CBP planning blockchain tests for trade compliance

The agency received positive feedback from a recent use case examining NAFTA/CAFTA certificates of origin, a CBP official said Wednesday.    U.S. Customs and Border Protection is preparing to test several new use cases for blockchain in the trade compliance environment, including verifying the origin of certain raw material imports, verifying the composition of liquids imported via pipeline under free trade agreements, as well as a potential joint test with the U.S. Postal Service, a CBP official said Wednesday.
   The raw materials case will involve testing precious metals, diamonds and timber, CBP Business Transformation & Innovation Division Director Vincent Annunziato said during the U.S.-Canada Regulatory Cooperation Council Stakeholder Forum in Washington, D.C.
   Those could be divided into separate projects or combined into one, he said.
   “Everything has that origin slant, plus that facilitation slant,” Annunziato said of CBP’s current testing of blockchain. “That’s the main focus right now. Blockchain will become an enforcement tool at some point. … But right now, we’re looking at the facilitation aspects.”
   CBP in 2017 identified 14 use cases for blockchain, which are now being assessed, according to a November Center for Strategic and International Studies (CSIS) report.
   Annunziato told reporters after the panel discussion that he doesn’t know when the next phases of the use cases will start and that blockchain testing involves multiple groups, including people involved in policy, operations, legal and technical aspects.
   “What we do as an innovation group, we put forth the proof of concept, and when we’re done with it, we do an assessment,” he said. “And that’s done by the federal government, that’s done by the private sector. And we’re calling it a 360-degree view.”
   CBP will present the results of the use cases to the Commercial Customs Operations Advisory Committee (COAC), after which the agency hopes the private sector provides their thoughts, Annunziato said.
   CBP recently completed its first blockchain proof of concept, for NAFTA and CAFTA certificates of origin, which received very positive comments from participants, he said.
   The few negative comments the agency received regarding the test mostly related to the fact that CBP couldn’t get actual foreign suppliers to participate, which would be required to get the most comprehensive assessment, Annunziato said during the panel.
   “We had to dummy up foreign suppliers in this case because we couldn’t get them,” he said.
   The agency will release a report on the test in the near future.
   Annunziato also noted that the agency’s next blockchain test will involve intellectual property rights.
   “That one, I think, is going to be really big,” he said.
   The proof of concept will look at how CBP can facilitate shipments based on licensing information.
   For the test, “we’re hoping that since the government is receiving the blockchain data on the licensing, we’re wondering if the retailers can as well,” Annunziato told reporters. “If the retailers know that this company has the licensing, then potentially, they can order for them with the certainty that they don’t have to worry that it’s something that’s black market goods, right? At least that’s what we’re thinking. But we have to test this whole concept out.”
   For the next tests, CBP is looking to “complicate things a little bit more,” though “that doesn’t mean that it’s a recipe for failure,” he said.
   Going forward, CBP is developing “niche programs” for blockchain testing, Annunziato said.
   “Everybody’s thinking every five years you’ve got to refresh your technology, and there are certain things that you do have to do that. But I don’t foresee it that way. What’ll happen is if you’re incorporating blockchain, it’ll be upgraded, but you won’t suddenly take over all your technologies,” he said. It’s a “transactional system, not database system. So, it’s there to reach out over the internet.”