Lack of International Standard Biggest Barrier to Digitizing Supply Chain Data, Witnesses Say

Industry and government witnesses told Congress that using blockchain markers could help make shipping more efficient and make fraud more difficult. But the lack of an international standard so far makes implementing a system difficult, they told members conducting a joint hearing on the technology's use in international trade.

The Department of Homeland Security's Science and Technology Directorate is working on pilot programs to test blockchain's usefulness, said Douglas Maughan, a division director in DHS's Advanced Research Projects Agency. He said CBP is working on a proof-of-concept pilot that will help the agency to detect counterfeit goods more easily.

The way blockchain would help with counterfeits is that each producer would have a unique 32-character identifier. So if goods are purported to come from a certain brand, but the producer was not a contract manufacturer for that brand, it would be immediately visible to Customs officials.

Block chain is "quickly moving from hype to reality," Maughan told Rep. Ralph Abraham, R-La., chairman of the House Committee on Science, Space and Technology's Subcommittee on Oversight. But industries will not move to digitize documentation for international shipping without a uniform standard. Mike White, head of global trade digitalization at Maersk, told the subcommittees that Maersk and IBM started looking to digitize documents three years ago. If the industry can get away from paper documents and faxing, it would save billions, while also enhancing the ability to detect fraud, he said. "Everyone agrees there must be a better way," he said, but companies are fearful of implementing a new tracking and compliance system, because if shipments fail to arrive, it would be disastrous.

UPS, which sends packages from 220 countries, said it is working with trading partners on developing a common set of standards for blockchain identifiers. The Blockchain in Transport Alliance and the World Customs Organization are among organizations trying to develop a standard. UPS Vice President of Global Customs Brokerage Staff Christopher Rubio said if the standard is set, there's still the barrier of the fact that not all goods being shipped have RFID or barcode identifiers. It's possible that X-rays can be used to validate what's claimed as the contents of the box, he said.

Because so many companies that traffic in counterfeit goods or send illicit drugs use fake names and fake addresses, express carriers hope that if those shipments are discovered, the entity using the blockchain identifier can be barred from sending packages in the future. Moreover, it would be obvious if a shipper said one thing when it filled out its bill of lading and another thing when it filled out its customs documents, because any change to a document would be flagged.

More transparency about who all the players in the supply chain are will help customers get their packages faster, Rubio said. "Documentation is required to clear Customs around the world. By posting information in real time, that would streamline the flow of goods. They can receive their products sooner without any interruption."