Blockchain and Your Supply Chain

Since our previous Client Alert, distributed ledger technology (DLT), also known as “blockchain,” has continued to find new applications in supply chain security and documentation. DLT provides an “append only” chain of transaction documentation that can be shared widely or narrowly to provide a strong record for import and export supply chain records.  A number of high profile announcements illustrate the resources being devoted to DLT and supply chains.

Creating a blockchain is something that is theoretically possible on a large scale (see https://azure.microsoft.com/en-us/solutions/blockchain/). The question is, is it right for you?

Many supply chain documentation issues can be addressed through DLT; just as ERP software programs such as SAP and Oracle brought enterprise-related transactions into a new era, DLT offers to transform additional aspects of the documentation related to import and export.  Expectations must be managed, however.

DLT is a robust digital record, but as trade agencies begin to rely on blockchain for their operations, importers and exporters must also consider whether to transition their supply chain documentation to DLT. Blockchain is essentially the creation of a strong digital record of both digital (such as signatures) and analog (real world) events. If an importer uses blockchain for declarations to CBP, for instance, the importer will have an advantage in demonstrating the strength of the links in the supply chain, but the underlying analog events remain subject to audit and verification. DLT cannot eliminate fraud in the documents that are appended to the blockchain, so self-audits are still required. But, the DLT can reduce the amount of time and effort that goes into such audits.

Crowell & Moring’s “Blockchain Gang” has been involved in the assessment and development of supply chain applications. Please click here to read about the firm’s recent success in helping establish the world’s largest investment in DLT.

For further information, please contact Jeff Snyder, Jenny Cieplak, Jana del-Cerro

U.S. Forced Labor Update

The most recent Department of Labor report on Goods Produced by Child Labor or Forced Labor lists 139 goods from 79 countries; industries include: agriculture, fisheries, construction, apparel, textiles, footwear, furnishings, and minerals, among others. NGOs are also investigating and reporting on labor trafficking.

Following the amendments to section 307 made by the Trade Facilitation and Trade Enforcement Act (please click here for Crowell & Moring’s Client Alert), CBP made conforming amendments to its regulations. Its website provides the following guidance: “CBP encourages stakeholders in the trade community to closely examine their supply chains to ensure goods imported into the United States are not mined, produced or manufactured, wholly or in part, with prohibited forms of labor, i.e., slave, convict, indentured, forced or indentured child labor.” CBP Guidance on importer due diligence can be found here.

Importers are undergoing investigations now that have not yet reached the “withhold release order” level; now is the time to consider supply chain audits. Crowell & Moring lawyers have experience with supply chain audits and assisting importers undergoing such investigations.

For further information, please contact John Brew, Jeff Snyder, Frances Hadfield, Aaron Marx

North Korea and Forced Labor

Overshadowed by the Russia portion of the new sanctions law, and buried in the North Korea section of the “Countering America’s Adversaries Through Sanctions Act (CAATSA)” legislation, is a provision that creates a rebuttable presumption that most items from North Korea are prohibited because of the use of forced labor. It reads:

‘‘(a) IN GENERAL.—Except as provided in subsection 10 (b), any significant goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part by the labor of North Korean nationals or citizens shall be deemed to be prohibited under section 307 of the Tariff Act of 1930 (19 U.S.C. 1307) and shall not be entitled to entry at any of the ports of the United States.

‘‘(b) EXCEPTION.—The prohibition described in subsection (a) shall not apply if the Commissioner of U.S. Customs and Border Protection finds, by clear and convincing evidence, that the goods, wares, articles, or merchandise described in such paragraph were not produced with convict labor, forced labor, or indentured labor under penal sanctions.
Key terms remain undefined. Although the impact may be negligible given the low volume of imports from North Korea and the existing sanctions, this formulation presents an example of how Congress might use this tool to address imports from other countries.

For further information, please contact Jeff Snyder