'Really intriguing': The agency in charge of protecting America's borders is getting serious about blockchain tech

Vincent Annunziato – who is the director of the U.S. Customs and Border Protection’s Business Transformation & Innovation Division – says he was skeptical when he first came across blockchain tech.

But that perspective evolved over time, and it’s that cautious optimism that has led CBP, under the auspices of Annunziato’s division, to serve as one of the key U.S. government testing grounds for the nascent technology.

“As I progressed, slowly learning more about it, I started to understand it’s usefulness,” he told The Block in an interview this week. “It’s one of the safest ways to trade data over the internet with entities you don’t normally get to within your own network.”

Annunziato’s history at CBP dates back to the mid-90s when we served as an officer in California. A passion for technology led to a shifting of gears that saw him leading the modernization effort of the Automated Commercial Environment or ACE, a massive trade reporting system.

Now he’s the director of CBP’s technology innovation unit, and it’s through there that CBP has conducted a series of pilots to test the efficacy of blockchain for reducing the complexity and cost of data exchange and sharing. These include looking at how blockchain can fit into the picture of cross-border free trade agreements, supply chain management and the tracking of major goods.

To be sure, Annunziato stressed that the U.S. government isn’t embracing blockchain wholeheartedly – not yet, at least – but he highlighted how the technology has triggered a rethinking of engineering processes and how elements of the CBP’s mission could evolve with real-time data.

“I’ve been around a long time now, I have really never seen the implementation of a technology that helps you get better security and at the same time better facilitation,” he told The Block. “That’s what’s really intriguing to me.”

The Block subscribers who’ve followed this editor's’ public-sector reporting know that the U.S. government has been devoting time and resources to the technology – spurred in part by supporters in Congress who have spurred on federal agencies via the budgeting process. Indeed, as Rep. Darren Soto told me last month, there is a view shared by some in both the legislative and executive branches that blockchain can “help us start addressing complex problems that would have been impossible to get our arms around 20-30 years ago.”

Annunziato is definitely no evangelist. But an issuer paper attributed to him and obtained by The Block contains some seemingly bold language about the technology’s prospects in the context of the CBP mission:

“Blockchain is a digital ledger that provides a secure, tamperproof and permanent record of transactions. CBP believes this technology has the potential to become a major component in the supply chain for the movement of goods and facilitation of entry into the United States.”

As enumerated in the issue paper, the CBP’s tests to date have focused on data retention and facilitation, enabling a possible shift from processes that are largely paper-based to digital, real-time ones.

“CBP’s end goals for every blockchain project are: … Obtain data earlier in the process… Enhance safety and facilitation o Improve reporting/targeting/predictive analysis...,” the paper notes. “So far CBP has demonstrated promising results, including accelerating cargo processing, expediting communications and supporting enhanced enforcement activity.”

That in itself is notable, given the CBP's oversight on the passage of goods across U.S. borders. According to its published figures, the CBP reported $2.67 trillion in total imported value for imported goods for the fiscal year 2019, with $71.9 billion in collected duties.

One specific area under recent investigation was a proof-of-concept focused on intellectual property rights (IPR). As outlined in the issue paper: “In September 2019, CBP completed the IPR blockchain proof of concept (POC), which demonstrated how blockchain technology can protect IPR on American imports and sensitive information transmitted between multiple parties using a single, streamlined platform.”

The results, in the CBP’s own words:

”Blockchain technology combatted potential IPR violations by allowing CBP to exchange data securely and efficiently with manufacturers, retailers, rights holders and importers… Blockchain’s single access point concept provided the agency with the technology to connect the data correctly to the product and to the license, resulting in fewer physical examinations. This was accomplished via blockchain interoperability, which enabled organizations with distinct blockchains to communicate regardless of differences in software used by each. This allows companies the flexibility to select and customize technology that suits their specific needs. … This POC was a first-of-its-kind test of standards and specifications to facilitate blockchain interoperability using open, standardized approaches.”

Looking ahead, the CBP’s innovation arm is working alongside the Department of Homeland Security via the Silicon Valley Innovation Program (SVIP) to investigate blockchain’s use for commodities processing – steel, timber and pipeline to start. As before, the goal is to see whether the technology can put data in the hands of key parties more efficiently and cut costs. More SVIP programs are being investigated, including one focused on food safety.

Annunziato summed up what his office does as taking new products and technologies and examining whether they can be used to reengineer such activities. He noted that the division’s purpose is, in part, to spend some time and money to see if it’s worth making deeper investments and, perhaps, moving new technology applications into production.

“If you are starting to look at this in a different way, it opens up more and more opportunities to save time and potential to save costs, which is ultimately what we’re trying to do,” he said.

“I get to look at the future and then start to apply that to the operators who are just so supportive of the work we’re doing,” Annunziato added. “So we get to look at some pretty neat stuff.”