This is Part Two of a three-part interview. Read Part One here.
World Customs Organization Director of Compliance and Facilitation Ana Hinojosa brought 28 years of customs experience to the global body when elected to her post in 2015. The former U.S. Customs and Border Protection deputy assistant commissioner-international affairs also served as director of field operations for the El Paso Field Office from 2008 to 2013 and as area port director for Los Angeles International Airport and Dallas Fort Worth International from 2002 to 2008. Hinojosa talked with HSToday about threats to global supply chain security along with blockchain, compliance and risk management.
HSToday: You are hearing a lot about “blockchain” and its utility for securing information and data. Are there applications of blockchain relevant to you in your work? Where?
Hinojosa: Blockchain is growing in the types of applications that it is being used for. Its impact within the global logistics arena is only in what I would call the beginning stages of being tested within the many transactions that make up the full cross-border global logistics transactions.
I think there is still quite a bit of confusion about what blockchain is, and what it isn’t. Separating blockchain from its use with cryptocurrency is helpful in being able to conceive the possibilities in the legitimate global trade arena.
There are a number of governments that are looking to pilot various aspects of their transactions using blockchain technology. There are also some interesting partnerships between the private sector and some governments to test opportunities for blockchain to smooth out and facilitate some of the transactions in a transparent and more efficient way. I think that customs administrations are clear that blockchain is something they need to understand and be able to leverage to the extent the supply chain continues to embrace its use. Some of the current discussions among members are about the potential uses of blockchain for sharing of information between customs and looking at how blockchain could be useful in risk-management systems and even as part of single-window environments.
One concrete example that I am aware of is where financial institutions are using blockchain for transactions, in lieu of traditional letters of credit, companies are able to free up their money much quicker because the parties of the transaction can confirm the terms being executed in a more efficient and transparent way. So instead of their money or collateral being tied up for 30 to 45 days, they are seeing turnaround times of one week to 14 days. This translates to huge efficiencies for multinational companies. Clearly this requires financial institutions to offer these types of services. It may not make them as much money as the traditional letter of credit, but the benefits for their customers will certainly attract new customers.
HSToday: How does compliance impact global security?
Hinojosa: This is a great question. I hope I am not oversimplifying my answer. At the risk of sounding cliché, the truth is that global security is as strong as its weakest link. And, I think that, in the United States, most people picture borders and security procedures as those that are present at U.S. borders. The reality across the world can be very different.
I think that the issue of global security is one that governments and the private sector have an equally strong interest in protecting. Having a strong compliance program can go a long way toward helping overall global security, as many of the weakest borders around the world still recognize compliance requirements and the transparency that they bring to the process. Like all crime and terrorist acts, softer targets are much more desirable for the bad guys.
Companies that have strong compliance programs, in my opinion, harden themselves against criminals and other threats to security. This is certainly not going to solve all of the evils of the world, but it will actually help identify where the problems are, and enable additional layers of protection to be put in place for those weak spots.
I know that I am not telling you something that you didn’t already know, but perhaps this will help the compliance folks out there to better recognize the value of their hard work. Compliance isn’t just about dealing with bureaucracy; it is about corporate integrity.
HSToday: What types of risk-management programs does the World Customs Organization undertake?
Hinojosa: The WCO has developed a comprehensive risk-management approach to help members develop and implement sound risk-management systems. Along with the development of a Risk Management Compendium, we also provide a variety of capacity building and technical assistance missions to support our members in the implementation of their risk-management systems, including the use of post-seizure analysis. We regularly update the compendium and include member case studies to help translate the theory into practical examples. We also cover aspects related to risk management in our work on the SAFE Framework of Standards and, more specifically, in helping members develop and grow sound Authorized Economic Operator (AEO) Programs. Members need a good risk-management system to be able to differentiate between high- and low-risk shipments/passengers.
We have a couple targeting systems that we deploy to interested administrations, which need help in operationalizing a risk-management system for either cargo or passengers. These systems are deployed through the financial support of donors, like the U.S. State Department.