How Blockchain eliminates Fraud done by Quality Surveyor
Most of the times, when we read news about fraud in trade, the buyer or the supplier are the most obvious of culprits that comes to our minds. However, if one generally talks to small and medium sized traders, one gets to know another kind of fraud that happens — quality fraud by quality surveyors.
Quality surveying is a very competitive area and one can find numerous service providers of all sizes. Since the entry barriers are low and new companies sprout up every time, one can find number of small companies that offer these services. Small companies, in order to win business, are easily influenced by larger traders or miners to provide quality reports as per the requirements of their clients and far from the truth. Recently, I was in discussion with a small trader who usually buys commodities from a mine and sells to a large company. The miner had obtained its inspection report and quality certification from an international surveyor and had been supplying these goods from the rated mine (various buyers already know the history of performance, technical specifications and capacity). The small trader who was buying from the mine had also carried out its own quality inspection using a pre-approved quality surveyor by the buyer and in the presence of the buyer’s representative. However, after the contract was signed and just before the quality report was to be produced and goods were to be loaded, the buyer asked for an additional quality surveyor to be appointed which was chosen by the buyer themselves. The buyer insisted that their risk team had brought up that only this new surveyor’s report would be used as the final quality report. The trader having their own report available, miner’s track record easily available for everyone to see agreed to this additional inspection. To everyone’s surprise, the quality report showed that the quality was much lower than indicated by the previous reports. This led to crisis mode for the trader as the ship was ready to be loaded and demurrage charges would be incurred if any delay due to quality report came up. The buyer started negotiating on this latest report for reduction in price and disregarded all the previous reports from their own pre-approved surveyor.
The trader, being under pressure due to rising demurrage charges had to negotiate to a lower price but this was totally not due to any fault of theirs. It was later realized that the last surveyor that had been chosen by the buyer derived close to 50% of their sales through this buyer. More importantly, various other traders too shared similar experiences especially with the same surveyor. However, there was no way or any of them to have access to this information of historical trend which if available, would have greatly lessened the probability of the above scenario.
Blockchain, with its history tracking and recording capability and also being immutable can greatly help in reducing such situations as the track record and derived performance ratings can be easily available to all. The industry needs such a solution for the smaller traders to survive and prevent cartels from operating in an organized manner which usually negatively effects the affordability of things for the common man.
