Q. Why is the bitsid System needed? What is driving the cattle industry to do this?
\n\nA. Lenders require clear title and legal descriptions for all other assets that are pledged as collateral for loans. Real Estate and Equipment loans for example require title searches, title insurance, and VIN\u2019s before funds are issued. On the other hand, livestock loans have traditionally been issued based on a handshake and perhaps a visual inspection. As a result of these loose control practices in livestock lending some major fraud involving millions of dollars has occurred. In reality, this causes lenders to factor the higher risk of fraud by a few, onto their entire cattle lending portfolio. Such fraud forces all clients who need livestock loans to incur a higher cost. Unfair as it may seem, borrowers who pay off their loans as agreed, are also paying the price of fraud committed by other borrowers. By reducing the opportunities for fraud, bits can helps to minimize a portion of the cost of borrowing. Borrowers should expect access to credit they might otherwise not get, or preferred loan terms for their participation in the bitsid System.
\n\n\nQ. Participation in the bitsid System looks like it will cost the producer/borrower money to implement. If a lender requests the borrower to use bitsid System, why wouldn\u2019t the borrower just go down the road to a lender who doesn\u2019t participate?
\n\nA.Cattle producers are business people, and once they are presented with the chance to lower their cost of financing to the point where it exceeds their cost of implementing the bitsid System, they will buy in. There are several opportunities to profit. First, a very small reduction in the interest rate or closing costs can turn into profit for the producers. Second, using bits services will open the door to premiums for source traceability, so producers can make more money when they sell their animals. Third, using the bitsid System allows the borrowers to negotiate more precise collateral pledges and avoid excessive pledges that might involve other unrelated assets. Borrowers may then leverage these other assets as they need.
\n\n\nQ. How does use of the bitsid System improve the value of a herd?
\n\nA. If the cattle producer provides the date of birth for each animal enrolled into the bitsid System, they will have the ability to show source and age verification for each animal. This is of value to buyers later in the food chain, and is a requirement to qualify for the Asian export market. Even without the date of birth, which is an optional field for animal enrollment, source verification -provided via the GPS coordinates- can produce excellent returns for the producer.
\n\n\nQ. Can bits help the livestock producers and lenders prevent animals disappearing?
\n\nA. Maybe. Identifying animals that have disappeared from their rightful owner is much easier when they have been enrolled in the bitsid System database. Lenders and borrowers have access to the database through the internet. When viewing the detail of an animal record the digital photo of the animal (preferably with a readable ear tag number) can provide strong evidence of ownership. Those contemplating theft might reconsider if they know this identification is possible, and look for an easier mark. Participation may therefore deter some disappearance. The Silver and Gold levels of Service available through bits clearly offer stronger proof of ownership.
\n\nQ. Why the three levels of service?
\n\nA. Gold, Silver, and Bronze levels of security are offered by bits Ltd. to reflect different lending risks that occur in the market, and also differing technologies that have been adopted by livestock owners to identify their animals. In situations where the risk is perceived to be high, the Gold level involving a digitized retinal image from each eye is recommended. This service level might also be used when a prized bull or other high value animal is at stake. Retinal imaging requires technology available from Optibrand Ltd., LLC and can be seen on their website www.optibrand.com. Retinal image identification is more certain than a fingerprint and is growing in popularity among fair and show animals.
\n\nA l arge share of the cattle producing market (nationally and internationally) has employed RFID to identify their animals. Since each RFID tag contains a unique signal that correlates to a 15or 16 digit number, and since these tags are considered by the industry as \u201ctamper-resistant\u201d, the Silver level is an excellent way to secure collateral.
\n\nThe Bronze level relies on a combination of data elements to provide a workable level of security between lenders and borrowers. The combination involves the enrolling owner\u2019s user name, a visual ID (ear tag number, BANGS number, tattoo number), the GPS/Time/Date at data capture, and a digital photo. Since these visual ID methods are the dominant identification technology in use today, many bits clients will be enrolling animals with this combination of data elements.
\n \nQ. How does providing a lender with an electronic report listing animal identifiers give lenders security?
\n\nA. bits supplies lenders with independent and objective information tools when livestock are used as collateral. Lenders have assurance that the collateral enrolled in the bitsid System database actually does exist and that the counts are accurate. They also realize that perpetrators of fraud are not likely to apply for loans when the bitsid System is in place for fear of being caught. The Gold level of Service, using retinal identification, offers the highest level of security because every animal\u2019s retinal vascular image is unique and cannot be entered into the bitsid System without an animal to produce the image. In both the Silver and Bronze levels of service one of the data elements required to enroll an animal in the database is a digital photo. Lenders can view randomly selected photos from their collateral reports and perform a \u201cdesktop audit\u201d by comparing the ear tag number in the database record to the ear tag number in the digital photo. If they are not in sync the lender has reason to question the validity of the collateral.
\n\nRegardless of whether the Gold, Silver or Bronze level is utilized, bits communicates with lenders and clients when the bitsid software detects the collateral is pledged multiple times, or is otherwise jeopardized. These tools are only available through the bitsid System.
\n\n\nQ. Livestock producers are concerned about confidentiality of their records. How does bits plan to address this concern?
\n\nA. Information is only shared with outside parties as previously agreed upon by the bits Ltd. clients. In order to provide value to lenders (resulting in benefit to the owners) bits is obligated to provide objective information whenever collateral might be affected. Collateral is affected and reports are generated for the lenders when an animal is sold, dies, or is classified as missing. The collateral may also be jeopardized when more than one owner submits a record for a single animal. bits notifies the clients and lenders when such an event occurs, but the ultimate resolution is still between the borrower and the lender. The agreement regarding bits responsibility to notify lenders and clients can be viewed on the Registration Page of www.bitsid.com.
\n\n\nQ. Does bits send data to the secretary of state for UCC filings?
\n\nA. No, that would be an option available to individual lenders. The Bits Identification Number (BIN) is generated by the bitsid System and correlates in the database to the identity of each animal. The BIN may become the key identifier for UCC filings.
\n\n\nQ. Does the bits database and the Optibrand system work only with beef or dairy cattle?
\n\nA. The bitsid System\u2019s value is not limited to cattle. The Bronze and Silver Service levels can secure any livestock that utilizes visual identification systems or RFID systems to uniquely identify individual animals that may be pledged as collateral for loans. However, the Gold Level Service requires the capture of a retinal vascular image. Due to unique structural characteristics of the eye in horses, this is not possible. However, the Bronze or Silver levels maybe suitable for equine enrollment. Any ruminant species including bison, sheep, goats, elk and deer are part of today\u2019s market for both Optibrand and the Gold level of service from bits
\n\n\nQ. Is bits Ltd. affiliated with NAIS?
\n\nA. No. The National Animal Identification System is a government sponsored system that is in no way affiliated with bits Ltd, LLC. The bitsid System has been developed as a private enterprise with the purpose of reducing the risk of fraud in livestock lending. The System might also be used to provide livestock producers an economical way to become eligible for source and age verification premiums. bits Ltd, is driven by the demand for security in the livestock industries, not by legislative mandate.
\n\n\nQ. How do I get the premiums for source and age verification?
\n\nA. The current industry procedure for source and age verification is to provide an affidavit declaring the location and the date of birth for individual animals or groups of animals when they are sold. Clients of bits can produce these affidavits easily from a menu option on the bitsid System. Of course the client must provide the date of birth (an optional data element entered at the time of enrollment) in order to receive an affidavit involving animal age verification. Often the seller must negotiate these premiums when they sell their animals. bits Ltd. puts the seller in position to do so.
\n\n\nQ. Does bits help producers comply with Country of Origin Labeling? (COOL)
\n\nA. Yes. Country of Origin Labeling is currently required to be available on all retail beef counter packages by October 2008. If a processor is producing retail product, they will need animals that have certifiable country of origin information. If such information is not available when animals are sold, some packers will reduce the price offered, or not even be in the market for non-certifiable animals. Registering an animal on the bitsid System tags the animal with a GPS/time/date stamp that can be help provide COOL information.
\n\nQ. How would I get started?
\n\nA. Visit our website www.bitsid.com
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