Department of Homeland Security (DHS) Trials Blockchain Solution for Canadian Borders

The DHS has implemented a number of rapid POC projects to investigate the usefulness of blockchain in border management.

In a novel and innovative approach, the DHS is working directly with trade members from the Commercial Customs Operations Advisory Committee (COAC) working group, including customs broker Customs Direct LLC. In this role, Customs Direct has partnered with blockchain developer Morpheus.Network to fast track the technical evaluation of blockchain as a key factor in improving efficiencies on border management.

Dan Weinberger, CEO of Morpheus.Network welcomes the evaluation by DHS. “We have trialed our secure blockchain technology across a number of supply chain sectors. We are confident that we can deliver simple-to-use yet trusted solutions for different areas of border management. “

The first POC investigated free trade in the context of the North American Free Trade Agreement (NAFTA). The DHS and Customs Border Protection (CBP) opted for a less formal but much more rapid approach by seeking POC participants directly from the COAC working group. Selected member Customs Direct, with its Morpheus.Network partner, worked through the POC and applied their experience to show the benefits of Distributed Ledger Technology.   

Jim Masloski, CEO of Customs Direct praised the approach taken by the DHS. “I’ve more than 30 years’ experience in custom brokerage and it is a complex area compounded by many touchpoints and legacy infrastructure. By adopting a rapid evaluation process the DHS can make decisions based on technology that is available today. This is a game-changer for supply chain transparency.”

The initial POC looked at benefits that could be realized by utilizing blockchain with NAFTA/CAFTA claims and was conducted in September 2018 by CBP’s Office of Trade, Trade Transformation Office, (TTO), Business Transformation and Innovation Division (BTID).

This evaluation ran for six months and concluded in October with a successful outcome. So emboldened, the DHS initiated a second POC, this time in Intellectual Property Rights (IPR) which is expected to be concluded in the coming weeks.

The IPR Blockchain POC will assess the agency’s ability to facilitate shipments by aligning right’s holders and licensee(s) to the entry for an improved importation experience. The live fire system test is anticipated to occur in September 2019. A 360-degree assessment looking at policy, operations, and legal and technical aspects of the Blockchain technology will be conducted following the POC.

The effect of this ‘live fire testing’ has been beneficial to the DHS as it can actively investigate the technical options without deploying overly laborious or time-consuming tender based processes.

The official response to the projects has been very positive. Documents released by the COAC note that the aim of utilizing blockchain technology for CBP is to improve the processing of trade-related documents by hosting information about trade transactions on a decentralized, tamper-proof distributed ledger system, which can be authenticated and accessed by various stakeholders.

Supply chain issues

In a typical supply chain, there are over 40 points of contact between different entities. Something as simple as sending a bulk shipment of flowers internationally can generate over 200 hard copy documents from more than a dozen sources. Each handling point is susceptible to human error: Misfiling, late documentation, lost packages, slow payments, etc. which can delay or halt the entire shipment. In addition, there is a huge issue of counterfeit goods and the lost revenue cost to genuine manufacturers. These are massive pain points causing lost time and revenue.

Removing the inefficiencies in supply chain will stimulate economic growth through the reduction of barriers to global trade. It is estimated by the World Bank in 2018 that reducing these barriers could result in increased global GDP by $2 trillion.

Weinberger commented: “The global supply chain sector encompasses incredibly complex systems and yet many of the processes are still analog and require physical delivery of documentation. We can leapfrog these antiquated, and largely inefficient, systems and use distributed ledger technology to securely automate end-to-end supply chains including handover and back-office procedures. The result is to increase speed, improve accuracy and reduce costs. Overall we can bring the supply chain customer experience into the 21^st Century.”

Masloski concluded: “Our partnership with Morpheus.Network works really well. We understand border management and they understand the technology to support it. Together we can assist the DHS and CBP optimize cross border activity, reduce fraudulent activity and keep costs down. We look forward to delivering more valuable solutions.”

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