Import Compliance a Measure of Readiness for 10+2 |
 Jeff Chiu, Vice President, Global4PL Supply Chain Services
In the past year, United States Customs and Border Protection (“CBP”)
issued the Proposed Rule on the Importer Security Filing (“ISF” or “10+2”)
to satisfy section 203 of the Security and Accountability for Every Port Act
of 2006. CBP received and reviewed comments from the import community;
the Office of Management and Budget officially signed off on the
Proposed Rule; and on November 25, 2008, CBP published the interim
Final Rule in the Federal Register.
http://edocket.access.gpo.gov/2008/pdf/E8-27048.pdf
The requirements of the Importer Security Filing - unofficially named
“10+2” for the 10 data elements supplied by the importer and the two
elements supplied by the ocean carrier - will take effect on January 26,
2009. The interim Final Rule allows for public comments (on six of the
importer's data elements) to be received on or before June 1, 2009, and
provides a compliance date of one year from the effective date.
Although much has been said and published on this subject, many have remained on the sidelines
contemplating the resources in preparing for the implementation. CBP has granted a 12-month
informed compliance period, during which importers are expected to gradually comply without the
threat of full enforcement and monetary penalty. What do importers need to do to get ready? Who has
the responsibility of gathering, validating, and transmitting this information? How will this latest security
initiative affect importers' businesses?
The importer is required to submit these "10" data elements:
- lManufacturer (or Supplier) name and address
- lSeller name and address
- lBuyer name and address
- lShip-to name and address
- lContainer stuffing location
- lConsolidator name and address
- lImporter of record number
- lConsignee number
- lCountry of origin
- lCommodity HTSUS number (minimum 6 digits)
The vessel carrier is required to submit these "2" data elements:
- Vessel stow plan
- lContainer status messages
The Importer Security Filing initiative states that the electronic transmission of the data elements must
be executed no later than 24 hours prior to the loading of cargo onto a vessel destined to the United
States. Chronologically, this requirement shifts the transmission to an earlier stage of the supply chain.
An importer may designate, with the proper power of attorney, its freight forwarder to submit the data
elements. A freight forwarder normally receives shipping documents with the cargo. Thus, it has access
to, and may be familiar with, six of the “10” data elements: manufacturer (or supplier) name and
address, seller name and address, buyer name and address, ship-to name and address, container
stuffing location, and consolidator name and address.
Many mid to large importers employ the services of a Customs broker. In the course of electronically
filing a Customs entry, the broker normally transmits eight of the ten data elements: manufacturer (or
supplier) name and address, seller name and address, buyer name and address, ship-to name and
address, importer of record number, and consignee number, country of origin, and HTS number.
The Customs broker may be asked to submit the information to CBP. A Customs broker normally
transmits electronic entry summary information to CBP while an ocean vessel is on the water. The
Importer Security Filing, as noted above, would shift the transmission of data to an earlier stage of the
supply chain. CBP will allow for a single transmission of the ten data elements and entry summary
information by the importer or a licensed Customs broker to help in reducing the amount of data entry.
The Importer Security Filing initiative states that the importer is the party ultimately responsible for the
submission of (the "10") data. Between the freight forwarder and the Customs broker, the importer
should have all of the data required. It would be a simple exercise of providing the appropriate party the
respective missing elements. The freight forwarder and Customs broker would require the respective
balances of data elements.
CBP provides some flexibility in the reporting of four of the importer's data elements. Importers are
allowed to provide a range of responses for the manufacturer / supplier, ship-to party, country of origin,
and commodity HTSUS number. Although this helps in meeting the filing deadline for each shipment, it
requires the additional work of submitting one or more subsequent update(s) to the original filing.
CBP provides additional flexibility in the reporting of two additional importer's data elements. Importers
are allowed to provide the container stuffing location and the consolidator name and address no later
than 24 hours prior to arrival of the vessel at a U.S. port.
All of the required data elements exist; that is certain. Whether the data is transmitted by the freight
forwarder, the Customs broker, or the importer, there remains an uncertain level of burden in the
exercise of data collection.
Taking the "10" data elements and turning them into questions is the very first step. How many
suppliers / vendors do I have? How many manufacturers do my suppliers / vendors represent? With
how many manufacturers do I deal directly? From how many countries do I import? What are the
products' countries of origin? What are the tariff numbers for those products?
An importer must be able to answer this set of questions with practically 100% certainty as the penalty
for the submission of false information to CBP would result in a penalty of 100% of the value of the
shipment. That was the penalty under the Proposed Rule; the penalty under the Final Rule is $5,000
for each violation of the Importer Security Filing. (100% accuracy of the data elements has the
additional benefit of contributing to overall import compliance.) Whatever the penalty amount, with
which department should the responsibility lie within each importer's organization? Who will take
charge?
An importer's organization may include both Customs compliance and logistics departments. These
groups are heavily involved in the daily operations and generally do not have the time nor the
perspective to execute this data collection. Even when the data is easily accessible, the task of
validation could be daunting. For example, Accounts Payable has an address for a vendor to which it
sends payment, but is that vendor the actual manufacturer? Is that vendor's mailing address the
physical location at which the goods were made or stuffed into the ocean container?
Some other questions to consider are:
- How many Customs brokers does an importer employ? Does each broker have the authority
to classify product independently or does the importer supply all classifications?
- Does the Customs broker have the support and coverage overseas to avoid lengthy delays
due to time zone difference and the timing to correct those issues at origin?
- Does the vendor know how to classify products correctly and does it provide the information
timely and consistently?
- Does the contract manufacturer provide support needed for its products?
- Do the procurement, logistics, import and trade compliance groups work together to
coordinate the information and avoid Customs delays? Is there an inefficient inbound of
materials due to lack of information from origin?
An importer's current processes may work well, but without a clean and efficient operations model,
including the documentation with the required information from contract manufacturers, vendors,
suppliers, etc. at origin, not only will an importer subject itself to potential delays and penalties under
the Importer Security Initiative, the import supply chain will suffer. Now is the time to assess and
correct any deficiencies before they affect a company's import compliance record as well as its bottom
line. |
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| About the Author: |
| Jeff Chiu is Vice President at Global4PL, a supply chain management consulting company that
assists clients to reduce costs and achieve their full operational potential. Mr. Chiu, a licensed US
Customs Broker, possesses over 12 years of experience in import operations and compliance, with
emphasis on internal Customs audits, commodity classification, tariff engineering, trade programs,
and training. |
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| January 2009 |
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