A subcommittee of the House Committee on Science, Space, and Technology held a hearing this week to examine the use of blockchain technology to improve supply chains and combat counterfeiting. If you’re like many people, you may have heard of blockchain technology but you’re still figuring out what it is and how it’s used.  There are lots of explanations out there, but here’s one from Forbes magazine that we think is fairly understandable:

“[A] blockchain can be described as an append-only transaction ledger. What that means is that the ledger can be written onto with new information, but the previous information, stored in blocks, cannot be edited, adjusted or changed. This is accomplished by using cryptography to link the contents of the newly added block with each block before it, such that any change to the contents of a previous block in the chain would invalidate the data in all blocks after it.”   By being decentralized and available to all participants, it creates accountability and transparency among all parties.

Putting this into a practical example, large food companies are using blockchain technology to track produce grown in Asia, trucked to a processing facility, shipped to the U.S., and stored and distributed throughout the country. Each step is recorded in the blockchain, creating a more transparent and, hopefully, reliable supply chain.  Since a supply chain is essentially a series of contracts, legal questions abound about how to sort out the parties, the governing standards, the remedies if the purpose of the contract isn’t achieved, dispute resolution, privacy, etc.

To examine some of these issues, the House Science Committee convened the following logistics and security stakeholders:

Key Points From the Witnesses Were As Follows:

  • Department of Homeland Security is partnering with industry to see if it can set standards for the supply chain process.  U.S. Customs and Border Protection, are currently conducting blockchain pilots with industry to see how the technology could be used to combat counterfeit products and intellectual property theft.
  • UPS and Maersk highlighted blockchain’s ability to verify transactions across distributed ledger could revolutionize the intricacies of the global shipping system, allowing them to trace counterfeit products and provide end-to-end visibility into the supply chain.
  • Both Maughan and the industry witnesses also called for the continued cooperation of federal and international partners to help craft blockchain standards agreements.
  • Blockchain could reduce fraudulent goods coming from overseas using American products without licenses in order to undercut domestic businesses.

For anyone interested in the full hearing transcript, it can be found here.