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American Shipper

Struggling to make grade on ’10+2′

Struggling to make grade on ’10+2′

Importers sweat advance filing requirements. While 54 percent of documents are late, accuracy rate continues to improve.



By Eric Kulish


      U.S. importers and their agents are required to electronically file detailed data about cargo shipments 24 hours prior to vessel loading in a foreign port, but less than half of the documents submitted so far meet the deadline, according to the official in charge of the government security program.

      The news indicates that companies are still experiencing growing pains as they try to comply with the '10+2' rule that went into effect on Jan. 26.

      The Importer Security Filing (ISF) requires 10 types of data identifying where a container originated, the cargo contents, the consolidator and buyer, plus two data fields provided by the ocean carrier (the vessel stow plan and container status messages normally issued to customers). The information is automatically analyzed by computers to identify high-risk shipments that should receive X-ray inspections.

      U.S. Customs and Border Protection is not enforcing the rule during the first year to allow industry to develop the infrastructure and processes for gathering and filing the data with minimal disruption to daily operations.

      The agency received more than 500,000 ISFs as of April 12 from 1,300 filers representing some 31,443 importers, customs brokers and freight forwarders, but only 30 percent of those arrived on time, according to CBP officials. Richard DiNucci, director of the Secure Freight Initiative, said at the Customs-Trade Partnership Against Terrorism's annual conference in New Orleans on April 2 that only 30 percent of ISFs arrived on time, but a CBP spokesperson two weeks later said the on-time rate had improved to 46 percent.

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      CBP has never clearly spelled out how it define on-time compliance, but the latest response indicated it is measuring timeliness against the first bill of lading filed by the carrier under the 24-hour manifest rule because it doesn't have a direct way to identify the lading time. As such, CBP officials believe the compliance rate is probably even greater than 46 percent since many bills of lading are actually filed more than 48 hours prior to vessel lading.

      The top five '10+2' filers by volume are all C-TPAT Tier 3 importers, but even these elite trusted shippers are having trouble with the timeliness of their submissions.

      Tier 3 companies are ones that CBP has recognized for exceeding normal supply chain security standards, making them eligible for the lowest possible cargo examination rates and other trade facilitation benefits.

      DiNucci told about 1,000 industry representatives that the on-time rate for those five companies ranged from 28 percent to 41.4 percent, according to Beth Peterson, president of San Francisco-based trade consultants BPE Global, who attended the presentation.

      CBP now receives about 9,500 filings per day, up from 1,200 per day during the first week of the program, CBP officials confirmed.

      One statistic still missing from CBP briefings is the number of filings to date compared to the universe of filings that should have been submitted if everyone was participating. ISFs are to be done at the 'lowest' bill of lading level being filed through the vessel Automated Manifest System, meaning the total number of ISFs should equal the number of house or straight bills of lading filed since the rule went into effect. A container can include multiple shipments and ISF filings.

      Although big shippers are believed to have an advantage in terms of in-country resources to track down necessary information and information technology, DiNucci said CBP is seeing a healthy number of small and medium-size enterprises submitting the '10+2' document, including one filer who imported one shipment in all of 2008.

      Trying to correctly line up information is daunting for shippers of all sizes. Complications include trying to find who has origin data when imported goods are purchased from a middleman and making sure overseas vendors or ISF filers know that they have to obtain the correct U.S. harmonized tariff number from the importer.

      CBP has also received hundreds of vessel stow plans and millions of container status messages, said acting Commissioner Jayson Ahern at a hearing of the House Appropriations subcommittee on homeland security.

      The rejection rate for inaccurate or incomplete Importer Security Filings has fallen to about 6 percent since the new advance electronic document became a requirement, according to figures provided by CBP. In the first few days of the new rule, up to 30 percent of submissions were rejected for poor data and the rejection rate was about 15 percent two weeks after going into effect.

      The highest number of ISF rejections (10,000) by CBP is due to duplicate filings, according to Peterson's account of DiNucci's presentation. The most common problem is that many filers are not waiting the necessary five to 10 minutes to receive a response before hitting the send key again, another program official explained later. System response times typically range from 15 to 60 seconds, but CBP recommends that filers wait at least 15 to 30 minutes before filing a second time. Duplicate documents are also caused by importers filing without realizing a supply chain partner at origin already did so.

      Some filers are still trying to use the manufacturer's ID number, lack a proper ocean carrier bill of lading number or are confused about whom to designate as the ultimate consignee. The confusion has led some importers to type in the bill of lading number for a feeder vessel move when CBP needs the B/L number for the vessel destined for the United States. Others have suffered delays because they incorrectly assumed that CBP required a copy of the B/L itself, not just the number.

      Most other errors are typically data entry mistakes, such as a filer using an ISF number for a transaction that has already been used by a different party, or a mistyped commodity tariff number or importer of record number, DiNucci said.

      The '10+2' interim final rule gives importers the flexibility to provide a range of acceptable responses for certain data elements that may be difficult to obtain early on from foreign suppliers. Four pieces of information (manufacturer, ship-to-party, country of origin and commodity code number) can be updated up to 24 hours before vessel lading. Two (consolidator's name and container stuffing location) can be provided no later than 24 hours prior to vessel arrival at a U.S. port.

      So far, importers are eschewing the flexible arrangements and filing accurately the first time, DiNucci said. Less than 1 percent of the filings have been updated using the extended time windows. The ship-to-party, manufacturer, stuffing location, and consolidator data fields, for example, have only been updated in 0.5 percent of the transactions, Peterson reported.

      Part of the reason for this could be cost, because an importer that is using a logistics partner to do the filing will have to pay a service fee for the extra filing work. The dearth of amendments may more reflect a desire to minimize costs during the soft implementation period rather than complete confidence in the information, said Melissa Irmen, vice president of products and strategy at trade software provider Integration Point.

      'Once they've done a filing, then they move onto the next one. The focus right now is getting it done at least once,' she said.

Companies have already started to add clauses to their contracts stating that suppliers must provide the data for the ISF, and in some cases they are required to foot the fee to file an amendment if the original data is not accurate, trade professionals say.

      'You really need to make sure you're getting this data up front and pushing back on your vendors when you have to make these amendments because it's going to start costing you money,' said Joe Burks, director of logistics at Cooper Wiring, during a Feb. 25 American Shipper webinar on the rule.

      Some shippers are still having trouble getting ocean carriers to issue a bill of lading number early enough so they can file the ISF in a timely fashion. The B/L number is required on the ISF form as a cross-check with the two carrier data elements and the ocean manifest that CBP already receives. Many carriers have addressed the situation by designating the booking number as the B/L number too. DiNucci encouraged importers to contact CBP if problems persist so that the agency can lean on the carrier to speed up the bill of lading confirmation process.

      CBP plans to issue the first report cards ' now being called progress reports ' to filers by the end of April to let them know how well they are doing with providing accurate or timely information, DiNucci said. The progress reports will measure how many ISFs a company filed per month, the on-time rate, whether CBP accepted or rejected the filing, and the overall accuracy for each of the data elements.

      'It's unclear from the sample report card whether there is sufficient detail for you to research issues with your ISF. For example, if you have a 50 percent compliance score for manufacturer name, how do you find out which shipments these errors are stemming from?' Peterson said on the webinar.

      'CBP is going to have data that shows non-compliance, but you will not be able to address the root cause of the issue if you don't have enough detail,' she added.

The agency is leaning towards issuing a batch report every 60 days to companies doing the filing themselves, or for multiple customers. Service providers may redistribute the performance reports to individual importers.

      'For this to be a success, ISF filers need progress reports on a daily basis so they can improve their ISF filing in time to comply with the mandatory ISF regulations that are less than 10 months away,' Peterson opined after the C-TPAT conference.

      On April 6, CBP sent a message to international trading firms that they needed to register to receive the performance reports. (To receive CBP performance report, e-mail progress_report@cbp.dhs.gov, and include filer's corporate name, filer code used for ISF and point of contact and phone. Questions should be directed to Chuck Miller, (703) 553-1772.)

      Many companies have hesitated to implement '10+2' until they better understand the process and have systems in place to support the ISF filing. Early on, some mistakenly held out hope that the new Obama administration would put the brakes on a program that raises costs for importers, and potentially could delay cargo if shipping data is unavailable by the filing deadline.

      CBP has insisted that shippers should start filing as soon as possible to learn from mistakes since errors are not being penalized. But the leniency policy will change next year, DiNucci reminded the audience. The agency will be less inclined to overlook filing errors by companies that failed to take advantage of the 12-month grace period and make reasonable efforts to implement compliance measures.

      'If you come to me on Jan. 25, 2010 and you have made no attempt to file by then, there's nothing for us to talk about,' he warned.

      CBP officials have indicated they would prefer to see incomplete and inaccurate ISFs for all of an importer's shipments rather than a phased implementation with higher accuracy and completeness.

      DiNucci advised importers to:

      '    Begin the classification process sooner than for preparation of the customs entry so that the information is available in time for the ISF.

      '    Decide who will transmit the ISF and how.

      '    Know all your supply chain partners.

      '    Require suppliers to provide '10+2' data sooner than before.

      '    Add data fields to existing forms such as the commercial invoice, purchase order and advance ship notice to capture as much of the required information through normal business processes.

      Importers should create an ISF to match 80 percent of their transactions on each supply chain, including tariff codes for their highest volume products, the most likely country of origin and all the parties to the transaction, Peterson said during a March 11 panel discussion at the International Compliance Professionals Association (ICPA) in Anaheim, Calif. The ISF filer should then be told to transmit the information even if the other pieces of data aren't available.

      She also recommended during the webinar that importers talk with their CBP account manager to set expectations for visits and communications regarding progress towards filing the advance data. They should also document the true cost of ISF compliance and share their findings with CBP, which is accepting comments on the rulemaking docket through June 1 regarding the economic impact of '10+2.'

      Burks said that among the costs facing companies ' beyond the potential penalty liability of up to $5,000 per violation ' are: information technology acquisition and set up; filing fees; additional inventory to cover potential delays; production disruptions if an ISF shipment from a component supplier is held up because of insufficient data; air freight costs to expedite shipments that face delays; extra domestic staffing to make sure ISF deadlines are met and containers cleared in different time zones of the world; and extra container storage fees.

      IT and logistics experts say '10+2' can be a way to use compliance requirements to gain understanding about shipment status in real-time, reduce buffer inventory needs and improve overall supply chain management to the benefit of the bottom line.

      Some technology vendors have built software applications to address the narrow challenge of filing the ISF. Others, such as Management Dynamics and Integration Point, have integrated an ISF component into their global trade compliance management systems that allows importers to automate the collection of data, validate it and manage the workflow online. The same data then can be used to populate the customs entry required upon arrival of the goods.

      GT Nexus specializes in collecting data from a wide array of supply chain partners and standardizing it in a digital format in a central, online hub that can then be used in various applications, including ISF filing. It says its Web-based logistics collaboration platform makes it easier to share transaction-level data that does not reside within a purchase order management system, but instead is locked up in supplier and transportation provider systems.

      'We see this as an opportunity to extend the visibility platforms that a lot of customers use to manage their import operations' from origin, through documentation and shipment arrangements, to customs entry at destination, said Sunil Sharma, director of product management at GT Nexus, at the ICPA conference. 'You know which shipments are at risk beforehand that you have to file an ISF for. If it's done in two different systems you're going to have shipments executed without knowing the ISF filing status and they are going to be misaligned.'

      Don Woods, brokerage division manager for UPS Supply Chain Solutions, said EDI connections are the best way to ease the data collection and validation burden, but that Web-based tools are a good solution for low-volume shippers.

      Companies worried about confidentiality should use a licensed customs broker that is bound by customs regulations instead of a foreign agent or get the forwarder to sign a non-disclosure agreement.

      'You want to partner with someone who can provide integrated services because you need representation at origin plus you need someone who is going to collaborate with your supply chain partners,' Woods added at the ICPA event. UPS is both a forwarder and a broker.

      DiNucci strongly encouraged industry compliance managers to participate in outside surveys about ISF, and said he is extremely interested in seeing the results to learn how people are coping with the implementation so far.

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