As president of Global Data Mining, I have the opportunity to speak daily with a broad range of clients from many diverse industries, all involved in international trade.
On January 2, 2008, U.S. Customs & Border Protection (CBP) published in the Federal Register a notice of proposed rulemaking for Importer Security Filing and Additional Carrier Requirements, commonly known as "10+2." Since then, I've watched companies react to 10+2 in three distinct ways.
A very small minority of our clients have responded by funding a cross-functional team to study the issue and develop an enterprise-wide strategic solution to meet the new requirements and optimize global trade business processes while they are at it. These best-in-class companies are way ahead of the 10+2 curve.
I have noticed the remaining companies seem to fall into one of two groups. There are companies heading full speed for a cliff and completely unaware of it…and there are companies heading full speed for the same cliff, but at least they are aware of it.
The "aware" group has a chance to use this dramatic change in customs regulations as a catalyst for process improvement and to remain competitive with the best-in-class group. I fear any companies that remain unaware will suffer mightily when 10+2 goes into effect.
The reason even "aware" companies are heading toward disaster is while their leadership may be alert to the newly proposed customs regulations they mistakenly believe it can be managed tactically by their trade compliance department, when in actuality it will require an enterprise-wide strategic solution.
It is important for senior management of U.S. importers to understand the significant impact 10+2 can bring to their companies and develop an enterprise-wide strategy to prepare for it.
Let me explain.
CBP is proposing to require your company to transmit an Importer Security Filing 24 hours prior to loading a U.S.-bound vessel. The filing must contain 10 data elements including three new data elements not currently required for U.S.-bound imports. The existing seven data elements will need to be reported a lot sooner in your supply chain than is required today. This is not a small change. It will require a considerable re-engineering of corporate processes and systems.
Click here to see the data elements that will be required, their typical source and responsible parties.
Creating an effective solution to the proposed 10+2 regulations is beyond the scope of the trade compliance department. It will require an enterprise-wide, strategic solution. Here are three examples to clarify my point.
Example One: The typical vendor master file in a corporate enterprise resource planning (ERP) system defines "Manufacturer" or "Supplier" as the party to which the company makes invoice payments. If a supplier has 10 different factories that may fulfill an order, the proposed 10+2 regulations will require the name and address of the actual factory that fulfilled the order. This granularity of data, and the functionality to differentiate at the specific factory level, does not exist in many ERP systems today.
Example Two: One importer I recently spoke with is changing the way his company selects freight forwarders in foreign countries in order to manage the requirements of the Container stuffing location and the Consolidator (stuffer) name and address. They feel the 10+2 regulations require a much closer relationship with fewer forwarders to assure that all data elements, especially the two mentioned herein, will be accurate and complete in time to transmit the Importer Security Filing.
Example Three: Today, the assignment of the fully qualified Harmonized Tariff number (US-HTS) is frequently made after the generation of the commercial invoice and before the shipment enters a U.S. port. The assignment of the US-HTS is often made manually by a broker. In order to achieve the requirements of 10+2, importers will need to create and maintain a Parts Master File complete with fully qualified US-HTS numbers assigned to every item. This data will need to be integrated into the software that will be used to electronically transmit the Importer Security Filing 24 hours prior to loading the U.S.-bound vessel.