U.S. Customs and Border Protection is expecting to conduct this month a second test of the agency’s potential use of blockchain technology, focusing on intellectual property rights. Other tests are also in the works.

A blockchain essentially functions as a distributed ledger that records transactions in a verifiable and permanent way. Blockchain records are transparent to all who have access to the network (though specific documents in those records, such as certificates of origin, are not) but are decentralized across that network, making them virtually incorruptible. This security has made blockchain a promising technology for recording a wide range of activities, including customs and trade-related transactions. Companies and organizations around the world are testing how blockchain may aid international trade flows, including tracking cargo containers, transferring shipping documents, and confirming cross-border payments.

In 2018 CBP tested the use of blockchain for the certifications of origin used to qualify goods for preferential treatment under NAFTA and CAFTA-DR. According to CBP, this test found that use of the blockchain achieved almost instantaneous communications between CBP and the trade, improved documentation of receipt, and expedited agency processing. Other benefits included eliminating manual documentation requirements and duplicative data entry, early capture of potential issues, receipt of full data (certificate of origin, entity data, etc.) with the initial submission of the entry summary, enhanced targeting, easier access to and more direct communication with the importer, and easier access to back-up documentation when required.

Since then CBP has been working toward testing its ability to use blockchain to facilitate shipments based on known relationships between intellectual property rights holders and licensees. A “live fire” system test is anticipated this month and an assessment of the associated legal, policy, technical, and operational issues will be conducted thereafter.

Other proof of concept tests that have been or will soon be initiated will address verifiable credentials (i.e., legitimizing a business or person via automation), purchase order to entry (combining shipping and entry data, reverse engineering the entry/entry summary processes to remove dependency on the HTS, etc.), and tracking oil shipments from spigot to importation.

For more information, please contact customs attorney Lenny Feldman at (305) 894-1011.

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