless other States Parties also take steps to implement lower thresholds, this lack of harmonization will continue to result in discrepancies in States Parties’ annual declarations.
The challenge of tracking the physical transportation of dual-use chemicals is another significant contributor to the occurrence of discrepancies in States Parties’ ADPAs. Exports and imports of chemicals do not always occur within the same calendar year. A State Party may declare the export of a scheduled chemical in one calendar year, while the importing State Party may not declare the successful transfer until the following year. Chemicals may be temporarily stored in a third country on their way to their destination, leading to confusion over which States Parties should claim responsibility for the export and import of a particular transfer. More complicated still, transfers through customs unions and free trade zones increase the risk of missing declarations, particularly when transfers are not considered “cross-border” under the separate terms of their trade agreements with the exporting or importing country.
Finally, not all CWC national authorities have the same resources or legislative powers as their peers. Whereas some national authorities may require domestic industry to support the investigation of discrepancies, others have more limited authority in the interest of protecting industry from undue regulation that may disturb their operations. Some CWC national authorities may be required to request permission from other governmental ministries or agencies to investigate possible discrepancies in industry declarations, further complicating and slowing down the process of resolving discrepancies.
To assist CWC States Parties in submitting their annual declarations, the OPCW introduced its Electronic Declaration Information System (EDIS) in 2020.6Note: “OPCW Launches New Electronic Declaration Information System (EDIS).”18 February 2020. OPCW. https://www.opcw.org/media-centre/news/2020/02/opcw-launches-new-electronic-declaration-information-system-edis#:~:text=OPCW%20Launches%20New%20Electronic%20Declaration%20Information%20System%20(EDIS),-18%20February%202020&text=THE%20HAGUE%2C%20Netherlands%20%E2%80%93%2018%20February,most%20modern%20electronic%20declaration%20system. Though not mandatory, nor the only way for national authorities to submit their ADPAs, EDIS helps to ensure a level of harmonization in the way States Parties submit data on past transfers of scheduled chemicals. However, EDIS is not designed to detect discrepancies between ADPAs before they are submitted, and there is no universal tool available for chemical industry and commercial entities to guarantee the accuracy of industry declarations.
The Potential of Distributed Ledger Technology
Since September 2021, the Stimson Center’s Blockchain in Practice program has been developing the Monitoring and Tracking Chemicals (MATCH) project in partnership with Global Affairs Canada’s Weapons Threat Reduction Program to test the feasibility of distributed ledger technology (DLT) as a tool to improve the accuracy of States Parties’ declarations on the international transfer of dual-use chemicals. DLT, or blockchain technology as it is also known, presents a novel tool for authenticating data, providing full provenance, and auditability on an authoritative, distributed digital ledger.
Unlike traditional databases that rely on a central authority to validate transactions, a DLT platform enables permissions, or protocols, to regulate each participant’s level of access and the transactions they may perform, allowing multiple stakeholders to access, transact, and store information in real-time with significantly greater efficiency and automation, both simplifying and reducing administrative processes. Data transacted between different participants using DLT is cryptographically “hashed” or encoded using a unique, algorithmic key that is difficult to tamper with or reverse engineer. Each hash is combined with others to form “blocks” of encrypted data. These blocks are then combined in sequence with the preceding and following blocks, hence the term “blockchain,” and replicated throughout the blockchain network. This process of constantly replicating blocks of encrypted information throughout a distributed network ensures the security and immutability of data across the ecosystem.
The application of blockchain technology for commercial and government initiatives in areas such as supply chain management and logistical support is becoming more widespread. PharmaLedger, a blockchain healthcare solution project currently in the final year of its three-year development (2020 – 2023), is being tested by 12 pharmaceutical companies, including Pfizer, Bayer, and GSK, and 17 private and public organizations, including regulatory, legal, and academic institutions to determine the platform’s ability to offer efficient and secure cross-company data sharing, medical goods traceability, and measures to prevent counterfeiting of pharmaceuticals.7Note: PharmaLedger Year 2 – First Generation Blockchain Platform Deployed. December 2021. PharmaLedger Blockchain Enabled Healthcare. https://pharmaledger.eu/wp-content/uploads/PharmaLedger-2021-Year-End-Press-Release_FINAL.pdf. The De Beers Group, the world’s largest diamond supplier, utilizes its Tracr blockchain platform to provide an immutable record of each diamond’s production and assure customers that the company’s products are ethically sourced.8Note: “De Beers Group Introduces World’s First Blockchain-backed Diamond Source Platform at Scale.” De Beers Group. https://www.debeersgroup.com/media/company-news/2022/de-beers-group-introducesworlds-first-blockchain-backed-diamond-source-platform-at-scale. In 2018, South Korea’s Customs Service (KCS) began a pilot program to test the application of blockchain technology to increase the efficiency of export clearance for e-commerce in partnership with fifty companies in Korea, Singapore, and Vietnam.9Note: Kang, Tae Il. “Korea pilots blockchain technology as it prepares for the future.” World Customs Organization News. https://mag.wcoomd.org/magazine/wco-news-88/korea-pilots-blockchain-technology-as-it-prepares-for-the-future/. KCS announced in 2022 that its blockchain platform was in the process of becoming fully operationalized and incorporated into Korea’s existing digital customs clearance system.10Note: “New Technologies in Customs Innovation.” Korean Customs Service. April 2022. https://www.youtube.com/watch?v=Ocu-7qfWkMI&t=212s.
Stimson’s MATCH prototype software system utilizes blockchain technology to track the transfer of Schedule 2 and Schedule 3 chemicals between fictional States Parties within a hypothetical ecosystem of chemical industries and national authorities, simulating global chemical trade and regulatory reporting using real-world trade data and national CWC implementing legislation.
In MATCH, “entities” broadly representing global chemical industry share information on the export and import of scheduled chemicals transferred between them and report the quantities of chemicals traded to their respective CWC national authorities. The quantities of each transferred chemical reported by entities are automatically aggregated for the national authority’s annual declaration to reduce the risk of human error. MATCH also checks chemical transfer records and ADPAs for discrepancies, and flags these for the attention of the responsible participants. MATCH’s underlying blockchain technology enables both industry and national authorities, in theory, to utilize a single platform for sharing information on chemical transfers without the need for mutual trust by enforcing strict access protocols to ensure the confidentiality of each participant’s data. This, in turn, provides both the benefits of the MATCH platform as well as the other advantages of blockchain technology, such as improved traceability, data authentication, and data sharing, to further streamline the way in which industry and national authorities declare chemical transfers. Because records on MATCH cannot be deleted or changed, only appended with new records, the platform also enables greater provenance and auditability over the history of each transaction for all participants within the ecosystem, greatly simplifying the process of locating and resolving discrepancies.
Feedback from chemical industry representatives and national authorities during demonstrations and live testing of MATCH has highlighted the platform’s ease of use and automation of the declaration process for both industry and national authorities to reduce human error. MATCH also converts units of measurement and calculates differences between recorded chemical concentrations when it compares export and import records, further reducing the risk of errors due to differences in how each entity records and reports data on chemical transfers, according to the requirements of national authorities. A primary takeaway for the MATCH project team has been the potential to expand the scope of the prototype in future iterations. Including additional participants, such as transporters and customs officials, could enable the MATCH system to better simulate the physical tracking of chemicals as they are transferred across national borders. The prototype’s protocols could also be expanded to track transfers of Schedule 3 chemicals to states not party to the CWC. Greater automation of the reporting and declarations process and expanded utilization of the prototype’s QR code functionality could also allow the system to automatically capture more data and reduce human error.
Conclusion
Tracking the international trade of dual-use chemicals and resolving discrepancies in the Annual Declarations on Past Activities of CWC States Parties is critical to preventing the re-emergence of chemical weapons. As the occurrence of discrepancies in declared transfers of scheduled chemicals continues to increase, so does the importance of resolving these discrepancies to ensure that quantities of controlled chemicals are accounted for. While uneven implementation of the Convention across its 193 States Parties and lack of harmonization in the way industry reports trade continue to cause challenges for CWC national authorities and the OPCW Technical Secretariat, emerging technologies may provide solutions for streamlining reporting and thereby reducing some of the more common causes of discrepancies. Blockchain technology initiatives such as the MATCH Project demonstrate how DLT may assist in simplifying and automating the data collection and declarations process for industry and national authorities, reduce the risk of human error, provide provenance, and contribute a degree of digital streamlining to the often complex and diverse reporting requirements for chemical industry.
Notes
- 1Note: OPCW, “Report of the OPCW on the Implementation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction in 2020,” p. 13: https://www.opcw.org/sites/default/files/documents/2021/12/c2603%28e%29.pdf.
- 2Note: 2018 figures from: OPCW, “Report of the OPCW on the Implementation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction in 2019,” p. 16: https://www.opcw.org/sites/default/files/documents/2021/04/c2504%28e%29.pdf. 2017 figures from: OPCW, “Report of the OPCW on the Implementation of the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction in 2018,” p. 8: https://www.opcw.org/sites/default/files/documents/2019/12/c2404%28e%29.pdf.
- 3Note: Declarations Handbook 2013 for the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on Their Destruction (Revised Version 3.0). 1 January 2022. OPCW. Section B, paragraph 2.1.4, Common Problems in Declaring AND. Page 32. https://www.opcw.org/resources/declarations/declarations-handbook.
- 4Note: Declarations Regulations (Chemical Weapons Convention), Chemical Weapons Convention Implementation Act. 11 March 2010. Part 4: Schedule 3 Chemicals, Declarations Regarding Imports and Exports, section 19. Page 16. https://www.opcw.org/sites/default/files/documents/LAO/article_VII/legislation_database/CAN-05a_decl_regs.pdf.
- 5Note: Regulation Implementing the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and On Their Destruction (Regulation Implementing the Chemical Weapons Convention). 20 November 1996. Section 6: Obligation to Submit Declarations on Imports and Exports. Page 7. https://www.bafa.de/EN/Foreign_Trade/Chemical_Weapons_Convention/chemical_weapons_convention_node.html.
- 6Note: “OPCW Launches New Electronic Declaration Information System (EDIS).”18 February 2020. OPCW. https://www.opcw.org/media-centre/news/2020/02/opcw-launches-new-electronic-declaration-information-system-edis#:~:text=OPCW%20Launches%20New%20Electronic%20Declaration%20Information%20System%20(EDIS),-18%20February%202020&text=THE%20HAGUE%2C%20Netherlands%20%E2%80%93%2018%20February,most%20modern%20electronic%20declaration%20system.
- 7Note: PharmaLedger Year 2 – First Generation Blockchain Platform Deployed. December 2021. PharmaLedger Blockchain Enabled Healthcare. https://pharmaledger.eu/wp-content/uploads/PharmaLedger-2021-Year-End-Press-Release_FINAL.pdf.
- 8Note: “De Beers Group Introduces World’s First Blockchain-backed Diamond Source Platform at Scale.” De Beers Group. https://www.debeersgroup.com/media/company-news/2022/de-beers-group-introducesworlds-first-blockchain-backed-diamond-source-platform-at-scale.
- 9Note: Kang, Tae Il. “Korea pilots blockchain technology as it prepares for the future.” World Customs Organization News. https://mag.wcoomd.org/magazine/wco-news-88/korea-pilots-blockchain-technology-as-it-prepares-for-the-future/.
- 10Note: “New Technologies in Customs Innovation.” Korean Customs Service. April 2022. https://www.youtube.com/watch?v=Ocu-7qfWkMI&t=212s.
