Federal rules, blockchain among changes to transportation of products
Big changes abound for shippers of agricultural products in the U.S. In September of 2016, large agricultural production and shipping companies of more than 500 employees had to begin to abide by the Food Safety Modernization Act (FSMA) which was passed by the Obama administration in January of 2011. As of September 2017, all agricultural producers and carriers now have to follow the legislation.
According to the Federal Drug Administration (FDA), “The FDA Food Safety Modernization Act, the most sweeping reform of our food safety laws in more than 70 years…aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it.”
All agricultural carriers must now be in compliance with the Sanitary Transportation of Human and Animal Food rule, commonly called the “Sanitary Transportation Rule.” This rule puts in place new regulations on vehicles and transportation equipment, transportation operations, training, and records maintenance for agricultural product carriers. For smaller companies these new regulations are going into effect just before the mandatory implementation of electronic logging devices starting in December of this year.
According to the Transportation Research Board, agricultural products account for 23% of total freight tonnage and 31% of total ton-miles of freight moved. Furthermore, trucks move over 90% of the nation’s fresh fruits and vegetables (by market share) and 95% of livestock transportation.
Though the rule introduces the potential for increased carrier liability, it also opens the door to prospective innovation and necessitates smarter solutions in the agriculture and trucking industries. Blockchain technology will allow agricultural producers and shippers the transparency to easily prove that they operate in accordance with the new Sanitary Transportation Rule and other parts of FSMA. In addition, blockchain will allow agricultural producers and shippers a chance to gain efficiencies in their supply chain, especially in the areas of operations, accounts settlement, and finance.
As consumer demand for healthier, more natural foods skyrockets, food producers and transporters will be able to verify the accuracy of data about their product from farm to table. It has been shown in the U.S. that consumers will pay a premium for niche products such as organic vegetables and free range beef, and blockchain technology will give consumers the ability to ensure that their food has been handled and shipped to the standard they are promised. And consumers will no longer have to rely on unclear certifications and regulations to tell them that their food is what it claims to be.
Furthermore, blockchain will take the inefficiency out of the entire agricultural production and shipment settlements process by ensuring that farmers are paid on delivery for their products. In the current system, farmers must wait weeks or months after delivering their product to be paid. This puts a stranglehold on the farmer’s cash flow which can preclude the farmer from paying his carriers and other partners promptly. Blockchain will eliminate this burden. And adding transparency, trust, and efficiency to settlements decreases risk for the farmer and the shipper and unlocks new financing opportunities for both.