Using ArbStore's Smart Contracts to Profit on International Trade — or Buying Way Cheaper Abroad

Every country possesses unique abilities and advantages, leading them to excel in specific areas. For instance, France is renowned for producing high-quality wines, while Japan is famous for its cutting-edge technology. Through international trade, countries can exchange their finest products, services, or resources with one another. This process involves buying and selling goods on a global scale. To capitalize on these opportunities, we can leverage the ArbStore.

Resources, products, and services, besides varying in quality, also differ significantly in price from country to country. Surprisingly, price disparities aren't always tied to differences in quality. Sometimes, identical or similar products can be much cheaper to produce in certain locations while being scarce and expensive in others.

Tropical fruits are likely a great example of this. An avocado is an avocado, no matter how you see it. However, a kilogram of avocados will cost around $5 in South Korea, while it’s around $0.8 in Colombia. That’s a difference of 525% for the same product. And why? Because Colombia is a top avocado producer, while South Korea has to import (buy) most of them from abroad. That involves distribution charges, custom duties, and more along the long way.

Sometimes, though, importing directly from manufacturers is the best path to find cheaper things. Even dealing with taxes, import, and delivery fees, the offer could be so enticing (and legit) that it’d be worth it. Electric Vehicles (EVs) and other products from China are the case for most countries. Let’s explore some rough profit figures and how the ArbStore could improve the deal.

A risky deal in a box

Jason Torchinsky, a US citizen, bought a small EV from China a few years ago. It’s a somewhat slow and pretty thing dubbed “Changli Freeman”, and it costs around $1,000. Even if it’s not very potent, that’d be quite the deal for any kind of vehicle in most countries. He found it surprisingly useful and durable, and he bought it through the online marketplace Alibaba. The car arrived at his house in a box.

The whole deal, including unavoidable fees (taxes, batteries, delivery, etc.) settled at around $3,300 per one delivered electric car to his door in 2020. Probably by then and without a doubt by now, the cheapest EV in the United States is around $20,000 per unit. A stunning difference of over 566%, because China controls the battery supply line and no Chinese company is currently building EVs in the USA.

Of course, this isn’t a unique case. In 2022, for instance, Rob Ferretti bought eight automotive lifts from China for $1,200 a piece, while on local US markets like Walmart, they’d be between $4,500 and $8,000 per unit. After adding the delivery, taxes, and other legal fees, he found out that every lift from China increased its price to $3,000. Still, the deal was up to 166% cheaper than just buying the lifts nationally.

Why is not everyone buying cheaper stuff from Asia and other countries, then? Well, the risk is considerable. As Ferretti pointed out, the vendor could have been a scammer, because marketplaces like AliExpress only connect the parties, and don’t sell the products themselves. The company established a reputation system and acts as a neutral intermediary. But, sometimes, that could not be enough. There’s a popular joke about the expectations and reality of shopping online, indeed. The results are often disappointing.

Potential costs from the risk

The issue with online marketplaces is that, in most of them, you should pay first for the product. Afterward, if you never receive it or receive something faulty, it’s unlikely that you will recover all your money. If you do recover the money, it’ll never be without a lot of wasted time, filled claims, uncertainty, and even a high arbitrage fee.

In the case of companies (let’s say that your company bought wholesale from Asia), the fees for international dispute resolution are very high. Escrow agents and arbiters are typically experienced lawyers whose fees may vary depending on numerous factors like the complexity of the case, the country, and the funds involved in the contract.

According to Aceris Law LLC, “For a relatively simple [international] arbitration requiring 1,500 hours of legal work, for instance, if billed at the rate of USD 300/hour, legal fees would equal USD 450,000 per arbitration.” Some companies offer the service including a filing fee between $2,000 and $6,000, besides a high percentage to properly manage the case.

That’s if you signed a proper contract and found the other party to be accountable for their actions. If you didn’t sign something legally binding, you can lose all your invested money. Yet, that’s no longer an issue with the ArbStore.

Contracts with Arbitration: A Trade

The Obyte wallet, which is used in the ArbStore solution, offers an easy option to prepare and send a contract with arbitration to any other connected party. They’re smart contracts that offer secure decentralized escrow protection for two-party agreements, eliminating the need for mutual trust. They can work for individuals as well as businesses, and they’re particularly well-suited for international trade.

These contracts can lock the funds until pre-set conditions are met by the parties. However, if one of the parties misbehaves, the other can call an expert arbiter to solve the dispute. They’re (human) professionals registered in the new ArbStore with their real names and are available to solve certain types of disputes in exchange for a reasonable fee. That’s currently between 2% and 5% of the involved contract, with no other requirements or tariffs.

An example with automotive lifts

Let’s imagine here that an American automotive Company A wants to cut costs and increase its profits by buying 20 of those Chinese lifts to increase its storage space. They can’t trust an online marketplace, so they decide to contact the manufacturer directly and offer them a contract with arbitration.

If the supplier agrees, both parties connect their Obyte wallets through the Chat Tab, prepare the shared terms, and select a well-suited arbiter from the ArbStore. Their address is included in the contract from the beginning, but no fees are required if there’s no dispute. Then, Company A pays the agreed amount to the contract, and the funds are locked.

If Company A receives the products without issue, they can release the funds with a click of a button. If the Chinese supplier had any kind of problem, they can refund the whole amount with a click of a button as well. Now, if one of the parties misbehaves, the other can call the arbiter and pay for their fees to start reviewing the case. They would be able to release the funds locked in the smart contract to the winning party.

To sum it up: the funds will always be safe in the whole process, and safety is offered to both parties from the start. Company A would be paying $1,200 per piece directly to the seller, without intermediaries and high transfer fees. Of course, they’d have to take care of the taxes and customs themselves, outside the contract. Meanwhile, the Chinese supplier would receive the funds after the buyer’s inspection, and with protection against buyer’s misbehavior. It’s a win-win situation for both parties.

This way, we can say that the ArbStore provides a solution for individuals and small and medium businesses to engage in international trade with drastically reduced risks. By using smart contracts and expert arbiters, it ensures secure and efficient transactions, making buying cheaper products from abroad a viable and profitable option for all parties involved.

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