Global trade has grown rapidly for decades, driven by improved technology and long-term macro-economic forces such as the shift to worldwide sourcing and dramatic cost-of-living, wage and currency gaps between advanced and developing countries.
At the same time, trends with the potential to restrain trade — protectionism, for example — have always existed. Post-9/11, security has emerged as a primary restraining factor that can significantly affect global trade volume and growth. However, some security programs, such as the 10+2 initiative, while appearing to add costs and delays to trade in the short to medium term, have the potential, for companies that embrace them properly, to have a net positive effect on global supply chains due to their alignment with quality control principles of the quality revolution.
10+2: It's Real
Arguably the most invasive import security measure put forward to date, US Customs and Border Protection's (CBP's) recently-enacted 10+2 Import Security Filing (ISF) initiative imposes major changes. The program takes effect on January 26th, 2009 with a one year "informed compliance" grace period, with "enforced compliance" beginning January 26th of 2010. These changes will reverberate across the supply chains of the U.S. and its trading partners, as well as other regions such as Europe and Asia that have already announced intentions to implement their own advanced trade data filing programs.
Essentially, 10+2 extends the 24-Hour Manifest Rule and enables the CBP's Automated Targeting System to more easily identify high-risk ocean shipments bound for the US. The ISF requires specific information — 10 data points from importers and 2 from carriers — at least 24 hours before a vessel is loaded. The good old days of "load now, file later" are gone, and players across the supply chain must find effective ways to cope with the new requirements and the increased costs they bring with them.
Prevention: A Tenet of Successful Quality Improvement
Interestingly, while most industry stakeholders have been concerned about the increased supply chain costs generated by 10+2, the program's most compelling feature is its alignment with a key tenet of the total quality management revolution that transpired in the 70s and 80s — higher quality can be achieved with lower overall costs. That is, by focusing on upstream prevention rather than downstream inspection, companies can lower their overall costs. In the case of 10+2, with a focus on upstream visibility and prevention of security and other data-related errors, as opposed to downstream container-level inspection and data reconciliation, companies can prevent or mitigate security breaches while keeping commerce flowing more efficiently than in the past.
As a result, importers, carriers and other trading partners would be wise to look at 10+2 as an opportunity to improve the overall efficiency of their supply chains, rather than simply as an obstacle to overcome.
What is the Impact to Trading Partners?
Each player in the supply chain will be impacted differently. Below is a brief summary of impacts for key trading partners:
Buyers will be most affected since they have to perform a new function, or designate an agent to perform services for them. CBP has estimated an incremental cost per shipment of $50-400 for importers. The Importer will bear this cost by investing in systems and personnel to directly handling 10+2 filings, through paying a designated agent such as a broker or overseas forwarder, or by sharing the compliance burden with suppliers or other third parties.
- There are several key gaps for buyers:
— Lack of IT systems in place to obtain and manage all of the information asked of them, such as Manufacturer and Seller Name and Address at the line level.
— Lack of personnel in the right location, with proper skills, or with timely access to information.
— Processes in place to manage overseas supplier-related activities in a short time window.