[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]




                   LEVERAGING BLOCKCHAIN TECHNOLOGY 
                   TO IMPROVE SUPPLY CHAIN MANAGEMENT
                      AND COMBAT COUNTERFEIT GOODS

=======================================================================

                             JOINT HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON OVERSIGHT &
                SUBCOMMITTEE ON RESEARCH AND TECHNOLOGY

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 8, 2018

                               __________

                           Serial No. 115-57

                               __________

 Printed for the use of the Committee on Science, Space, and Technology






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       Available via the World Wide Web: http://science.house.gov



                                   ______
		 
                     U.S. GOVERNMENT PUBLISHING OFFICE 
		 
30-320PDF                WASHINGTON : 2018                 

























              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                   HON. LAMAR S. SMITH, Texas, Chair
FRANK D. LUCAS, Oklahoma             EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         ZOE LOFGREN, California
MO BROOKS, Alabama                   DANIEL LIPINSKI, Illinois
RANDY HULTGREN, Illinois             SUZANNE BONAMICI, Oregon
BILL POSEY, Florida                  AMI BERA, California
THOMAS MASSIE, Kentucky              ELIZABETH H. ESTY, Connecticut
RANDY K. WEBER, Texas                MARC A. VEASEY, Texas
STEPHEN KNIGHT, California           DONALD S. BEYER, JR., Virginia
BRIAN BABIN, Texas                   JACKY ROSEN, Nevada
BARBARA COMSTOCK, Virginia           CONOR LAMB, Pennsylvania
BARRY LOUDERMILK, Georgia            JERRY McNERNEY, California
RALPH LEE ABRAHAM, Louisiana         ED PERLMUTTER, Colorado
DANIEL WEBSTER, Florida              PAUL TONKO, New York
JIM BANKS, Indiana                   BILL FOSTER, Illinois
ANDY BIGGS, Arizona                  MARK TAKANO, California
ROGER W. MARSHALL, Kansas            COLLEEN HANABUSA, Hawaii
NEAL P. DUNN, Florida                CHARLIE CRIST, Florida
CLAY HIGGINS, Louisiana
RALPH NORMAN, South Carolina
                                 ------                                

                       Subcommittee on Oversight


                  RALPH LEE ABRAHAM, Louisiana, Chair
BILL POSEY, Florida                  DONALD S. BEYER, Jr., Virginia
THOMAS MASSIE, Kentucky              JERRY McNERNEY, California
BARRY LOUDERMILK, Georgia            ED PERLMUTTER, Colorado
ROGER W. MARSHALL, Kansas            EDDIE BERNICE JOHNSON, Texas
CLAY HIGGINS, Louisiana
RALPH NORMAN, South Carolina
LAMAR S. SMITH, Texas
                                 ------                                

                Subcommittee on Research and Technology

                 HON. BARBARA COMSTOCK, Virginia, Chair
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
RANDY HULTGREN, Illinois             ELIZABETH H. ESTY, Connecticut
STEPHEN KNIGHT, California           JACKY ROSEN, Nevada
DANIEL WEBSTER, Florida              SUZANNE BONAMICI, Oregon
JIM BANKS, Indiana                   AMI BERA, California
ROGER W. MARSHALL, Kansas            DONALD S. BEYER, JR., Virginia
LAMAR S. SMITH, Texas                EDDIE BERNICE JOHNSON, Texas



























                            C O N T E N T S

                              May 8, 2018

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Ralph Lee Abraham, Chairman, 
  Subcommittee on Oversight, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     4
    Written Statement............................................     6

Written Statement by Representative Eddie Bernice Johnson, 
  Ranking Member, Committee on Science, Space, and Technology, 
  U.S. House of Representatives..................................     8

Written Statement by Representative Donald S. Beyer, Jr., Ranking 
  Member, Subcommittee on Oversight, Committee on Science, Space, 
  and Technology, U.S. House of Representatives..................    10

Written Statement by Representative Barbara Comstock, Chairwoman, 
  Subcommittee on Research and Technology, Committee on Science, 
  Space, and Technology, U.S. House of Representatives...........    12

Written Statement by Representative Daniel Lipinski, Ranking 
  Member, Subcommittee on Research and Technology, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    14

                               Witnesses:

Dr. Douglas Maughan, Cyber Security Division Director, Science 
  and Technology Directorate, U.S. Department of Homeland 
  Security
    Oral Statement...............................................    16
    Written Statement............................................    19

Mr. Robert ``Bob'' Chiaviello, IPR Counsel, Nuby Law
    Oral Statement...............................................    27
    Written Statement............................................    29

Mr. Michael White, Head of Global Trade Digitization, Maersk
    Oral Statement...............................................    50
    Written Statement............................................    53

Mr. Chris Rubio, VP Global Customs Brokerage Staff, UPS
    Oral Statement...............................................    57
    Written Statement............................................    60

Discussion.......................................................    65

             Appendix I: Answers to Post-Hearing Questions

Dr. Douglas Maughan, Cyber Security Division Director, Science 
  and Technology Directorate, U.S. Department of Homeland 
  Security.......................................................    84

Mr. Robert ``Bob'' Chiaviello, IPR Counsel, Nuby Law.............    87

Mr. Michael White, Head of Global Trade Digitization, Maersk.....    89

Mr. Chris Rubio, VP Global Customs Brokerage Staff, UPS..........    91 
 
                    LEVERAGING BLOCKCHAIN TECHNOLOGY
                   TO IMPROVE SUPPLY CHAIN MANAGEMENT
                      AND COMBAT COUNTERFEIT GOODS

                              ----------                              


                          TUESDAY, MAY 8, 2018

                  House of Representatives,
                      Subcommittee on Oversight and
            Subcommittee on Research and Technology
               Committee on Science, Space, and Technology,
                                                   Washington, D.C.

    The Subcommittees met, pursuant to call, at 10:03 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Ralph 
Abraham [Chairman of the Subcommittee on Oversight] presiding.


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    Chairman Abraham. The Subcommittee on Oversight and 
Research and Technology will come to order.
    Without objection, the Chair is authorized to declare 
recess of the Subcommittee at any time.
    Good morning, and welcome to today's hearing entitled 
``Leveraging Blockchain Technology to Improve Supply Chain 
Management and Combat Counterfeit Goods.'' I'll recognize 
myself for five minutes for an opening statement.
    Good morning again. Welcome to today's joint Oversight and 
Research and Technology Subcommittee hearing, ``Leveraging 
Blockchain Technology to Improve Supply Chain Management and 
Combat Counterfeit Goods.'' Today's hearing will highlight 
potential applications of blockchain technology in shipping, 
logistics, and customs, emphasizing supply chain management. A 
focus today will be how this technology can be leveraged to a 
greater visibility into the supply chain and how the technology 
can be used to combat the distribution of counterfeit products.
    We will hear from government and private-sector experts 
about blockchains potential to improve the security of our 
systems and how it can ensure customers and the companies 
alike, that the products and services being used are verified.
    The Science Committee continues to engage in oversight of 
emerging forms and applications of technology, just like the 
discussion that we--will occur on blockchain today. We 
recognize that these technologies can benefit both the public 
and private sectors and seek to understand what can be done to 
ensure that this technology is appropriately leveraged in an 
efficient and productive manner.
    Through ensuring reliability, increasing productivity, and 
securing systems and data, the application of blockchain 
technology is an area in which there is much to learn. While 
the applications for blockchain technology are continuously 
increasing, this hearing is an opportunity to learn more about 
its specific use in supply chain management. Today's witnesses 
can provide valuable insight into how blockchain can enhance 
security and be leveraged outside of the private sector to 
improve government efficiency.
    We must also recognize that--the barriers faced by the 
private sector in leveraging blockchain technology in order to 
fully realize its potential benefits. By hearing from 
individuals today that are taking part in ongoing and proactive 
efforts within the private sector to utilize blockchain 
technology in different areas of their business models, we can 
gain a better understanding of what, if anything, industry 
needs from the government.
    I want to thank Mr. White for being here to represent 
Maersk, and Mr. Rubio representing UPS. These companies are 
presently engaged in important case studies using this 
technology. We look forward to learning about those efforts.
    Additionally, Mr. Chiaviello is here today to do--detail 
some of the counterfeiting and business issues companies like 
Luv N' Care are experiencing. Baby care products are some of 
the most important on the market. We must be able to verify the 
authenticity of these goods. There is a potential role emerging 
for technologies like blockchain to address these global supply 
chain safety issues.
    The committee will continue to prioritize issues like 
verification and overall cybersecurity. We hope venues like 
today's hearing will help provide a better understanding of the 
issues our private industries are facing and how they are 
utilizing emerging technologies. This knowledge can better 
inform the Committee on how the application of blockchain 
technology could potentially bolster private companies' and the 
federal government's cybersecurity weaknesses.
    Dr. Maughan, we appreciate you being here today to provide 
more insight into the role DHS has played in utilizing this 
emerging technology. DHS Science and Technology Directorate is 
in a unique position to provide valuable insight and services 
as a useful role in exploring a broader understanding and 
application of the technology in areas directly related to 
shipping, logistics, and customs.
    Additionally, through the many projects and ventures it 
supports, DHS has the ability to effectively identify the 
potential for blockchain technology and address how the federal 
government could benefit. These potential solutions could help 
secure data and enhance our national security.
    I look forward to the insight our witnesses will provide. 
This dialogue will help us resolve important questions and 
better understand the next steps that must be taken to ensure 
the integrity, resilience, and security of our systems and 
industries that could--and do--benefit from the application of 
this technology.
    [The prepared statement of Chairman Abraham follows:]
  
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    [The prepared statement of Ms. Johnson follows:]

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    [The prepared statement of Mr. Beyer follows:]

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    [The prepared statement of Mrs. Comstock follows:]

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    [The prepared statement of Mr. Lipinski follows:]

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    Chairman Abraham. We're going to recognize our witnesses 
now. Our first witness today is Dr. Douglas Maughan, Director 
of the Cyber Security Division of the Science and Technology 
Directorate at the Department of Homeland Security. Dr. Maughan 
previously worked at the National Security Agency from 1987 to 
1999 as a Senior Computer Scientist before moving to DARPA to 
work as a Program Manager. In 2003, he joined the Department of 
Homeland Security as a Program Manager and was promoted to 
Division Director in 2010. He holds two bachelor's degrees from 
Utah State University in computer science and applied 
statistics, a master's degree in computer science from Johns 
Hopkins University, and a doctorate in computer science from 
the University of Maryland, Baltimore County.
    Our second witness is Mr. Bob Chiaviello, an IPR Counsel at 
Nuby Law. Mr. Chiaviello has practiced intellectual property 
law for 37 years starting at Pennie & Edmonds in 1980. After a 
brief stint with IBM, he joined Baker Botts in 1990. In 2002, 
Mr. Chiaviello joined Fulbright & Jaworski as a partner and 
worked there until 2011. He received his bachelor's degree from 
Washington and Lee University and his juris doctor from the 
John Marshall Law School.
    Our next witness is Mr. Michael White, head of the Global 
Trade Digitalization at Maersk. Mr. White has worked at Maersk 
since 2007, first as a Managing Director at Maersk Holding. He 
then became Managing Director at Maersk Line before becoming 
the head of Global Trade Digitization in 2017. He received a 
bachelor's degree from Virginia Wesleyan University and also 
studied at Harvard Business School and the International 
Institute for Management Development business school in 
Lausanne, Switzerland.
    Our final witness is Mr. Christopher Rubio, Vice President 
of Global Customs Brokerage Staff at United Parcel Services. 
Mr. Rubio holds a bachelor's degree in accounting from Pace 
University and an MBA in finance from Rutgers University. He 
has worked for UPS since 2004, first as Department Manager for 
the Midmarket Sales Team. He then became the Department Manager 
for UPS Trade Management Services before joining the Global 
Customs Brokerage System Group.
    I now recognize Dr. Maughan for five minutes to present his 
testimony.

               TESTIMONY OF DR. DOUGLAS MAUGHAN,

               CYBER SECURITY DIVISION DIRECTOR,

              SCIENCE AND TECHNOLOGY DIRECTORATE,

              U.S. DEPARTMENT OF HOMELAND SECURITY

    Dr. Maughan. Chairman Abraham and distinguished Members of 
the Oversight and Research and Technology Subcommittees, thank 
you for inviting DHS to speak with you today. I will be sharing 
important aspects of how the Department of Homeland Security 
Science and Technology Directorate is using blockchain 
technologies in research and development and working with 
department missionaries to integrate the innovative technology 
into everyday use.
    As the R&D arm of DHS, S&T develops the tools, 
technologies, and knowledge products for DHS operators and 
state and local first responders, ensuring that R&D 
coordination across the Department to develop solutions for the 
needs of today and tomorrow. S&T partners with federal 
agencies, industry, academia, and international governments to 
create and test real-world solutions that help the Nation's 
homeland security officials defend against, respond to, 
mitigate, and recover from all hazards and threats in a 
realistic time frame.
    Blockchains offer promise, as witnessed by the rapid growth 
of interest across government and private sector. From a 
government perspective, the technology holds potential for 
enhanced transparency and auditing of public service 
operations, greater supply chain visibility to combat the 
distribution of counterfeit products, and automation of paper-
based processes to improve delivery of services to 
organizations and citizens.
    There are many types of blockchains with varying degrees of 
support of classic security principles such as confidentiality, 
integrity, and availability, as well as support of privacy 
principles such as pseudonymity and selective disclosure. 
Analysis to determine if a particular blockchain supports these 
security and privacy considerations is often nonexistent and/or 
not readily available. There remain other challenges with 
blockchain technology, particularly a lack of support for 
standards that may limit the growth and availability of a 
competitive marketplace of interoperable, cost-effective, and 
innovative solutions for both government and industry.
    Certainly, private industry is leading the way in 
blockchain development, as many see it as a key competitive 
advantage. Government must be informed and ensure blockchain 
technology, as it evolves, supports standardized approaches for 
security privacy and data exchange to create efficiencies and 
enhance the public good. Government must also consider 
leadership opportunities within the broader community and 
partner with industry to bring solutions to market.
    Blockchain technologies are an integral part of several 
ongoing S&T research efforts with both DHS components and 
industry partners. We're exploring many issues, including the 
development of best practices and decision criteria on when and 
how to implement the blockchain technologies, understanding the 
support for security and privacy principles in commercial 
blockchain implementations, developing specifications to ensure 
standardized approaches for decentralized identifiers, defining 
interoperable data formats using verifiable credentials, and 
identifying scalable and usable approaches to decentralized key 
management systems.
    DHS S&T is also supporting the development of globally 
available specifications as a precursor to standards, which are 
open, royalty-free, and free to implement to ensure 
interoperability across systems, while ensuring there is no 
vendor lock-in. We are doing this through organizations like 
the World Wide Web Consortium and the Organization for the 
Advancement of Structured Information Standards.
    Within DHS, the U.S. Customs and Border Protection 
organization has been the most active operational component to 
partner with S&T on the use of blockchain technologies for its 
mission. Our ongoing engagements with CBP include a proof-of-
concept deployment with the Border Patrol to evaluate how 
blockchain technology can ensure the authenticity and integrity 
of imagery data collected from cameras, both fixed and mobile; 
conducting analysis of alternatives and feasibility studies to 
understand the potential benefits and challenges for 
facilitating and enhancing international passenger travel; and 
conducting proof-of-concept deployments in partnership with 
CBP's Office of Trade and Office of Trade Relations that are 
directly focused on applications of blockchain to shipping, 
logistics, and customs.
    Blockchains are moving rapidly from hype to reality in the 
application domain areas where DHS S&T is currently working. We 
believe our careful and considered approach benefits not just 
DHS but everyone who is considering the use of a blockchain 
technology by ensuring that there are multiple vendors with 
interoperable solutions from which the government can choose.
    Thank you again for your committee's thoughtful interest 
and leadership in blockchain technology and how it will help 
DHS accomplish its important mission. I look forward to your 
questions.
    [The prepared statement of Dr. Maughan follows:]
   
   
   
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    Chairman Abraham. Thank you, Dr. Maughan.
    I now recognize Mr. Chiaviello for five minutes to present 
his testimony.

              TESTIMONY OF MR. ROBERT CHIAVIELLO,

                     IPR COUNSEL, NUBY LAW

    Mr. Chiaviello. Mr. Chairman, Members, thank you for 
focusing a light on this problem. I also want to thank your 
staff for helping to coordinate and the hospitality they've 
shown us coming up from Monroe, Louisiana, for this hearing.
    I represent Luv N' Care. It's a company located in Monroe, 
Louisiana, and we make baby products. If you're a parent or 
grandparent of small children, you probably are familiar with 
our products. We make sippy cups, pacifiers, bibs, a wide range 
of products. We're not a tech company, so--but I'm here to 
explain to the Committee a problem--a growing problem that we 
are experiencing from unfair competition, particularly unfair 
competition from overseas.
    As a consumer products company, we've always had to deal 
with people who would copy our intellectual property and try to 
sell it to--as counterfeits or knockoffs, but today, what we're 
facing is a foreign-centered threat. It's costing our company 
millions of dollars a year, and it's seriously affecting our 
bottom line.
    Some of the--what we are seeing today is really a 
combination of two things. One is online retailing, combined 
with the ability to ship products directly from overseas into 
the U.S. market. When I first started 30-some years ago, if 
there was unfair competition, it usually came in by a container 
load, which usually gave us plenty of time to deal with it or--
either on the water or by the time it arrived here we--we could 
deal with it either with customs or in the court system.
    Today, the products are coming in by UPS and China post. 
What we see is a foreign-based entity that will use an online 
retailer like Amazon or others. They market their product to 
U.S.-based consumers. Typically, they use our intellectual 
property. They're using our trademarks to promote their 
product. They'll even go so far as to copy our photographs from 
our website, photograph our products, marketing it as their 
own. Then, they use digital advertising to attract the consumer 
to their website. The consumer thinks of course that the 
product is somehow related to us, purchases the product, and 
then the product is shipped directly to the consumer from, 
typically, China.
    We are now--and this--the product can be shipped in. We've 
done experiments or testing. It can be 48, 72 hours from 
placing an order online to the time the product arrives here in 
the United States.
    The--well, let me see. The--another--well, our problem is 
primarily with intellectual property where we can enforce our 
rights. There's also a problem with U.S. health and safety 
laws. Baby products are a fairly regulated item between the 
Consumer Products Safety Commission and the FDA, and our 
company spends a great deal of effort, resource complying with 
those rules and regulations, as well as our own quality 
standards.
    Quite often, these pirates do not. We--some of the products 
that we've inspected, they use inferior materials. They use 
banned materials. The products don't comply with the size 
regulations of the CPSC. We've found pacifiers, for example, 
that are made using inferior plastic materials or with 
adulterants so that the nipple part can come off the pacifier, 
obviously can become a choking hazard.
    And the U.S. consumer, as well as we, have no recourse. 
These folks are located--these pirates are located in China. 
They have no domestic connection, and our current systems for 
trying to enforce U.S. IP laws and health and safety 
regulations fail when the infringer or the violator is located 
overseas and outside the jurisdiction of U.S. courts and 
customs.
    The way we see the problem, it's really a question of how 
the border is opened, and we implore for some solution to try 
and place better controls on the border to prevent these kinds 
of--this kind of activity.
    I want to thank the Committee for its attention to this 
problem.
    [The prepared statement of Mr. Chiaviello follows:]


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    Chairman Abraham. Thank you, Mr. Chiaviello.
    Mr. White, five minutes please, sir.

                TESTIMONY OF MR. MICHAEL WHITE,

           HEAD OF GLOBAL TRADE DIGITIZATION, MAERSK

    Mr. White. Good morning, Chairman Abraham, Chairwoman 
Comstock, Ranking Member Beyer, Ranking Member Lipinski, and 
members of the subcommittees. My name is Mike White. I'm head 
of Global Trade Digitization for Maersk. Before moving to my 
current role, I was President of Maersk Line North America for 
the past eight years, and I have had the pleasure of working in 
this industry for over 37 years. Thank you very much for the 
opportunity to testify this morning.
    In a global economy, supply chains are of critical 
importance. It is estimated that over $16 trillion worth of 
goods cross international borders each year, and more than 80 
percent of those goods are carried by the ocean shipping 
industry. Over the past five years, global container volumes 
have increased on average of 3.7 percent per year.
    Moving goods from point A to point B involves many parties 
who are separate but dependent upon one another. Importers and 
exporters, freight forwarders, customs brokers, ports and 
terminals, ocean carriers, customs and government authorities, 
inland transportation providers, financial institutions, and 
others all gather discrete sets of sometimes overlapping 
information, which they share using a convoluted web of 
individualized formats and aging technologies. This 
inconsistent flow of information across organizational 
boundaries hampers the efficient flow of goods, but through a 
collective complexity-driven inertia, supply chain participants 
persist in their outdated practices. Perhaps this is because 
they trust that, flawed though it may be, the system will 
deliver ultimately a container from point A to point B, and 
they can't afford to experiment with a system that may fail to 
do so.
    The industry operates today much as it does--or has since 
the introduction of shipping containers in the 1950s. Many 
processes are manual, time-consuming, and too often paper-
based, with transactions still frequently coming today via fax 
machine. The cargo on any given container vessel voyage 
generates a mountain of documents, many of which are sent to 
the relevant container's destination by some other means. 
Container shipments can often be delayed in the port because 
necessary paperwork has not caught up with the goods that they 
carry.
    In a Freightos survey recently cited by The Economist, 2/3 
of respondents said that over 1/4 of their deliveries abroad 
arrived late. Nearly 1/2 said they spend more than 2 hours on 
paperwork when arranging a given shipment, and the vast 
majority of respondents had real difficulty tracking goods in 
transit.
    In an industry where global transport costs are 1.8 to $2 
trillion annually, administrative costs can sometimes exceed 
the end-to-end transport costs for a given container, and 
overall inefficiencies are estimated at 15 percent or higher. 
The World Economic Forum estimates that by reducing barriers 
within international supply chains, global trade could increase 
by up to 15 percent, boosting economy and creating jobs.
    These barriers have proven incredibly difficult to surmount 
as participants are trapped by the layered complexity of 
entrenched methods. Everyone agrees that there must be a better 
way, but no single participant is able to affect change because 
of the overarching desire to stick with what is known to work 
even if not very well over an experiment that could fail with 
disastrous and cascading consequences.
    In 2016, Maersk and IBM began a collaboration with the goal 
of digitizing the global supply chain. To begin, we analyzed a 
number of supply chains to understand the current challenges in 
specific areas of complexity. One of these involved a shipment 
of avocados moving from Kenya to the Netherlands. This one 
container involved over 30 different actors or entities, more 
than 100 individuals, and over 200 separate exchanges of 
information and documentation, the vast majority of which were 
completely manual, paper-based, and extremely time-consuming.
    We soon realized that no sustainable solution can exist for 
streamlining this entrenched complexity without unprecedented 
buy-in from the entire industry. In our analysis, an open and 
neutral industry platform, consisting at its core of a 
worldwide network of interconnected supply chain participants, 
is by far the best way to drive efficient, transparent, and 
secure global trade. The trust necessary to build this network 
would likely not exist without blockchain technology.
    In January of this year, Maersk and IBM announced our 
intention, subject to the receipt of all applicable regulatory 
approvals, to form a joint venture to implement this global 
platform. The platform will follow the flow of cargo from 
source to destination. As empty containers are provisioned and 
transported from a warehouse, as the containers are stuffed and 
transported to a port, loaded on board a vessel, cleared export 
regulatory clearance, and continuing on the vessel to the 
import side will follow the flow of the cargo through customs 
clearance and ultimately delivery to the final consignee and 
the empty containers returned to a depot.
    The platform will do this by leveraging network 
participants who both make information available and consume 
information by others. Blockchain enables this unprecedented 
collaboration by ensuring the security, trustworthiness, and 
permissioned accessibility of sensitive participation 
information, even as that information is distributed across 
heretofore segregated enterprises. Participants will be able to 
go to one place to track the real-time status of a container 
and to locate and transact with up-to-date, trustworthy trade 
information.
    Blockchain is the critical ingredient. It creates an 
immutable record of transactions, which enables the ecosystem 
to track the exchange of critical information like records of 
inspection, bills of lading, customs documents. Throughout the 
trade, each participant has real-time visibility access to 
supply chain according to permission levels. Trust is built by 
validating the participants, authenticating transactions, 
distributing information, and maintaining unalterable records 
that are located or accessible through the platform.
    At the end of the given shipment, these immutable records 
will provide one version of the truth of how a container 
transited from beginning to end, and the documents submitted to 
the platform can be actioned and stored using blockchain 
technology. This means that, once a document has been certified 
by a government agency, the slightest alteration to that 
document will be exposed and rejected as different from the 
original. This will obviously have lasting benefits towards 
fraud detection and prevention.
    The result: a previously unattainable information backbone 
of the global supply chain, encompassing the milestones 
documents in a structured form, customs filings, and many more 
solutions. Access to this platform will give traders and 
transportation real-time end-to-end visibility of, and 
permission to access to, information about cargo shipments such 
as status and whereabouts of containers, shipping milestones, 
and trade documentation. As the network grows, its benefits 
will multiply and it will generate billions of dollars in 
savings for all industry participants, along with entirely new 
approaches to global logistics.
    Thank you for the opportunity to discuss this vital topic. 
I look forward to answering your questions.
    [The prepared statement of Mr. White follows:]

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    Chairman Abraham. Thank you, Mr. White.
    Mr. Rubio?

                 TESTIMONY OF MR. CHRIS RUBIO,

             VP GLOBAL CUSTOMS BROKERAGE STAFF, UPS

    Mr. Rubio. Chairman Abraham, Chairman Comstock, Ranking 
Member Beyer----
    Chairman Abraham. Turn your mic on.
    Mr. Rubio. Thank you, sir. Chairman Abraham, Chairman 
Comstock, Ranking Member Beyer, Ranking Member Lipinski, and 
distinguished members of the committee, thank you for the 
opportunity to testify before you today on how blockchain 
technology can be leveraged to provide greater supply chain 
visibility and possibly help combat the distribution of 
counterfeit products.
    I applaud the Committee's efforts to get in front of this 
rapidly evolving technology, and this hearing before two 
subcommittees speaks to the importance of this issue.
    With over 434,000 global employees delivering more than 19 
million packages and documents every day in over 220 countries 
and territories around the world, we work hard to be united 
problem solvers. At UPS, our business processes are complex and 
our technology advanced, but our objective is simple: to ensure 
world-class service for our customers.
    UPS has been researching the use of blockchain technology 
with the purpose of identifying ways blockchain may impact, 
disrupt, and/or drive efficiency in the supply chain. Our goal 
is to engage in a collaborative discussion with customers and 
policymakers on how blockchain technology can be utilized to 
further enable supply chain digitization, efficiency, and 
security, blockchain as an enabler.
    In terms of logistics applications, blockchain could bring 
together buyers, sellers, suppliers, payment companies, and 
logistic companies to provide end-to-end supply chain 
visibility, while addressing privacy and data security 
concerns. For government border agencies, blockchain could 
enable greater transparency of a transaction, possibly 
including what's in the box and who's buying it, how much 
they're paying for it, assurance that the duties and taxes are 
paid, and possible confirmation that shipments are not under-
declared, resulting in faster release and a more trustworthy 
supply chain.
    As a result of the technology underlying blockchains, UPS 
sees four key benefits for our company and our customers: 
integrity, transparency, interoperability, and security. In 
particular, our large customers have the potential to benefit 
greatly from the adoption of this technology.
    Given the complexities of the modern supply chain, 
multinational corporations have invested large amounts of money 
in enterprise resource planning systems and supply chain 
management software yet only have limited visibility and 
insight into where all of these products are at a given point 
in time.
    However, it is not only large multinationals that will 
benefit. We also see the potential for small and medium-size 
enterprises to realize the many benefits of blockchain, for 
example, a small business would be able to ship its products 
globally due to the blockchain framework that enables multiple 
parties to share important trade information in a single ledger 
for the contents of that shipment.
    As a protector of intellectual property rights, UPS and 
other express delivery service providers engage regularly with 
customers and governments to ensure that our network around the 
world only carries legitimate and legal products. However, 
there are practical limits to what we and other express 
delivery providers can do day-to-day. First, we're not the 
originators of the information about the shipments, and 
limitations exist on the quantity of information that we can 
obtain from customers. Second, we and other express delivery 
providers do not have the requisite expertise to identify 
counterfeit or pirated goods. And third, we're not law 
enforcement agencies, which means we're subject to national 
data protection and commercial information and confidentiality 
rules.
    This is where blockchain could potentially provide a 
solution. By having the ability to track any product from the 
beginning of its journey through the supply chain, blockchain 
may provide a solution to unknown or unverified product 
origins. In fact, we are already seeing this technology used to 
trace the origins of various products from diamonds and mangos. 
By creating a digital record of each individual item, the 
company and consumer are able to verify the authenticity of the 
product and ensure standards are met each step of the way.
    The United States and international governments' role in 
fostering blockchain: The U.S. Congress, federal agencies, and 
our international counterparts will play a vital role in the 
adoption and success of blockchain in the supply chain. 
Governments must take a balanced and measured approach between 
regulating this everchanging technology and allowing for its 
innovation and evolution. As e-commerce and global trade flows 
continue to rapidly grow, the United States must work with our 
international trading partners to establish a common set of 
blockchain standards that are recognized throughout the world.
    As I mentioned previously, UPS operates in over 220 
countries and territories around the world, and I know 
firsthand that a patchwork of global regulation would stifle 
innovation, slow the flow of goods across borders, and increase 
the likelihood that illicit material would enter the country 
undetected.
    Despite the potential upside to the widespread adoption of 
blockchain, a couple of key barriers exist that must be 
overcome. The first and biggest hurdle is the linking of all 
physical objects to the digital stream. Currently, individual 
items may be tagged digitally with RFID, near-field 
communication, or two-dimensional barcodes. However, in order 
for blockchain to realize its full potential, all products 
would have to be tagged digitally, requiring an overhaul in 
today's supply chain practices. Without an industry and supply-
chain-wide commitment to adopt to digitalization, many 
organizations will not make the investment in the technology.
    Finally, the international community must come together to 
ensure that there is one unified set of standards for 
blockchain. This will give companies the confidence they need 
to know the technology they adopt will be recognized throughout 
the world. Without these common standards, uncertainty will 
prevent the largescale investment that is needed to make 
blockchain a success in the supply chain.
    Thank you once again for inviting me to testify before you 
on the technology that could change how the world understands 
supply chains. I look forward to any questions.
    [The prepared statement of Mr. Rubio follows:]


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    Chairman Abraham. Thank you, Mr. Rubio. And I want to thank 
all the witnesses again for coming here and certainly bringing 
your knowledge base to this subcommittee.
    If I understand blockchain correctly--and I am in a steep 
learning curve--but it will revolutionize tracking of goods 
somewhat like GPS revolutionized navigation. So I think this is 
world-changing technology that we're dealing with.
    I'm going to ask some questions for five minutes. Mr. 
Chiaviello, I'll ask you first.
    In your testimony you detailed the issues your company and 
others are experiencing with counterfeit goods in the supply 
chain. What sort of impacts, either quantitative or 
qualitative, has this had on your business and on your 
customers?
    Mr. Chiaviello. Well, on our business it certainly affects 
us on the order of millions of dollars a year. I mean, it's 
hard--it's difficult to put an exact number on it because we 
don't know what we don't know, but based on what we can 
determine from what we have investigated, as I say--and it's 
growing. You know, five years ago, we didn't really see this 
problem, and--so now it's--it's a million-dollar problem, 
whereas five years ago, well, it barely existed.
    The direct effect is not only does it--it costs us--it 
costs us money, it affects our competitive situation as these 
pirates or counterfeiters, they don't bear the cost burden that 
we do in making sure that our products comply with federal 
regulations, so they can compete against us with a much lower 
cost structure. Our products set the--sort of set the price 
level. They come in just slightly underneath us, but because 
they don't have our cost structure, it's very, very profitable, 
which is what's driving this business.
    Chairman Abraham. So building off that, Mr. White and Mr. 
Rubio, how can your companies, with the application of this 
blockchain technology, help a company that Mr. Chiaviello 
represents? What can you guys do to combat that counterfeiting 
of goods?
    Mr. White. Well, the platform we're putting together 
between Maersk and IBM initially is one that helps identify the 
sources of information. So we use blockchain to help establish 
who are the--it's a blockchain solution which is permission 
blockchain, which means that the entities that are involved are 
known to each other. And if the documents created from origin 
are sent to anybody else who are party to that transaction, if 
any of those documents change, it's immediately identified that 
the document has been changed. And that could work from a 
change from when it goes to a customs authority or another 
government agency, when that's been certified and the document 
is therefore sent down the path.
    So the ability to identify any changes in the documentation 
of what's been shipped or any new entities that are involved in 
the party is immediately identifiable. So it helps identify the 
potential risk of fraud I think much easier, much earlier, and 
for everybody involved in the transaction to see one document 
is different from what was--the rest of the documents that they 
had seen up to that point.
    Chairman Abraham. Mr. Rubio?
    Mr. Rubio. Yes, and what we can envision is an environment 
where you can have a provision--permissioned network of 
traders, and in this permissioned network of traders, you could 
have the different actors in the supply chain exchanging 
information. And as the exchange information, fraud can, you 
know, immediately be detected via the technology, and then 
those that fall outside could be, you know, scored negatively 
and removed from the networks, et cetera. So the technology 
really lends itself to advancing the internet--intellectual 
property rights protection, and we see that as a possibility 
going forward.
    Chairman Abraham. And Dr. Maughan, could DHS potentially 
leverage this blockchain as a tool to combat the importation of 
counterfeit goods?
    Dr. Maughan. Yes, certainly. In fact, if you look at the 
Customs and Border Protection, they are just one person and one 
organization involved in the whole transaction, along with 
companies like Maersk and UPS and others. And so that's the 
work we've been looking at is in the pilot phase. How could we 
use the blockchain technology to detect counterfeit goods more 
easily?
    Chairman Abraham. Are you seeing any obstacles that we as a 
federal government are throwing up in your path to prevent you 
from using that technology in an efficient and productive way?
    Dr. Maughan. To date, no. As I pointed out in my testimony, 
the one area that does concern us is a shortage or lack of 
standards, and so we've been focusing on specifications towards 
that end, and I think when we have a full network of standards 
that everybody can live by, then I think that will be even more 
useful for all involved.
    Chairman Abraham. Thank you, Dr. Maughan.
    I now recognize Ms. Bonamici for 5 minutes.
    Ms. Bonamici. Thank you very much, Mr. Chairman, and thank 
you to all of our witnesses for your testimony today. There is 
certainly a wide range of possible applications for blockchain 
technology, some quite fascinating, for example, safeguarding 
ownership of creative works or voting technologies. There's a 
lot of potential there.
    These and other possible uses are important, but the health 
and safety of Americans is of course something that is of 
paramount importance. So I'd like to focus on one particular 
area where blockchain may offer benefits, namely drug abuse 
prevention. I recently had a series of community meetings in 
northwest Oregon about the toll of the opioid epidemic on our 
families and our communities, and one issue that came up not 
infrequently was the influx of dangerous drugs from foreign 
countries, especially fentanyl from China. So it seems that 
blockchain could be used to prevent the importation of illicit 
drugs or the unlawful diversion of legitimate medications.
    Parcels that are shipped from foreign countries are a major 
source of illegal substances, including opioids and, as I 
mentioned, fentanyl. I understand that Homeland Security, 
particularly customs, is as concerned about this as I am. And I 
know there are several legislative proposals to combat this 
problem. For example, one of the bills I'm cosponsoring is the 
Synthetics Trafficking and Overdose Prevention Act that would 
require foreign and postal operators to provide electronic 
data, enabling Customs and Border Patrol to better target and 
screen high-risk shipments.
    So, Dr. Maughan, might there be uses for blockchain 
technology in verifying that imported goods are legal and do 
not pose a threat to public health or safety? And are you aware 
of efforts or discussions specifically around using blockchain 
to prevent illegal drug activity, whether it be the 
interdiction or preventing diversion?
    Dr. Maughan. So I am unaware of any activity to date that 
is looking at this issue, but I certainly believe that it has a 
very interesting opportunity for us. As I mentioned in my 
testimony, there are other pilots that we are looking at with 
CBP to address counterfeit goods. We just haven't had the 
conversation about the opioids, fentanyl, and other illicit 
drugs in those types of pilots.
    In the end, the goal here is to be able to track goods, not 
only the--you know, using industry providers as well as 
government participants, and I certainly believe there's 
opportunity to look at that in the same example.
    Ms. Bonamici. I think that would be some welcome work. 
Also, Dr. Maughan, of course food safety, which you mentioned 
and has been mentioned in the testimony, the FDA and Centers 
for Disease Control recently warned us all about E. coli 
contamination in romaine lettuce, for example. Would you be 
able to comment on how blockchain might improve that ability to 
ensure food quality and safety? And you mentioned pilots. I 
know there's a couple of pilots going on and trial projects 
regarding seafood traceability, working with organizations so 
that customers, when they're shopping for fish, can know 
exactly where that came from and trace that. So do--are you 
aware of that work?
    Dr. Maughan. I'm not aware of that work but one of the 
other witnesses mentioned mangoes. There have been--and 
avocados. There have been other examples of cases where we've 
tracked food and goods, and I certainly believe the application 
areas are unlimited as to how we would use the technology to 
provide food safety for the Nation.
    Ms. Bonamici. Mr. Rubio, I understand that UPS already 
requires a kind of electronic registration data from foreign 
shippers. Could you comment on whether blockchain could play a 
role in this area?
    Mr. Rubio. Yes. Most definitely, we see the opportunity, 
again, leveraging the potential of blockchain to provide 
permissioned access for the exchange of information and then 
leveraging the information that's--that can be collected to 
perhaps maybe score customers and then provide access to, you 
know, secure supply chains.
    Ms. Bonamici. Terrific. And I don't know who wants to weigh 
in on my next question. As we are talking about this great 
potential from blockchain, we also understand and talk about in 
this committee a lot quantum computing and whether the 
development of blockchain is really keeping up with what's 
happening with quantum computing. I know NIST, the National 
Institute of Standards and Technologies, is looking at this, 
sort of incorporating some quantum cybersecurity measures along 
the way because everything I've read said that that is the big 
threat eventually that if we don't keep--as we're developing 
blockchain if we don't keep up with what's happening with 
quantum computing. Does anybody know about the work that's 
going on there as blockchain is developing? Are we developing 
these quantum-resistant algorithms? Anybody able to answer 
that?
    Dr. Maughan. I'll give you a shot and try, but--so if you 
look at the blockchain technology, at its core it's 
cryptography and the ability to secure the data, and the 
concern is that our cryptographic systems eventually can be 
broken using quantum computing, and so the concern is how do I 
make my cryptographic algorithms at the core of the blockchain 
technology something that can be quantum-computing-resistant or 
at least allow the cryptography to be--to last a lot longer. 
And the concern is if our adversaries are using quantum 
cryptography to break our cryptographic algorithms, they would 
actually be able to break the blockchain technology.
    Ms. Bonamici. Certainly something we can discuss further. 
Thank you. My time is expired. I yield back. Thank you.
    Chairman Abraham. Mrs. Comstock.
    Mrs. Comstock. Thank you.
    Mr. Chiaviello, as a mom and a grandmother now, your 
testimony about the challenges of knockoff children's products 
was certainly troubling. So how might the use of blockchain 
technology help a company resolve this problem? And what other 
tools might be useful in helping companies and consumers combat 
counterfeiters particularly in this area?
    Mr. Chiaviello. Well, I think the primary goal would be to 
control access, in other words, as the term has been used, 
permissioned access. And so when a consumer is--well, let me 
give you an example. Teethers are regulated by the Food and 
Drug Administration and require that any factory where a 
teether is manufactured has to be registered with the Food and 
Drug Administration, has to pass extensive health and safety 
evaluations. And then once the factory passes those tests, the 
factory is given a number. And that number then identifies the 
source of all the teethers that originate from that factory. 
And so that number can act as a stamp of approval like USDA 
approval on hamburger, on beef products and go with the 
product, using a blockchain technology to assure the consumer 
that the product they are buying is an authentic product. In 
other words, it's been--I don't want to say certified but 
it's--originates from a certified location. So I think there's 
great opportunity for--in that respect.
    Mrs. Comstock. Okay. Thank you. And then I guess for other 
witnesses, if any of you work--does any of your work involve 
coordinating with NIST or leading any type of collaboration 
with other industries regarding standards for blockchain 
technology?
    Mr. White. From Maersk and IBM, we're looking to embrace 
existing standards, industries, wherever there are standards 
available so that we can make sure that we adopt and embrace 
it. In our view, to have a platform that really helps to 
accelerate the digitization of global trade, we need to be 
completely open and neutral, and we need to take advantage of 
having common standards around the world.
    So here in the United States we're looking into the BiTA, 
which is trying to look at some of the standards. Also, we're 
working with other agencies as they develop across the global 
economy to understand where those opportunities are. Also, we 
look to be embracing not only DHS and CBH here--CBP here in the 
United States but also other customs and WCO to understand what 
direction they're going because we think it's really important, 
this interoperability. We need to make sure that everybody can 
avail themselves of this platform and exchange information in a 
transparent way using blockchain that provides that immutable 
trust.
    Mr. Rubio. Yes, and UPS is also involved in the BiTA 
Alliance, and we're clearly interested in advancing standards 
in blockchain.
    Mrs. Comstock. Okay. And have your companies recognized any 
cybersecurity benefits in the development and implementation of 
blockchain technologies across various applications? That's for 
any of you.
    Mr. White. At this point, we're still in the pilot program 
of putting together the platform and again waiting for 
regulatory approval, so it's a little bit early on in that, but 
I think it was mentioned using cryptography and having a 
permission blockchain, I think it's a 32-character alphanumeric 
sequence that has to be attached to the previous documents in 
there. So, so far, it seems that it's pretty trustworthy in 
terms of getting that information across there. It's a little 
bit early to see about the broader applications for 
cybersecurity, but that's obviously high on our list at Maersk 
Line, concerning some of the challenges we went through last 
year, and just make sure that we continue to keep that high on 
our agenda because it's critical to global supply chains.
    Mrs. Comstock. Okay. Anyone else on that? Okay.
    Well, I'll yield back, Mr. Chairman. Thanks.
    Chairman Abraham. Thank you, Mrs. Comstock.
    Dr. Marshall?
    Mr. Marshall. Thank you, Mr. Chairman. Let me first of all 
brag on my two grandsons, so congratulations to Mrs. Comstock 
on a new granddaughter.
    Mrs. Comstock. Yes, I have a grandson and a granddaughter--
--
    Mr. Marshall. Well, good for you.
    Mrs. Comstock. --this past year. Yes, so I----
    Mr. Marshall. We've both got two each up here. This doesn't 
count against my time does it?
    I want to start with Mr. White. How important is NAFTA to 
Maersk?
    Mr. White. Well, NAFTA is important to all of us. I think, 
as Maersk, we're obviously supporters of global trade and 
trying to make sure that, you know, there's opportunities to 
promote that. In terms of North America, South America, most of 
our shipments are international by water, so there's some 
that's moving via that route, but most of that's moving 
overland borders. So we of course are interested in monitoring 
that, and we----
    Mr. Marshall. Okay.
    Mr. White. --just support whatever the regulations are and 
make sure that we can make trade as easy as possible under the 
regulations that are available.
    Mr. Marshall. Mr. Rubio, how important is NAFTA to UPS?
    Mr. Rubio. It's very important. Canada's one of our largest 
trading partners, and of course we move lots of products 
between United States, Canada, and Mexico. So we're also 
involved with CBP on some pilot work related to NAFTA.
    Mr. Marshall. Okay. Yes, China--I mean, Canada actually is 
our largest trading partner. We export $280 billion a year to 
Canada, 230 to Mexico. China is a distant third at about half 
of those.
    Blockchain technology, as we're modernizing the NAFTA 
agreement, do you feel like we're doing anything to help 
empower you all? Either one, Mr. White, Mr. Rubio, are we 
taking blockchain technology--have you had any conversations 
with Administration if you're allowed to what would allow you 
to better use blockchain as we modernize this NAFTA agreement?
    Mr. Rubio. We're--yes, as I mentioned, we're working right 
now with CBP on a pilot related to NAFTA, and it's progressing 
very well. We think that will have a pilot up and running in 
the fall time frame, so I think we're getting great support 
from CBP in this area.
    Mr. Marshall. Great. And, Mr. White, anything to add there?
    Mr. White. Yes, likewise, we're working with Canadian 
customs and CBP here in the United States to try and look at 
the documentation that's required for a certain specific 
commodity segment of that and to see if that can be applicable 
there and can we actually make that a standard elsewhere. So 
we're early days, but we're working together on that.
    Mr. Marshall. So there's a spirit of cooperation in 
anticipation of this technology from this Administration?
    Mr. White. Absolutely.
    Mr. Marshall. That's great to hear.
    Dr. Maughan, let's talk to you for a second. One of my 
biggest concerns is I go to all my different meetings, 
different committees, talk to different folks, is when it comes 
to cybersecurity, let alone blockchain technology is--I'm 
worried that every department is doing their own thing. Would 
you--is DHS the leader on these issues? Would--is there some 
cooperation between your department and the other departments 
in the Administration, whether it's blockchain technology or 
cybersecurity?
    Dr. Maughan. So I'll answer from two sides. From the 
science and technology side, there's a lot of coordination and 
collaboration going on in the interagency and particularly in 
the blockchain area where we share what's going on across the 
different agencies. You have NSF and NIST and others also 
funding research and development in blockchain.
    On the operational side, DHS does have the lead on the 
cybersecurity, as well as with the NIST cybersecurity framework 
and it's--how it explains cybersecurity. So both operationally 
and R&D, DHS has a strong position there.
    Mr. Marshall. Is there a cooperation with the military in 
what they're doing in these areas with DHS?
    Dr. Maughan. That I'm aware of on the research and 
development side there is because I'm involved in it and we----
    Mr. Marshall. Okay.
    Dr. Maughan. --do things from an interagency perspective. I 
don't know the details on operationally. I would expect there 
is, but I don't know the details.
    Mr. Marshall. Okay. It's been said--I'll stick with you Dr. 
Maughan--is that China steals $400-$600 billion of our 
technology every year through copyrights or computer software, 
whatever it is, explain to me again--you all have touched on 
it. Go a little bit deeper. How can blockchain technology 
impact that? And be as specific give me examples if you could.
    Dr. Maughan. Sure. So the--if you look at how a blockchain 
works and the ability for organizations or individuals to put 
their cryptographic stamp on the data, right, now, if I use it 
in that way, you as the Chinese or others, wouldn't be able to 
counterfeit and----
    Mr. Marshall. So Nike would have their unique encryption, 
and you knew if you got----
    Dr. Maughan. Right.
    Mr. Marshall. --a pair of Nike shoes from someone that 
doesn't have that unique encryption, you as a producer would--I 
mean, not as a producer--you as a wholesaler in America would 
understand--would see that?
    Dr. Maughan. Correct. And if it's not--if it doesn't have 
the correct data, doesn't have the correct integrity on the 
data, then someone would be able to tell that you're not the 
legitimate producer or supplier.
    Mr. Marshall. Okay. Thank you. I can ask one more question 
if you're not quite ready.
    Tell me--you know, fentanyl is one of my big concerns. 
Fentanyl is 100, 1,000 times more potent than the typical 
opioids coming across. You can make this in your garage. It's 
coming over by the truckloads from China, I'm told. How can 
blockchain--you know, UPS or DHS--maybe--Mr. Rubio, you're the 
UPS guy. Any thoughts how blockchain could impact that?
    Mr. Rubio. It's a tricky issue because it's ultimately what 
gets packed in a carton, and I think that becomes a challenge 
for us. Blockchain certainly provides the framework for us to 
begin investigating the contents and then perhaps scoring 
transactions and then eliminating them from the supply chain. 
So the framework is there, and it's an area that will require 
work----
    Mr. Marshall. Can we trace it backwards, you know, perhaps 
back to the origin----
    Mr. Rubio. Absolutely.
    Mr. Marshall. --a little bit better?
    Mr. Rubio. Yes, using the same techniques that Dr. Maughan 
explained, that's exactly the way we would go.
    Mr. Marshall. Thank you, Mr. Chairman, and I apologize I 
went over. I yield back.
    Chairman Abraham. That's quite all right, Doctor.
    Mr. Hultgren, 5 minutes.
    Mr. Hultgren. Thank you, Chairman. Thank you all. I 
appreciate you being here. This is a really important, 
interesting, challenging topic and grateful to learn from you 
all. And I've also been grateful I've been able to see a number 
of great ideas coming out of Illinois, my home State, with many 
investments in the financial sector coming out of Chicago. 
There are also some efforts at the state level to look at many 
innovative solutions to state and local government with the 
Illinois Blockchain Initiative, a consortium of state and 
county agencies who issued their first report just in February.
    I've also been encouraged through the work that I've been 
able to do on the Tom Lantos Human Rights Commission on the way 
in which new technologies like blockchain can better secure and 
validate supply lines in conflict regions, as well as better 
manage the disbursements of aid through the federal government 
and other NGOs. The transparency of something like a 
distributed ledger can also give new tools for individuals to 
finally assert basic property rights when governments deny the 
rule of law or access to the legal system in other countries.
    If I can address first, Mr. White, Mr. Rubio, and Dr. 
Maughan. Previous witnesses before the Committee have detailed 
how thoughtfully inserting blockchain, inappropriate projects 
already funded would ensure we stay at the forefront of this 
transformative technology. Have you taken this approach to 
analyze blockchain's potential for appropriate projects? And in 
your opinion, what are some examples of where it would be 
appropriate or not be appropriate to implement blockchain 
technology? And what's the distinction of where it would work 
likely and where it would likely not work?
    Mr. White. Well, from a Maersk Line perspective, one of the 
opportunities we see are global supply chains. So global supply 
chains are some of the most complex multiparty networks in the 
economic landscape today. So, by definition, you have a number 
of companies that are involved, transmitting sensitive 
information for the cargo across different channels. I think 
blockchain is especially suitable for that because you can 
enable, through this permissioned blockchain, the entities that 
should have a right to see and have access to that information, 
to have access to that information, to make sure that they can 
see it, and trust that the information has not been tampered 
with or modified in any way, shape, or form. And then you can 
tie the visibility of the sort of end-to-end, in-transit 
information and have that simultaneously with the documents or 
the data on that to actually enable smoother supply chains but 
also in a trusted immutable way. So we think for that 
blockchain is very much fit for purpose, and I think it can be 
a game changer because it provides that immutable trust through 
the distributed ledger, through smart contracts, and through a 
permissioned blockchain, so we think there's a great 
opportunity.
    Mr. Hultgren. Great. Mr. Rubio or Dr. Maughan?
    Mr. Rubio. Yes. From our side, really it's about reducing 
friction in the supply chain and streamlining the exchange of 
information. So what blockchain provides is the opportunity to 
digitize transactions and then share that information through 
the network. And as we can collect information near real-time, 
that will just speed up supply chains and provide, you know, 
fast-moving product.
    Mr. Hultgren. Okay. Dr. Maughan?
    Dr. Maughan. As I mentioned in my testimony, there are 
other additional ones from a DHS perspective in addition to the 
supply chain, but certainly the ones we've been working on is 
the data and sharing of imagery on the border with CBP in order 
to be able to share that and ensure the authenticity and 
integrity of that data. And I think that has tremendous value 
as we think about IOT devices that are doing--that are 
collecting data and sharing that data. We'll be able to protect 
that. There are others that have to do with passenger 
processing and other aspects that I think our potential uses as 
well.
    Mr. Hultgren. Yes. Any that jump to mind that you feel like 
this just wouldn't work? It's just not the right place for 
this? I guess if that comes up, let us know because we 
definitely respect your thoughts and opinions.
    Let me move on in my last minute here again to Mr. White, 
Mr. Rubio, and Dr. Maughan. Do you collaborate or coordinate 
with any domestic or international standards bodies on 
blockchain?
    Mr. White. Yes, so from a Maersk Line and IBM association, 
we're working together and looking to work with BiTA here in 
the United States and also looking to work with other entities 
around the world. We think it's very important to have sort of 
a common definition of standards where standards exist, and 
where standards don't exist or need to be improved, we want to 
work collaboratively with others to make sure that we get the 
right standards so that we can all--make sure that we can talk 
more easily through a digitized environment going forward.
    Mr. Rubio. UPS is also a member of the BiTA, and we're very 
interested in driving standards to improve this technology.
    Dr. Maughan. And we are actively involved with both the 
World Wide Web Consortium, the W3C, and OASIS, the Organization 
for Structured Information Systems for some of our standards 
work as well.
    Mr. Hultgren. Great. My time is expired. Thank you again 
for your work. Thank you, Chairman, for holding this hearing.
    Chairman Abraham. Thank you. Mr. Beyer?
    Mr. Beyer. Thank you, Mr. Chairman.
    Dr. Maughan, you--in your briefing you said, and I quote, 
``Most organizations don't need a blockchain.'' Can you tell us 
why most organizations don't need a blockchain?
    Dr. Maughan. So we've worked through kind of a process to 
ask some questions of people about what they're trying to do, 
and they oftentimes don't need a blockchain. They can solve 
their problems with a database or other accounting instruments. 
And it takes a little bit of a discussion to get to a point. A 
lot of times people are thinking just in a single organization 
they'll use a blockchain. Well, they don't really need one. The 
blockchain, its attributes include multiple parties, trust 
relationships, and different types of sharing of information 
and storage of information. And you really need to actually 
walk through a certain set of questions to decide whether you 
really need a blockchain. And in a lot of cases, people don't 
need a blockchain.
    Mr. Beyer. You know, there have been lots of anxiety the 
last couple of elections--and not just 2016--2004, 2008 about 
the security of voting machines, and there's a move to online 
voting but only if it's secure. Is voting someplace where 
blockchain might be relevant or is this like again a place 
where there are other simpler technologies?
    Dr. Maughan. I think we're early days. I don't know that 
we've done the real diligence that we need to look at that, but 
I actually believe that voting is probably not a place where we 
would use blockchain technology.
    Mr. Beyer. Would every voter have to have their own 
blockchain key and----
    Dr. Maughan. Right, well, the question is, is who am I 
sharing my vote with? I mean, the only person that I really 
want to share my vote with is my local voting establishment, 
and so I think the complexity there is even worse than what we 
have today in just paper in normal elections.
    Mr. Beyer. Thank you. Mr. Chiaviello, you are--I very much 
empathize with the problems of your company. I'm an automobile 
dealer, so counterfeit parts have plagued me for more than 4 
decades. But are any of the companies that you represent now 
pursuing blockchain technology? And do--on the other hand, if 
you complain about reselling the counterfeits through a big 
company, an Amazon, do they have to be a participant in the 
blockchain with you to make this work?
    Mr. Chiaviello. I--we are not pursuing blockchain at this 
point directly, but it would appear that the retailer, the 
Amazons of the world, would have to be participants in 
blockchain technology. And we would have to be participants as 
well. As we see it, where this is going is that the blockchain, 
the key to a blockchain would be like a digital hologram or an 
equivalent to a trademark or a watermark that you might find on 
paper identifying the product itself as an authentic, 
legitimate product. That would have to be established by 
someone like us, the designer/manufacturer, but then it would 
have to pass through the entire supply chain, and ultimately, 
we would need a method for the consumer to be able to verify 
that that product is a legitimate, authentic product.
    Mr. Beyer. Interesting. Mr. White, you have your--you had 
global perspective with Maersk obviously, and I strongly 
believe, just based on this committee's interest, that America 
should take the lead on blockchain innovation research. But we 
have--we see what a lot of the other nations are doing. China 
recently launched what they call the Trusted Blockchain Open 
Lab. Dubai says it will be the world's first blockchain-powered 
government. Singapore is exploring it. Russia's state-run bank 
Sberbank announced it's going to team up to do blockchain for 
document transfer. The European Union launched its E.U. 
Blockchain Observatory and Forum. Where is the United States 
compared to the rest of the world in terms of our blockchain 
leadership in research?
    Mr. White. Well, I think the United States is leading in 
lots of ways on blockchain. Maersk and IBM are coming together 
for our collaborative effort that we are seeking regulatory 
approval in different authorities around the world to launch 
this global digitization platform I think is evidence of the 
largest marine transport container shipping company in the 
world and the technology giant of IBM that is a leader in 
blockchain coming together to have some innovative uses of 
blockchain.
    And it's not--I would say blockchain is not a solution 
looking for a problem. It is specifically fit for purpose for a 
global supply chain, so when we talk about this large, 
distributed network, multiple parties transmitting sensitive 
information across not only organizational but also 
geographical boundaries, having some way to do that in a secure 
manner I think helps facilitate trade. I think it helps to 
certainly identify fraud much earlier in the process, which is 
a significant disincentive to it. And I think we can create 
safer, better, more efficient supply chains by deploying this 
technology. And I think the United States is right in the 
forefront of that.
    Mr. Beyer. Thank you. Mr. Chairman, I yield back.
    Chairman Abraham. Thank you. Mr. Loudermilk?
    Mr. Loudermilk. Thank you, Mr. Chairman. And first of all, 
I want to thank the Chairman for holding this hearing. I've 
kind of felt a little bit like a voice in the wilderness on 
blockchain--excuse me--after spending 20 years in the--20-plus 
years in the IT industry. And I've often said for the last 
couple of years if we can get over the stigma of cryptocurrency 
and look at the technology beneath it, it could be a solution 
to a lot of our cybersecurity and data protection issues.
    And so I appreciate the Chairman having this hearing. I was 
very excited when I saw it because I think we're beginning to 
make some progress from this side of the dais in looking at 
this incredible technology.
    Mr. Chiaviello, you talked about counterfeit and knockoff 
products as a problem, the sale and distribution of those. Can 
you elaborate a little bit how the sell and distribution of 
these counterfeit goods makes it difficult and costly to police 
and enforce IP rights, intellectual property?
    Mr. Chiaviello. Yes. The big problem that we're facing now 
is that the--the pirates, the knockoff companies are now 
located overseas, and we have no way of identifying them. They 
establish an online store with typically a fake name and no 
identifying or contact information. The--if they have a domain 
name, it's hidden behind a proxy server, privacy proxy, and so 
we have--we or the consumer have no way of identifying where 
that entity is located.
    Products that are shipped into this country, often they use 
fake addresses. Return addresses on the packaging are fake, and 
so we and the U.S. consumer is essentially left without a 
remedy. There's--as you know, to bring an action in a federal 
court or even a state court, you need personal jurisdiction 
over the seller.
    Mr. Loudermilk. Right.
    Mr. Chiaviello. And if we don't even know who the seller 
is, much less where they're located, we cannot get personal 
jurisdiction, and any default judgment would be essentially 
valueless trying to enforce it.
    Mr. Loudermilk. What would be the long-term consequences of 
failing to address the issue both to business and to the 
consumers?
    Mr. Chiaviello. Well, it puts domestic companies at a 
financial disadvantage. We're competing with people who don't 
incur the cost for the R&D, don't incur the cost for the 
regulatory compliance. And at the least it limits our growth. 
We're not as--we cannot be as big company as we should be based 
on this type of foreign unfair competition. And to the extent 
it continues, it threatens domestic industries.
    Mr. Loudermilk. Okay. Thank you. Let me steer a little 
closer back to Georgia with our good corporate partner from 
Atlanta. Mr. Rubio, you've stated or actually wrote that 
blockchain could make large multinational companies such as UPS 
more efficient and could, and I quote, ``leave them better 
equipped to handle the continued growth of e-commerce.'' Can 
you elaborate a little bit more on the e-commerce aspect of 
that and how it can help these companies be more efficient, as 
well as more secure?
    Mr. Rubio. Sure. The promise of blockchain is that it 
allows for the digitization of transactions within the supply 
chain. And in the e-commerce space, oftentimes documentation is 
required to clear customs around the world. And so what 
blockchain can do is it can provide the vehicle for us to 
digitize transactions, collect that information, and make it 
simpler for the consumers and then eliminate this friction in 
the supply chain. So by posting information in real time to the 
supply chain, data can be shared among the different players, 
and that would streamline the flow of goods.
    Mr. Loudermilk. What's the benefit to the consumer?
    Mr. Rubio. The benefit to the consumer is that they can 
receive their product quicker without any interruption.
    Mr. Loudermilk. All right. Thank you. Mr. Chairman, I yield 
back.
    Chairman Abraham. Thank you. Fascinating subject, so we're 
going to have another round of questions here.
    I'm sure volumes have been written on the efficiency of 
both Maersk and UPS as far as moving goods, phenomenal 
companies. But, Mr. White, in your testimony you said that 
blockchain technology could increase global trade by up to 15 
percent. That's a phenomenal figure, and certainly we want to 
move that forward. One barrier to the widespread adoption of 
blockchain technology is the linking of the physical object to 
the digitization. Can you guys--Mr. White and Mr. Rubio--can 
you all elaborate as to how we can actually make that happen, 
how we can make those physical dots connect?
    Mr. White. I think it's well-cited. Actually, during our 
evaluation of supply chains, we looked at some of the most sort 
of complex supply chains, as I mentioned. You have a challenge 
of both the physical end-to-end transport of the goods, which 
is one thing, and the visibility of the events that--the real-
time access of that information as to where that container in 
our case is physically located at any one point in time and 
then the disconnect that we see from a paper-based 
documentation flow, so linking the two of them together with 
digitization so you have the opportunity to have more real-time 
visibility as to where a shipment is.
    So with our platform we have a shipment--shipping 
information pipeline, so we can actually see more events of 
what's happening with that container, everything from when it's 
empty for loading to when it's stuffed to when it's back to the 
terminal facility to when it's loaded on board a vessel and 
onto any train shipment through customs clearances on both 
ends, endgame delivery, but also having the capability with 
this platform to have digitize documents. As Mr. Rubio has 
said, it enables us to have them in a structured way in a 
format that the government agencies require so that they can 
actually process them. So you have the capability of having 
them both together.
    In our supply chain evaluation, the one shipment of 
avocados I mentioned was I know is a 34-day end-to-end transit 
from when it was actually farmed at the farm and then put to 
the truck to be loaded into a container until it would end up 
being delivered. In that 34 days, 14 days, two weeks of it, it 
was sitting there waiting for documentation for processing. So 
you've got an opportunity to actually improve supply chain 
cycle times and the efficiency, as I mentioned, over 200 
individual exchanges of document and information. With the 
certifications that were required, they actually are stamped by 
one authority and moved by courier by motorbike to another 
authority for another stamp and then to the port so you're 
physically moving documents instead of transmitting 
electronically.
    Chairman Abraham. Mr. Rubio, do you want to weigh in on 
that?
    Mr. Rubio. Sure, yes. The big challenge of course is making 
the physical world connect with the information world, and that 
really is a key challenge that will need to be overcome in 
order to achieve the ends that you're asking about.
    But there are technologies that can speak to the data like 
RFID, as I mentioned, and potentially even x-ray technology. So 
x-ray technology, you know, the possibilities exist for 
interpretation of x-rays to understand what's actually in a 
carton and then leveraging that information with what's 
physically been communicated by the different players in the 
supply chain can then further support the validity of what has 
been claimed on the transaction. So those are kinds of 
techniques that can be used to link up the two. It's a very 
tricky issue, but that would be how it could possibly unfold.
    Chairman Abraham. All right, thank you. Dr. Maughan, we 
have consistently heard that in order to effectively foster the 
adoption of blockchain solutions to supply-chain problems, 
there must be a common set of standards, and we've addressed 
that somewhat here today that are globally recognized. How can 
such standards be promulgated and adopted?
    Dr. Maughan. First is the development of those standards, 
which we're working on with some of our partners, but then I 
think it is--it's an education game. As you can tell, we're 
fairly early on in the blockchain world, and it becomes up to 
companies like Maersk and UPS as they use it to educate others. 
And I think we are in a leading position within the world that 
we the United States can take a leadership role and continue to 
push blockchain and educate people on the use of it.
    Chairman Abraham. So you agree that the United States 
should lead that charge?
    Mr. Rubio. I certainly believe we should take a leadership 
role. I don't know if we're going to be out in front because 
you can't do a blockchain by yourself, right?
    Chairman Abraham. Right.
    Mr. Rubio. I mean, what we want to do is have this 
conversation both government to government and have a 
conversation with our government partners so that they are also 
on board because it is a global community.
    Chairman Abraham. Okay. Thank you. Mr. Beyer?
    Mr. Beyer. Thank you, Mr. Chairman.
    Mr. Rubio, you talked about how UPS is committed to 
blockchain, and you also talked about some of the obstacles. 
One of the things I read is that Visa right now can process 
56,000 transactions per second, but the Bitcoin blockchain is 
only about five transactions per second. Do you see this 
transaction processing power an obstacle to making UPS 
effectively use blockchain?
    Mr. Rubio. Well, I'm unfortunately not in a position to 
qualify any statements on Bitcoin, but certainly, the 
blockchain itself, we certainly see the capability to share 
information, streamline information, and process it in real 
time and absolutely by exchanging information rapidly, that 
will streamline the supply chain and allow trade to happen 
efficiently.
    Mr. Beyer. If you adopt blockchain, will UPS drivers be 
allowed to turn left?
    Mr. Rubio. Hardly.
    Mr. Beyer. Okay. Dr. Maughan, one of the things that--you 
know, when we had our last blockchain technology, we got all 
excited for two hours and somebody pointed out that when 
quantum computing comes, that it goes so fast that they 
actually break the block chain keys. How soon do you see this 
coming? Do--does it make sense for us to make all this huge 
investment of blockchain if quantum computing is going to make 
it irrelevant once it arrives?
    Dr. Maughan. You know, that's a very good question, and I 
think we don't know yet where--when quantum is going to be 
here, right? I mean, it depends on who you talk to. Quantum is 
10 to 15 to 20 years out, and there's still I think a lot of 
research and development to be done even to get us there. And I 
think the issue is blockchain today can use cryptographic 
algorithms of today and still provide us the security and the 
privacy we need? I think we're going to have to figure out how 
this competition, if you will, between blockchain and quantum, 
how that plays out over the next decade or two.
    Mr. Beyer. Blockchain at least is a lot more intuitive----
    Dr. Maughan. It is and----
    Mr. Beyer. --than quantum entanglement and things like that 
so----
    Dr. Maughan. That's right, a bit easier to understand.
    Mr. Beyer. So you have this beautiful education, a Ph.D. in 
computer science. The President still doesn't have a National 
Science Director, head of the Office of Science and Technology 
Policy at the White House. Are you--should you apply? It would 
be the first computer scientist ever to be the White House 
Chief Scientist.
    Dr. Maughan. I don't think I can comment on that.
    Mr. Beyer. I'm talking to my friend here, the Chairman. I 
yield back, sir.
    Chairman Abraham. Thank you, Mr. Beyer.
    Mr. Hultgren?
    Mr. Hultgren. Thank you again, Chairman.
    Moving on to a couple other questions I had, so, first, I'm 
going to address this to Dr. Maughan. Other experts in the 
field have noted the potential opportunity for nurturing future 
blockchain projects within SBIR, the Small Business Innovation 
Research program. Do you see any other areas within the federal 
government that could help facilitate the establishment of 
blockchain projects or pilots, certainly within DHS but other 
spots as well?
    Dr. Maughan. I think the applications are almost limitless, 
and I think the question is really up to the departments or 
agencies as to how they try to address that. We have--from a 
science and technology perspective, we have taken a fairly good 
leadership position so far within the government. We are 
talking about other applications where blockchains might be 
usable, and we have also used our Silicon Valley Innovation 
Program to fund startup companies to look at some of these 
techniques and technologies. In fact, the pilot we're doing 
with the Border Patrol on data imagery is with a startup 
company out of Texas.
    Mr. Hultgren. Great. Thank you. Mr. White and Mr. Rubio, 
specifically with respect to collaboration and standardization, 
what are some of the lessons your companies have learned that 
will help you utilize blockchain technology at scale?
    Mr. White. So in terms of lessons, I think this item of 
standardization is critically important. We need to understand 
what standards are out there. For instance, you know, if we 
look at just end-to-end supply chains, UNC codes or the way 
that we define inland points varies depending on what geography 
you're in, and then also are they specific enough to really 
nail down, you know, what the geography is that you're--if 
you're talking about multiple facilities within a common ZIP 
Code, for instance. So the ability to sort of embrace and 
tackle some of those challenges I think, as an industry, we 
have to do it. It's something of course Maersk and UPS could do 
individually, but then if we're both calling it something 
different, it makes it a challenge. So I think coming together, 
working through these advisory boards and these standards 
committees, I think it's really important to prioritize what 
are the most important standards to get alignment on and how 
can we move that forward.
    And in addition to joining these established organizations 
between Maersk and IBM with our new platform we're looking to 
establish an industry advisory board, you know, making sure 
that we have participants from ports, terminals, other 
carriers, inland carriers, customs entities if we can to make 
sure that we look at it from a collaborative multi-perspective 
position.
    Mr. Hultgren. Thanks.
    Mr. Rubio. And the lessons that I'm learning personally in 
this space being involved in some of these working committees, 
but as you sit through and you look at defining standards for 
how we're going to communicate and collaborate via blockchain, 
there are painstaking issues over data that you will exchange. 
And so it's fascinating to listen to the different players and 
their perspectives of what information would be useful to 
exchange and what information would not. So it is--in driving 
the standards, it's not a trivial task but it's an important 
task. And in the end, you end up with a very sound product. And 
my first-hand experience is that's how we did it with CBP, and 
you guys should be proud of the work that they have done so 
far.
    Mr. Hultgren. Absolutely. Thank you. One last question, 
again, Mr. White, Mr. Rubio, and Dr. Maughan. Given its 
jurisdiction over NIST, what can this committee do to ensure 
that the United States is cultivating a supportive environment 
for blockchain technology projects? Dr. Maughan, I'll start 
with you.
    Dr. Maughan. Well, I think certainly in our role within 
DHS, we work a lot with NIST and the roles there. They've 
published documents identifying blockchain overview and how 
that all works, and I think just to continue participation in 
the standards community is an important part for NIST 
participation, and we've certainly been working with them on 
that.
    Mr. Hultgren. Great. Thanks.
    Mr. White. The interaction we've had with DHS and CBP has 
been very positive. We've been working with the E.U. CORE 
project for the last 18 months to try and understand how 
they're approaching digitization, and CBP and DHS have been 
supportive of that. And then also as we're developing our 
platform trying to learn from those lessons, that continued 
support and looking to how we can work with other partner 
government agencies, I think they have been very constructive 
in that process.
    Mr. Hultgren. Great. Thank you all so much. I'll yield 
back.
    Chairman Abraham. Thank you. Mr. McNerney?
    Mr. McNerney. Well, I thank the Chairman and I thank the 
panelists.
    Mr. Rubio, can you walk us through why blockchain 
technology is useful for identifying--for identity verification 
and why this is important for chain logistics?
    Mr. Rubio. So it's--it would be important for identity 
verification in that it would help secure supply chains. And so 
understanding who the actors are in the supply chain that are 
exchanging product or information would be critically important 
so that we can maintain security and it can also be leveraged 
for potential intellectual property rights types of issues.
    Mr. McNerney. Good. Thank you. Mr. Maughan, is the U.S. 
Government currently using blockchain technology to mitigate 
cybersecurity threats?
    Dr. Maughan. I'm not aware of actual deployed blockchain 
technology. As I mentioned in my testimony, we have a number of 
pilot deployments where we're testing out some of the 
technology to see how it will be used and the scale at which we 
can use it.
    Mr. McNerney. Are there any potential risks associated with 
using blockchains to reduce cybersecurity threats?
    Dr. Maughan. I don't know that there are that many risks. I 
mean, I think we're--you know, when you start talking about 
cybersecurity, it is about the data and can I ensure integrity 
and authenticity? As long as the technology is implemented 
correctly, then I think the risks are--they're mitigated by the 
technology itself. A lot of times in cybersecurity the problem 
is implementation and people implementing it incorrectly.
    Mr. McNerney. I understand. I'm not sure which panelist to 
ask, but could someone discuss the energy implications of 
expanding applications of blockchain technology and how can it 
be mitigated? Who would be the right person to address that? 
What are the energy implications of blockchain--widespread 
application of blockchains?
    Dr. Maughan. I believe your question is probably related 
to--if you look at from an energy standpoint, are you talking 
about computing power?
    Mr. McNerney. Right.
    Dr. Maughan. Yes. So if you look at the way 
cryptocurrencies are used--and there's an awful lot of 
computing power in the background of cryptocurrencies to 
actually make them work. And so the--I think the question and 
the discussion is about if I start to do large-scale 
blockchains, I now have computing infrastructure that I also 
have to operate. And the question is is does that make it a 
difficulty for a small business or someone else to ensure that 
they have the adequate power to do their blockchain technology? 
Because you do have to check. And there's checks all along the 
way in the data to ensure that it hasn't changed and that--and 
it is authentic, and so there is a computing infrastructure 
that goes along with this. It doesn't just happen.
    Mr. McNerney. So, I mean, what can be done to mitigate the 
energy usage implications of widespread application of 
blockchains?
    Dr. Maughan. I actually believe you're going to see 
companies like Maersk and UPS probably have their own large 
infrastructure from a computing standpoint. I think you have a 
potential for service companies to provide, which is what 
happens in the cryptocurrency world. There are what are called 
Bitcoin miners, and they run the infrastructure that does a lot 
of the calculation.
    Mr. McNerney. Right.
    Dr. Maughan. You could very easily see something similar in 
the blockchain world where someone else is doing--offering a 
technical capability to provide you a service and be the 
computing infrastructure if you are a small business.
    Mr. McNerney. Mr. White, I have in my district the Port of 
Stockton. It's the largest inland port on the West Coast. It's 
the third-largest port in the State of California. What steps 
is your company taking to increase adoption of blockchain 
technology?
    Mr. White. Well, we're working with ecosystem participants 
from ports and terminals to major rail operators, so we're 
already in discussion with four out of the seven class I 
railroads in the United States and also with trucking 
communities because we think by everybody participating in this 
new global platform, we have the capability of making it more 
visible in terms of the seamless and more efficient movement of 
cargo and, by using blockchain, make sure that those who are 
permissioned--it is a permissioned blockchain, so those who are 
party to the shipment can see the information; others cannot. 
And those that can see it can get better real-time information, 
so in terms of moving cargo efficiently through ocean or inland 
terminals, getting better visibility as to when cargo is 
available, will be available, and enabling more efficient use 
of the landside equipment that moves cargo between the ports 
and the shippers or the consignees and D.C.'s and warehouses.
    Mr. McNerney. It sounds like a lot of advantage.
    Mr. White. We think it's a great utility for everybody. I 
think this industry has not really changed since the 1950s 
since containerization has come around, and I think this 
technology affords us an opportunity to look at things 
differently. And what we're seeing is a lot of engagement from 
everybody involved in the supply chain because I think the 
industry is ready for change.
    Mr. McNerney. Thank you. I yield back.
    Chairman Abraham. Thank you, Mr. McNerney.
    Well, once again, I thank the witnesses and the members had 
some great questions. Robert, tell everybody in Monroe, 
Louisiana, give them my regards. I'll be home shortly.
    Mr. Rubio, is that your family behind you?
    Mr. Rubio. It is, yes.
    Chairman Abraham. I tell you, I've been watching those two 
young people. They are our future, and they have been listening 
intently, so they are our future blockchainers and quantum 
computer tacticians, so I appreciate their presence very much 
here.
    Mr. Rubio. Thank you, Mr. Abraham.
    Chairman Abraham. The record will remain open for two weeks 
for additional comments and written questions from members. 
This hearing is adjourned.
    [Whereupon, at 11:32 a.m., the Subcommittees were 
adjourned.]

                               Appendix I

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                   Answers to Post-Hearing Questions

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