In this webinar, Todd Smith, Principal at EY Irvine will share the new digital trade platform EY is creating with Microsoft and highlight how technology is impacting trade processes, what it will mean for eCommerce businesses, and how they can benefit.

Webinar Transcription

Kuntal: Hey, I think we can get started at least with some introductions. Thank you all for joining us today after some technical difficulties last week. We are on a new platform. So, please just be patient with us. If something freezes in the middle will try to get it sorted really quickly and just know that a recording will be available afterwards. But once again, thanks for joining us at CITC’s industry Innovation webinar series. Hope you’re all staying healthy and safe. We’ve got a great crowd today across from California and beyond so we’re very happy to see that we are taking a slightly different approach and perspective in this session. We’re looking at new technology that impacts global trade processes, regulations, and compliance and while CITC’s focus is on building digital competency for small and medium-sized businesses in California, it’s also interesting to understand innovations that can potentially change the way that SMEs do business in the future, particularly in the global trade arena.

So with that I want to introduce Todd Smith principal in the global trade services practice at EY Irvine, he’ll share with us their new global trade platform that’s being developed with Microsoft and show AI Automation and blockchain, how AI Automation and blockchain is being applied to trade regulation and compliance. They also just hosted a three-day Global blockchain Summit last week and so I’m sure we’ll hear a little bit more about that as well. Todd, Thanks for being here and we’d love to hear more about your background and the platform and what you all are doing in your division.

Todd: Sounds great Kuntal, before I go too much further, can you hear me? Yes, I can. Yes, I can so you can hear me you can see me and can you see the deck, I just advanced the slide to about me I can yeah, excellent. So hello everybody. Good afternoon. My name is Todd as Kuntal said and I am a principal with Ernst & Young based in Irvine, California.I’m in my home and in the area and I’m a principal in the tray practice, which is a small specialty practice within Young. I’m a licensed broker and you know, essentially I provide and our team provides consulting services to a broad spectrum of companies and industries as it relates to importing products and exporting products.

It cover the gamut, you know from helping companies set up their policies and procedures and systems if they get into trouble and we hope they don’t, you know, we can help them through audits and prior disclosures and you know detentions and other matters, so doing this for a very long time, and I’m really happy to have been invited to talk to you guys today about some of the work that you know our team and you know me in particular are working as it relates to technology and automation within the global trade space. They’re also told me before this webinar that you know, a lot of the audience has more of a focus in the e-commerce space.We help companies that are trading products through e-commerce.

We also have a lot of companies that are what we call Big Box retailers and are shipping massive carriers with containers through the Port of Long Beach and elsewhere, but I understand that there’s more of a focus on the small to mid size and you know e-commerce activity and so I’ll try to you know keep that in mind as I’m going through my presentation. What we have, E&Y just for background has a really strong alliance with Microsoft and we do a lot of work for Microsoft broadly speaking not just within global trade and you know through our relationships there we have essentially teamed up to create what we’re calling a global trade technology platform that will offer what I think are pretty unique and novel tools and services to traders like you whether they’re you know, small size or large size that really fill some gaps in the marketplace. There are traditional, you know in port management and global trade Management systems for helping companies Import and Export and classify their products and manage free trade agreements and FTC’s and a whole slew of other things.

Trade Automation Systems

We’re feeling some areas where we’re not seeing some of these other larger global trade automation systems, you know fill a need and so what I’m showing on the screen are some examples. There’s this category called know your goods for example under this category of know your goods will be these tools that we’re developing and they’ll be hosted on the Microsoft Azure platform. Someday soon you’ll be able to access these tools either off the EY website or off the Microsoft website or you know, it’s possible that there will be other locations where these tools could be obtained. But just to kind of walk through some of those, you know right now if you’re importing a product you really should know the 10-digit HDs number for that product. You know that HDs number determines the rate of Duties, that would be out on that product as well as other government agency requirements like you might need a license or a certificate depending on an agency that may have some controls over that product like the FDA if it’s a medical product, for example. What we’re developing is a technology that will enable really anybody to automate the determination of what that HDS number is using AI in ML.

So this is something that we’re really excited about. There’s been a lot of talk about doing or using AI and ML to classify it. IBM Watson, you know was trying to do this maybe 10 years ago. They never pulled it off. There’s a couple of small boutiques, small specialty practices that say that they can do this. We’re really taking it to the next level in such a way that an individual could literally input the word mouse and the system- well a little bit more than mouse, like they would in put the word mouse, they may input that it’s being sold by Microsoft for example, but it could be any manufacturer and that alone would be enough information for the tool to figure out that it’s an electronic mouse. It’s not an animal. It’s not a stuffed animal. It’s not food, i.e. moves, because they could, the system would know intelligently that manufacturer only manufactures mice, you know for computers. That’s just an example. So it’s something that we’re really excited about, if it’s a larger company that has hundreds, well thousands, tens of thousands of products you would be able to upload descriptions of those products and then it would produce the 10-digit tariff number again using AI in ML and it would also map to other countries HTS numbers. A lot of our clients are classifying a product let’s say for the US, but then they may subsequently resell or sell that product into other countries. This would map the U.S. HTS to the ACs numbers of these other countries for example. Another really cool technology that we’re really excited about is we are developing a country of origin blockchain.

Country of Origin Blockchain

Okay, what is that? So if you’re importing products or even exporting products and you want to qualify for a free trade agreement, in order to qualify and make a free trade agreement claim most agreements require that you issue a certificate of origin for that product and that Free Trade Agreement and for the last year since NAFTA was introduced, it’s been that long, these certificates of origin have been pretty much manually filled in, it’s a certification, it’s a form, usually they’re emailed or they’re faxed to the buyers of the product. And basically the seller of the product is certifying that their product qualifies for the Free Trade Agreement under a particular rule of origin for that product. But the sellers and producers of the products don’t want to provide the underlying data that’s really necessary to verify that that certificate of origin is in fact correct, and there’s a lot of errors associated with those certificates of origin. So I’ll over into this origin blockchain that we’re real excited about. We’re also developing some tools around export compliance. When we talk about export compliance obviously U.S. companies cannot sell goods that may require a license from the BIS, they can’t sell goods to certain people that are on deny party or sanctions parties list that the government maintains, treasury and olfactory example, and of course, they can’t sell and ship the products to countries that are sanctioned or embargoed. So there are tools that companies use to screen the customer against these lists.

We’re taking that to the next level again by enhancing and Reducing some AI and ML capabilities around that and you know, we’re introducing technology that not only will screen the name of the party that you’re doing business with, but it’ll also look at that product as part of the transaction. It’ll leverage some of the technology on the tariff classification to not only let the company know that it’s okay to sell a product to a certain person but it’s okay to sell the product to the country that it’s going to as well from the export compliance standpoint.

Track and Trace

Track and trace, using internet of things. This is where we’re creating a digital twin which essentially is taking a physical product, somehow integrating or attaching a device that would allow the detection of the movement, you know of that product onto the internet or onto a Block Chain so we can literally track and trace the movement of the product without humans, you know having to manually enter information about that product and what we what we’re also doing is something that is known as geofencing and what geofencing does is it could trigger an event based on, you know, the movement of the product from one geo zone to another geo zone.

And just to give you a real life example, we did a blockchain project with Maersk and some of the ocean freight insurance companies that were charging very excessive premiums when their ships were going through a shipping lane that was considered a Hot Zone, you know for pirates like the Somalia pirates. So if the ship was, you know, going close to Somalia, if the ship came anywhere close to that region the amount of insurance for that entire lane would be really high, and so working with the insurance companies and the ocean carriers we came up with, we put a device on the ships and in the containers, we created a geomap and they charged one rate for the insurance until it entered the hot zone and those hot zone could move depending on where the action is, but then once the ship exited the hot zone the rates on the insurance would go down. So that’s just an example of how we’re actually using track and trace internet of things and geo-tracking, you know, real life and in the trade space. So that’s just, you know, giving you an idea of some of the tools and capabilities under the know your goods. There’s trade optimization where we’re going we’re helping ports optimize how the movement of container ships in and out of the port, the offloading of containers, drayage, Etc happen. We’re creating virtual visual Maps real time again using digital twin technology and other sensing technology. And in one instance, for a port we were able to demonstrate almost a 50% reduction in fuel costs for the ships that actually refuel the containers, not the containers, but the you know the freight liners, the big ships who were waiting to come into port just by optimizing the wait time and the arrival time of the ships.

So we were able to really quantify a savings on fuel which is also very good for the, excuse me, trade analytics where we’re going in and we’re we’re running all sorts of predictive analytics, changes to the supply chain, how that will impact landed cost not only from a just a pure duty standpoint, but actually in store landed cost. So incorporating costs that are occurring after the importation, for example, COVID has really caused a lot of havoc in supply chains as I’m sure you can imagine and companies are looking at shortening the supply chain in some cases, moving production out of China, and we’re able to use trade analytics to really tell them what lanes and countries they should look at from a physical product movement, but also from a financial flow, and if they’re possibly going to be giving up Free Trade Agreement benefit, or maybe they’re going to be taking advantage of a Free Trade Agreement benefit by moving it out of China.

Now, there’s a big withholding tax, you know on the distribution of dividends so we’re looking at the impact around all taxes, not just duties. And then, not today, but where we’re going with a lot of the origin blockchain and other initiatives is by being able to track the movement of the container using internet of things and you know having that information on a blockchain, you can actually create what you’ve probably have called smart contracts.

So smart contracts are that, its logic that’s been coded into a program that’s on the blockchain and if you could imagine a container crossing a border, customs indicating that you know, the container has been entered, then that information could trigger a smart contract which would then actually facilitate a payment to the carrier or the broker without a human having to wait for a bill to show up, do a three-way match, and then cut a check or send a wire. This could all happen through the blockchain. So these are some other areas that we’re really excited about.

So that’s the global trade technology platform. We’re actually working on development of some of these things now. Some other things are a little further out. But the Tariff classification is under development, the blockchains under development, the goods related to fraud detection AML, under development, the port analytics, trade analytics are under development, the blockchain payments a little bit further out. We’re hoping to allow companies such as yourself to actually start using these tools towards the later part of this year or early next year is what we’re hoping to achieve.

Future Technology

And then, Kuntal just wanted me to go through where technology is going. And so again, I’ve already spoken a little bit about blockchain and where that stands now, biometrics, drones, these are other technologies that are really coming to the forefront in a practical way. It’s not so theoretical and I just have some information here and we’re going to show the deck with you guys so you can see about where it is now, where it’s going, and then even a little bit further down the road. 

One of the things that’s really exciting is, and you may have saw it on that last side, it was the Hololens, which is a virtual reality, augmented reality goggles that Microsoft has made. They, and this is public information, they want a contract with the Army. They’re literally building goggles that are going to be like an Iron Man type of display for soldiers. And Customs is doing pilots with them so that when they open up a container and they see a barcode, they’ll instantly get a response to what should be on that or in that container.

There’s also things that it can do besides just doing quick lookups like maybe, sense different odors and smells for bomb detection and things and drugs. So that’s a really cool technology that’s coming. We talked about drones, we talked about internet of things, AI and ML for HTS. So this will just be a good reference for you to have in terms of where things are today versus where things are going in the future. 

Trade Agreements and Blockchain of Origin

So Kuntal wanted me to spend just a little bit more time on just that origin blockchain, which we’re really really excited about, we actually filed a patent, a provisional patent for this two weeks ago and this was something that we did present on that blockchain summit that we held last week. The blockchain summit covered all kinds of different technologies not just related to trade. We had 45 minutes just to present the global trade origin blockchain, where Microsoft is going to be our first customer and we had Vincent Annunziata from the CDP trade transformation office. He was one of our panelists and he’s real excited from a customer standpoint as well.

These are just some statistics on the number of free trade agreements. This is just such a big big area 50%, 50% of all trade globally falls under a preferential trade program. That’s just a huge amount. There’s about nine point seven trillion in goods traded a year and half of that falls under a preferential agreement, and pretty much every agreement has these rules of origin which need to be met in order for a particular product to qualify for the agreement, and there are, just to give you another, 2,000 different rules of origin just for autos and trucks just for NAFTA. That’s just one agreement, you know in one area so by our estimates and we are an accounting firm, I’m not an accountant, but we estimate that there are probably over 700,000 different rules of origin that determine whether or not a product will qualify under a free trade agreement. 

So this is just a really big area and we’re solving for that with the blockchain. The way these rules of origin work, again, they’re very product-specific and each agreement will have rules around what needs to happen in order to qualify. I mean if the good comes right out of the ground, it’s relatively easy. But if you’re producing a good and that good has several components, you need to look at the bill of materials and you need to look at the tariff classification for each component in the bill of materials. You need to look at the cost of those components and then you need to look at the rule for that product to determine if there’s enough content or if there’s enough activity and transformation, meaning a good transforms from a tariff number when it was imported to a different tariff number after its produced into some other good in order to determine if the product qualifies or not. And another example is that there could be a certain percentage of the components need to be sourced from a country of origin that, of a member country of the free trade agreement, so you can imagine the complexity and as a result there’s a lot of errors around this and I don’t know if I have that statistic, but the World Customs Organization did a study and they determined that 22% of all certificates of origin that are issued by manufacturers that their product qualifies for some particular free trade agreement would not pass an audit. 22%. That’s a very high error rate and it’s because these rules are just so complicated that manufacturers, when they’re asked for a certificate of origin by an importer or a buyer, they’ll just fill out the certificate of origin without really knowing if the product qualifies or not. So 22% of the time is really how often that that happens based on this WCO study.

Certificates of Origin and Free Trade Benefits

So our blockChain will really fix that issue because well, let’s just go through the slide. This is talking about the complexity of providing certificates of origin. The current state is very manual. It’s paper-based. If I’m the buyer of your product and you’re selling it to me from Mexico, I’m going to send you an e-mail and I’m going to say “Hey send me a certificate of origin that the product qualifies” and then you’re going to have to figure if it qualifies, you being the Mexican manufacturer are going to have to see if it qualifies under the rule of origin and then fill out a certificate of origin and then sign it which is basically, you are testing that that product in fact qualifies such that if US Customs audits me the Importer and I have a certificate and I claim free trade agreement and didn’t have to pay any duty, but then Customs wants to audit whether or not that certificate and claim were in fact accurate or not, then even though I have that certificate it’s possible that they could say it didn’t qualify, it was not filled out correctly. you owe us the duties. That is the importer not the producer.

So the blockchain that we’re developing will solve for this because the manufacturer will be able to essentially upload confidential bomb information but hide it from their customers, so it’s on the blockchain. It can’t be changed and it can’t be accessed by anybody other than who the manufacturer gives access to. So what we envision is that the producers who don’t have a lot of experience in this area, it’ll be much much easier for them to find a qualified expert that they can give access to the information on the blockchain. A qualified expert could be a broker, it could be a lawyer, it could be Price Waterhouse, it could be really anybody that can gain access because the producer gave them access, can review all that information and then basically attest or certify that the certificate of origin that’s being issued by the manufacturer would in fact stand up to a customs audit and so they’ll be like a notary, you know that goes on to that certificate of origin such that the Importer goes, okay, yeah, the manufacturer provided the certificate of origin and an independent third party that you know, we know and trust also reviewed all the underlying data and notarized it essentially so that it would pass an audit, I feel more comfortable now about claiming the free trade benefit.

If you’re an exporter and you are qualifying for free trade benefits, this is going to be, in the future, something that is going to make your life easier and you’re going to want to participate in because I think it’ll help your reputation, not that it’s questionable in the first place, but it will also show your buyers, you know that you’re compliant. So from a marketing standpoint, I think it will help differentiate you because you’ll be able to prove that you went the extra mile to provide certainty and confidence to your buyers that the products that you’re selling them will in fact qualify for the free trade agreement that they’re counting on. So I think this is going to be a real game-changer. It’s going to make the process easier to comply with less expensive to comply with faster and it’s also going to allow small and medium-sized traders to take more advantage and utilize more of these free trade benefits that are out there.

There are a lot of companies that just won’t mess with this because it’s so complicated, so will just say, you know, I’m not going to give you a certificate of origin and you have to pay the duties because I’m not dealing with this. that happens a lot today, the utilization of free trade agreements, 50% globally, that’s probably mostly the big players. A lot of SME’s aren’t taking advantage of these free trade agreements again because of the complexity. So we think this is going to be a real game changer.

This was just, when last week we were going to give this presentation, it was before the panel that we did. I guess this just validates the fact that we actually did have a panel and if any of you are interested and would like to see a replay of this panel, it was recorded, and Kuntal, we can we can send out a copy of the link to the recorded panel. 

Kuntal: Sure, that sounds great. We’ll be sure to include that.

Todd: Yeah, and so I think in terms of like a formal presentation, that’s pretty much what I wanted to go over and I was thinking that with the time remaining that maybe we could just go through some Q & A.

Q & A

Kuntal: Awesome. Thank you so much for that review of the platform and what’s to come, you know you and I had talked some time ago about all of this. I saw your presentation at the Foreign Trade Association meeting in September, I believe, and I think you had done the presentation along with Customs and Border Protection. So just very curious to know, what is the level of connection there? How closely are you working together with them? And then also, are you working in partnership with any local and state governments as well? 

Todd: Yeah. No, it’s a great question. We’re real excited because we are having conversations with not only U.S. Customs, but we’re also having discussions at a global regulatory and policy setting level. We’ll start with Customs. So U.S. Customs in, I think it was June of last year, they held their own blockchain summit day through COAC, which is a committee of private companies that meet, I think it’s on a quarterly basis, and these are people that are basically, you have applied to customs to become a member of a COAC committee, a small committee relatively speaking, and they meet quarterly and they give advice and direction and input to Customs. So Customs advertised through COAC that they wanted to have a blockchain day where they invited private companies to come in and do what I would call a Shark Tank presentation on blockchains.

So we submitted an application to present our idea on the origin blockchain, and I think about 12 other companies that were also invited, and we had 10 minutes to make our presentation, and then they had 10 minutes to drill us with all kinds of questions. So all twelve companies sat through everybody’s presentation and then you had probably another 30 people ranging from people from the state department to the US Department of Commerce and CBP, and at the end of each 20-minute companies pitch, you would fill out a card and you would grade on a scale of 1 to 10 if you thought the idea had legs or not, and you had the private industry rating everything and then you had Customs rating everything and then you had to wait and figure out how you ranked. And long story short, this presentation on the origin blockchain that we’re explaining came in second overall amongst the trade, and it came in fourth or fifth from Customs standpoint. And the only reason why it came in, I’m real competitive, but that really upset me from the Customs standpoint, the only reason why it didn’t come in higher is, and you can Google this, Customs did their own origin blockchain pilot about six months before this summit and it was a very successful pilot. They were very very happy with it.

It wasn’t nearly as sophisticated as what we are talking about, that pilot, and actually you can Google origin and blockchain, you’ll see several countries, several Customs authorities around the world doing pilots around origin. It’s a big deal. But all those Pilots are doing is they’re basically doing a track and trace where they take, you know, lettuce out of the ground, they put it on the block, it moves to wherever and all the way to the grocery store. So it’s a track and trace and they say origin. That’s not what we’re solving for here. Obviously we’re for copying the parts with multiple components and bold steps in the supply chain. Nevertheless, they had already done their origin blockchain. They wanted to do some other block and they gave us 4 out of 12. Overall we came in third, when you merge the two other. Vincent Annunziata’s the individual who sponsored that blockchain Bake-Off, our Shark Tank, and nevertheless he said Todd, nevertheless, they are very very interested in origin. I mean, not only does it help them decide and determine if a good qualifies for a free trade agreement, but as I said earlier, there are different laws, like the Lacey Act. Do you remember the Lacey Act? The Lacey Act says that you can’t import products that are from certain species of wood.

Kuntal: Right.

Todd: So you have to, in some cases, certify that your product complies with the Lacey Act. There’s forced labor. In some cases you have to be able to prove if they ask that there was no forced labor involved in the production of a good. There’s the Kimberly Diamond Act, if your product is auto-related you have to be able to meet certain FDA, all drug manufacturers plants have to have FDA registration. There’s any go with origin. So he’s actually, and Customs is really really excited about this. And then going up from U.S. and talking about more globally, of course, there’s the World Trade Organization, and then there’s the World Customs Organization, and then there’s the International Chambers of Commerce, which then gets into the World Chambers Federation.

So that’s, all of those deal with origin and we actually had a call, I was telling Kuntal this morning, we had a call with the director of the origin committee for the World Customs Organization, and she saw our panel last week and so she’s really excited about getting involved as an observer, to what we’re in the process of developing because she sees how this is a real game changer. The International Chamber of Commerce, also showing some interest. They, and I should say, and some of you probably know this, maybe many of you know this, and you had asked about involvement of the states. I mean the U.S. Chambers, they have members located in different cities and states. There’s a chamber in LA and that chamber and a lot of chambers around the world will issue a certificate of origin.

Kuntal:That’s right.

Todd: Because some free trade agreements require that a third party like a chamber issue the certificate of origin on behalf of a manufacturer. And some of those chambers are able to issue what is known as an electronic certificate of origin. So the chambers are issuing something like 15 million or so certifications around the world a year. But even those chambers by their own admission don’t understand some of the complex rules of origin. I mean they’ll issue a certificate of origin, they’ll say, yes Todd Smith Company located in LA, real company, they pull let us out of the ground or whatever, and certify that. But if it’s a really complex product with a complex rule of origin, they don’t get into that type of an analysis. So we’ll be talking to them about also leveraging the origin blockchain for what they’re doing very early in those discussions.

So a lot of excitement, and there are other Customs authorities that we’re also in discussions with too. We’ve actually had discussions with our team in Africa. And this is a, by the way, I don’t know if everybody knows about this, but guess what the biggest trading block in the world is now.

Kunal: Yeah it is. I was just reading about it, that it is actually indeed. I believe the title is escaping me but it is the African nations. 

Todd: Yeah, African Continent Free Trade Agreement.

Kuntal: Right, exactly. 

Todd: Yeah, because of Brexit, they just became the world’s largest trading block. And they already did agreements with China, Russia and several other countries. A lot of those countries have no clue about how to determine the, you know, and they’re all really afraid of this free trade agreement because they’re not only afraid of neighboring, actually, they are, they’re more afraid of neighboring countries in the African continent then countries from outside Africa in terms of taking advantage of this new free trade agreement. So we are, some of our, E&Y has offices all over the world and I’m talking to my partners in Africa about this blockchain and they’re like, this is exactly what’s needed here. And so they’re already having discussions with Nigeria and Kenya and other countries about possibly doing early POCs to prove out the concept with them.

Kuntal: Fantastic. Fantastic. Yeah, I hope we’ll have a chance in our Conversations From the Field series to be able to talk about that new free trade zone and how that’s shaping up and what it will really mean for global trade, frankly. So I know we’ll be touching on that in future webinars as well. I do want to get to a question we have here since I’m going to be teaching your future workforce, what tools and resources are available to have students ready? So either from a technology perspective or from those who actually go into global trade and international trade and development. What are the kinds of things that they’ll need to know to get themselves ready as they’re going through their program now?

Todd: Yeah, it’s a very very good question and in my opinion there is a big need for more trade compliance, professionals trained in trade compliance. I found out about trade compliance by accident. Yeah, there’s maybe one or two, like Monterey University, I think has a pretty good trade master’s program and there’s a law school in, I forget the name of it, I think it’s in Chicago that has a really solid trade in law degree almost, but for the most part none of the four year universities or even the community colleges have any core focus training in trade compliance, and trade compliance is now kind of become kind of cool. Before our current administration my kids didn’t know what I did, my wife kind of knew what I did, now everybody knows what I do and I’m sure a lot of people on this call probably hearing that, I mean historically I would just say I’m the duty guy. I help with Customs duties and had I known that all I had to say was tariffs, everybody would listen to me because tariffs are just in the news like crazy. You have the China 301 tariffs, right? You have the section 232 steel and aluminum tariffs, and you have retaliatory tariffs being put on goods coming from Europe. There was a risk that wine and Louis Vuitton handbags would be subject to tariffs coming from France and other countries. So companies, our clients have really been struggling and the CEO and the board are now wanting to have discussions with the trade compliance people to figure out if they have exposure to figure out what they can do to offset or mitigate all these tariffs.

And it’s really caused a lot of disruption. I mean before COVID the China 301 tariffs, which just for any of those who don’t know, is an extra, it’s a retaliatory tariffs duty that’s assessed on imported, certain imported goods, if they’re if  they’re manufactured in China. If the country of origin of that product is China then it’s subject to a China 301 Tara. And for some companies that tariff is their entire gross profit. I mean, it could be 10, 15, 25 percent of the value of that imported good is now assessed against the value of the good in the form of a China 301 tariff, and it’s the importer who pays that tariff, not China. You’ll hear the president say China is paying these tariffs, they are not paying the tariffs. The U.S. importer is paying the tariff, and now China has imposed tariffs on us. So if you, SME, are exporting your plant products to China, your margin, well, your product is probably becoming non affordable, and maybe you’re lowering your price so that your product still does go to China because of the retaliatory tariffs there, maybe that’s what Trump means, but because you’re lowering the price of your good so you can still sell it to the U.S., China is paying the price. But when he says China is paying the Tariff, that’s not what’s happening. The U.S. Importer is paying the tariff to customs directly. And maybe, the U.S. importer will increase the price of their product to recoup the duty that they paid the government, but my point is is that board members, CEOs, CFOs, are now, trade policy guys, are now having a seat at the table with c-level executives and boards of directors, and a lot of companies are hiring up on qualified individuals to help in this area and to go back to the question, there’s not enough being done right now to train students in this area through the community college or through the four year degree programs like there should be, and really the only way right now to get that level of education so that you can go to a company and say hey I have this emphasis, even, in trade policy through these courses I took, that would be a huge thing. It would be a huge differentiator for a lot of students, but we just don’t see that.

Kuntal: And as you mentioned with this administration, I think trade has been front and center, for better or worse, and particularly with USMCA and all of the discussions around that, and all of the conditions of particularly the fact that technology was not really, or digital technology was not really factored in when NAFTA was first enacted and went into and the USMCA has had to take into account all of those developments and evolutions. And so I think the fact that that discussion has been front and center, all the other conversations around trade have been front and center, it sounds like what you’re saying is that having that exposure and understanding of the trade environment, of how trade regulations get made and enacted and enforced, and then all of the technologies that go along with not only what those treaties cover, but also how those treaties are enforced, it sounds like your platform is really on both the functionality side as well as potentially on the enforcement side. Is that correct?

Todd: Yeah. It’s on the policy side. You have to understand, it helps to understand the policy and the regulations in order to have an effective technology solution. But in terms of students coming up into the field, you have some people gravitate toward research and analysis and regulatory and policy and they’re more legal, analytical from that standpoint. And then you have other students that are coming up through education that are technical, and they like IT systems, to your point. It’s rare to find the combination, but you know that that really would be a remarkable thing when you have that combination. So if you’re coming up through the education system, and I don’t know if this panel was around education, but I am kind of passionate about it, maybe because now that one of my daughters wanted to go into this field, some people will gravitate towards the analysis and the law and the regulations, others, fabulous, equally important demand for people that have technical skills around trade and can automate and know how to implement systems because there’s already a lot of IT people who know what a purchase order is, that’s pretty common, but do they know what a certificate of origin is and how that would work within an IT system. The whole IT around trade has really not gotten the attention it’s deserved over the years, and to your point, I mean NAFTA was enacted 20, 25 years ago. 

Kuntal: Yeah 1994, yeah.

Todd: Corporate America went through an ERP Revolution, SAP, Oracle, IT for everything,IT for HR, IT for payables, AR management, general ledger, you name it, but the IT around trade, it’s still a lot of paper and faxes even in PDFs that are mainly uploaded into a system. So it’s electronic right? You got it via email, but now you’re having to save as and then upload in order to get it into a system and that’s all changing now with these tools that were talking about in technology and it’s interesting that the government really is a driver behind this, because governments, and Customs authorities, and I’m not sure how much more time we have.

Kuntal: Yeah, I think we’re going to be wrapping up in just about 10 minutes and I did want to get to another question but I’d love for you to finish your thought. 

Todd: Let me finish this point. Governments are going to be driving this technology revolution more than just corporates and the reason is that governments, and it’s surprisingly like governments like Brazil and Mexico and the country of Georgia, those Customs and tax administration’s are now requiring a companies allow them access to their ERP systems, and they go in and they compute the taxes. 

Kuntal: That was the other question I was going to ask you. What are you seeing from other countries and international organizations when it comes to this type of technology for global trade and how much of this is being driven by either the government side or by private companies? so I think that is very interesting.

Todd: Governments, I think, are really pushing innovative technologies on Corporate America. I mean, you can’t file and import entry by paper anymore. There’s a huge incentive to file your taxes electronically in the US, right? So companies are, and with Brexit, the law says you cannot enter a good or export a good unless you file everything electronically. It all has to be electronic. So the government’s are forcing the issue on us and in some cases smaller countries, you would think the US would take the lead on this. They’re not. They’re actually behind other countries. China has taken a lead. They’ve announced an initiative called the bel- I think it’s called the Belgian Road Initiative. This is huge. The Belgian Road is a consortium of other neighboring countries, and some not so neighboring, that have all agreed to a set of standards on sharing information via blockchain technology. 

Kuntal: Yeah.

Todd: So it’s here. I mean, blockchain will be as, as I say, omnipresent and ubiquitous as email is today. I mean, it’s going to be everywhere in the next, five, I’m not even going to say 10 years. I’m going to say years. It’s just going to be everywhere.

Kuntal: Well, so I think the last question I have and I do encourage anyone else that still on to, we have a few minutes, we might go over just a little bit, but we have a few minutes and if you have any questions that are more business focused or particular to your business, we encourage you to ask your question, but I do have a question about how any of this that you’re developing and that we’re talking about, the blockchain and how technology is being applied in the trade compliance area, how it will impact or get impacted by e-commerce transactions. Do you see that functionality and that sort of channel as being different from any other type of trade or sale of goods across borders, and can this type of platform be integrated into e-commerce marketplaces, for instance?

Todd: It needs to. In the way we’re designing the solutions that we had earlier with Microsoft is that it is accessible to an individual user on an e-commerce site just as it will be accessible to a large big box retailer. The way you interact with the tool though will be different, but underlying AI in ML abilities will be working off of the same platform. And so I do Envision on an e-commerce platform, if you’re the merchant or if you’re the customer and you want to buy a product and have it shipped to Dubai or anywhere outside the United States, that the same tools on the tariff classification and the determination of whether or not it qualifies for free trade agreement would be almost seamlessly integrated into that checkout process where you would be able to determine those things before making your final decision on whether or not you’re going to move forward with the transaction. Same technology. It’ll just be accessed differently. You’ll have APIs that are able to access the technology from the e-Commerce platform, whereas if you’re a manufacturer of automobiles your ERP system will have an API into the same system where you can also do your classifications or origin of determinations. And cost-wise, like so many other software as a service platforms, I would envision that there would be, in some cases, a no charge level of utilization and then based on volume or complexity there would be a standard, intermediate enterprise-level fees associated with technology in the platform.

Kuntal: I think I’m on mute. So our last box. Our last question is really about cost. So how accessible would this type of platform, would your platform be to SMEs? I think that’s probably a thought that a lot of people have on their minds. 

Todd: Yeah, so as I was saying there, software as a service, so you’re not having to buy or license software and then have it installed by a systems integrator that would cost you hundreds of thousands of dollars and have you host it on your own servers or on AWS or Microsoft Azure. If you’re a major automotive company, that’s probably what you’re going to do, but if you’re a small to medium-sized enterprise, there’d be no need for that and you would just subscribe to the service just like you would drop box or other software as a service platforms. Again, there very well could be a level of membership or a license that would just be free up to maybe five classifications a month for example, and then after that there would be a flat monthly fee for up to a certain number of classifications all the way up to an enterprise license for an unlimited number of classifications. So the idea is to make it accessible to a wide range of companies, different sizes, different sectors and different countries. 

Kuntal: Okay. Perfect. Well Todd, thank you so much. This was really not only informative but also exciting I think, to see how this segment of trade is shifting and changing and evolving and integrating technology. So I think that’s really exciting. Thank you all for joining us. I think you can definitely get in touch with Todd either through Linkedin or even through us, feel free to send out an email to CITC. If you haven’t already checked out CITC’s resources online, some of the tools that we have to offer, please do that. We’d love to talk with you if you’re interested in checking out some of our services. So please do get in touch with us and also join us next month for the next installment in the series. We’ll be looking at cyber security and how small and medium-sized businesses particularly in the e-commerce space can prepare for everything that’s going on and that has been going on the last two months with COVID-19. So do join us for that on May 14th. Todd, thanks again, and I’m sure we’ll have you back to talk a little bit more about how that platform is going to be launched and any new developments with it. So thanks so much, everyone stay safe, have a great day, and we’ll talk to you again soon. 

Todd: Thank you. Thank you for having me. 

Kuntal: Okay. Thanks. Talk to you soon.