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CBP launching blockchain testing

Technology will be applied to verify NAFTA and CAFTA certificates of origin.

   U.S. Customs and Border Protection will start “live fire testing” blockchain functionality to verify NAFTA and CAFTA certificates of origin in September, CBP Business Transformation and Innovation Division Director Vincent Annunziato told reporters on Tuesday during CBPs 2018 Trade Symposium in Atlanta.
   “Really what the government’s trying to do is twofold: One is to help blockchain along in a healthy manner for increasing market adoption, and the other thing is we’re trying to prepare ourselves in a proactive way to be ready for when private industry begins to really take off with this technology,” Annunziato said during a media engagement.
   CBP hopes that using blockchain for the NAFTA and CAFTA certificates of origin will allow the agency to apply the technology toward getting more accurate information about the subject goods from the country of export and toward verifying that suppliers in other countries are compliant along with their U.S. importers, he said.
   But as the U.S. government presses forward with integrating blockchain in the trade compliance arena, questions remain about how seamlessly the technology can be applied across CBPs 47 partner government agencies.
   Data without borders, a fundamental principle of blockchain technology, “sounds good if you’re only looking at shipping, but you have to take into account that we have importation entry data coming in, and we have 47 agencies … that aren’t just going to give up their sovereignty of their laws and their rules, Annunziato said. “So it’s a very interesting time right now, but I think it’s a good time for the government to be involved because we’re starting to really push forward and make sure things are honest and working the way they’re supposed to.
   CBP also is working with the Commercial Customs Operations Advisory Committee (COAC) on a proof-of-concept exercise exploring the use of blockchain in the intellectual property environment to identify IP licensees and licensors, Annunziato said.
   “So if you have a rights holder that is granting licenses to Company A, and then did they also grant the right for Company A to license out? You can now follow generationally what’s going on. So in a way the government’s got a view of that interaction with the company, and we see it as a worthwhile venture for the rights holders,” he said.
   Such blockchain uses could help with trade facilitation, as the licensor has “already told me [the licensee has] a right to bring that in,” Annunziato said. “We can do stuff with dates, we can make sure everything’s valid, so there’s a lot of potential in that.”
   CBP also is considering whether an app might be built to help it look at trademarks. As an example, Annunziato mentioned a purchase of a Louis Vuitton bag and using the app to verify the authenticity of the bag and to further examine its physical properties.
   “I can even go in and say, ‘Hey, I need a little information on the stitching,’ or, ‘I need information on what colors are viable,’” he said.
   CBP might have a 150-page guide on granular physical information associated with that bag’s IP, for example, but an app potentially could streamline the manual process for gathering that information, Annunziato said.
   CBP is considering whether officers could utilize such an app for IP examination purposes, he said.
   Speaking on Wednesday during a conference panel discussion, Annunziato said if blockchain takes off in the U.S. customs world as expected, paper processes will eventually be eliminated.
   “Why would we need to have that absolute signature if we know the government of Australia is sending me something, and I can, without a shadow of a doubt, know that it’s Australia or France or Switzerland?” he said. “All I need is the data. I don’t need the paper anymore. I just need somebody saying that it’s authorized. That is a big, huge difference that I see coming down in the future.”
   Speaking Tuesday morning during the symposium, CBP Commissioner Kevin McAleenan said CBP is working with private sector partners and the Department of Homeland Security Science and Technology Directorate on what should be the “interoperability standard” for blockchain.
   “Blockchain is not one thing,” McAleenan said. “Everybody is looking at it from their perspective, from their ecosystem, if you will, from their business model. So there’s a lot of different blockchains. They’re looking at it in different ways. Some are simply trying to ensure the providence of that transaction from the beginning; you can see it later in the chain. Others are trying to add data that can ride on the blockchain and share more data on the shipment.”
   McAleenan added that CBP has done something similar before. The agency brought passenger name record data and FDA Animal and Plant Health Inspection Service data into CBP, getting that data from more than 100 different foreign air carriers, he said.
   “We had to develop the ability to understand that data, reformat it in a consistent way, so our targeting system and our analysts could use it,” he said. “That’s the kind of interoperability challenges we’re going to face with blockchain. As industry tries to adopt blockchains more broadly, the ability to understand what they mean — and to apply in our decision-making — is going to require that interoperability standard.”
   DHS’ Science and Technology Directorate’s work on blockchain should be very helpful in guiding blockchain’s development in the trade compliance environment, moving forward, McAleenan said.

Clarification: An original posting of this article on Wednesday did not make clear that Annunziato referred to the sovereignty of CBP partner government agencies not in a general sense, but in the specific context of blockchain and the ability of blockchain data to cross agency lines. This article has been changed to accurately reflect that context.

Brian Bradley

Based in Washington, D.C., Brian covers international trade policy for American Shipper and FreightWaves. In the past, he covered nuclear defense, environmental cleanup, crime, sports, and trade at various industry and local publications.