"10+2" Archives

Ready for Full Enforcement of Importer Security Filing?

Global Trade | By Adrian Gonzalez • 07/03/2013

Starting on July 9, 2013, U.S. Customs and Border Protection (CBP) will begin the liquidated damages phase of Importer Security Filing (ISF) enforcement. According to the press release:

CBP may issue liquidated damages of $5,000 per violation for the submission of an inaccurate, incomplete or untimely filing. Liquidated damages in simplified terms refer to a penalty secured by a bond. If goods for which an ISF has not been filed arrive in the U.S., CBP may withhold the release or transfer of the cargo. For carrier violations of the vessel stow plan requirement, CBP may refuse to grant a permit to unlade for the merchandise. Additionally, noncompliant cargo could be subject to further inspection on arrival.

The Importer Security Filing regulation — commonly referred to as “10+2” because importers or their agents have to submit ten data elements to customs 24 hours prior to vessel departure, and ocean carriers have to submit two additional data elements — was published in the Federal Register on November 25, 2008 and has been in effect since January 26, 2009. In short, importers, freight forwarders, and customs brokers have had almost five years to get their act together, so there’s really no good excuse for not being prepared at this point.

Last week on Talking Logistics, I interviewed Kevin Gavin, VP of Supply Chain Compliance at Descartes Systems Group (a Talking Logistics sponsor) about various cargo security and trade compliance programs, including ISF. Watch the short clip below where Kevin shares two data-related problems some companies still experience that could lead to ISF non-compliance.

Finally, as I wrote back in November 2008, if there’s ever a business process that lends itself perfectly to a network-based solution, it has to be “10+2” compliance. This is really a data collection and connectivity challenge, and freight forwarders and network-based solution providers are in the best position to address it. What you do with the data is less important (and easier) than getting the data (timely, accurate, and complete) in the first place.

(Note: Logistics Viewpoints will not be published July 4-5. Have a great holiday!)

This Week in Logistics News (February 4-8, 2013)

Global Trade Management Solutions | By Adrian Gonzalez • 02/08/2013

Schools are closed, the roads are empty, and we’re all just waiting for the blizzard to arrive. It’s a stay-at-home-in-your-pajamas kind of day, my favorite. And the fact that it’s Friday makes it even better. I’m not looking forward to shoveling two feet of snow tomorrow, but there is something undeniably beautiful about seeing the world outside covered in white, and your kids laughing and playing in it, with their red cheeks and noses, shovels and buckets, snowmen and snow forts — winter’s version of a day at the beach.

While we wait for the storm…

C.H. Robinson and Con-way both reported Q4 and full-year 2012 results this week. You can read the press releases for all the details, but here are some highlights:

C.H. Robinson: Total net revenues increased 5.2 percent and net income increased 37.6 percent in 2012 compared to 2011 (including contribution from acquisitions). Truck net revenues, which includes truckload and less-than-truckload services, increased 7.1 percent in Q4 2012. The company’s North American truckload volumes increased eight percent in the quarter, and its average truckload rate per mile charged to customers (excluding fuel) increased about 1 percent in Q4 2012 compared to Q4 2011, while its truckload transportation costs increased approximately two percent (excluding fuel). Net revenues from “other logistics services,” which include transportation management services, customs, warehousing, and small parcel, increased about 15 percent in Q4 2012 (excluding contribution from acquisition), driven primarily by transaction increases in its transportation management and customs services.

Con-way: For the full-year 2012, Con-way reported net income of $104.5 million, up 18.2 percent from 2011. Menlo Worldwide Logistics reported net revenue of $161.8 million, up 2.7 percent from Q4 2011; “net revenue grew at a lower rate than gross revenue, primarily due to slower growth in warehousing volumes at current accounts, and tighter margins on new business.” Revenue at Con-way Truckload in Q4 2012 was basically unchanged from Q4 2011, with operating income decreasing 10.5 percent. Loaded miles declined 3.7 percent in the quarter compared to Q4 2011, and empty miles were 9.9 percent compared to 9.6 percent in Q4 2011.

2013 is off to a slow start for freight shipments, according to the Cass Freight Index Report for January. Here is an excerpt:

Both shipment volume and total freight payments declined significantly from December [2012] to January [2013], as the economy slowed to a near stall. Total shipment volume has fallen in each of the last four months, mirroring the recent contraction in GDP. The 0.1 percent contraction in GDP for the fourth quarter of 2012 was the first negative result since the recession.

January shipment volumes fell off 4.8 percent from December and were 2.5 percent lower than they were a year ago. For each of the last two years, freight shipment volumes ended the year at about the same place they began. This was the first year since the recession period that January shipments were actually lower than January of the previous year.

In technology news, LLamasoft announced the launch of Supply Chain Sherpa, “a mobile supply chain modeling app developed to make supply chain design and what-if scenario analysis accessible to everyone throughout the extended enterprise.” According to the press release, Supply Chain Sherpa enables users to:

Rapidly modify a pre-loaded supply chain design or quickly prototype a new design using built-in reference data
Immediately visualize results in detailed maps and graphs including service, cost, logistics, sustainability and risk
Share designs with other Supply Chain Sherpa users via email, or send the models to Supply Chain Guru for more detailed modeling, optimization and simulation

As I commented in my predictions for 2013, tablets and smartphones are quickly becoming the preferred computing platform for business professionals, and this is just another example of how enterprise applications are being designed and optimized for these devices.

Another of my predictions was the continued adoption of alternative fuel vehicles, and this week UPS announced the deployment of 100 fully electric commercial vehicles in California. Here are some excerpts from the press release:

These UPS electric trucks [manufactured in Stockton, California by Electric Vehicles International] will reduce the consumption of conventional motor fuel by approximately 126,000 gallons per year. Additional benefits include reduction of carbon emissions and noise. The vehicles have a range of up to 75 miles and primarily will deliver packages to customers in Sacramento, San Bernardino, Ceres, Fresno and Bakersfield.

“We currently operate more than 2,500 alternative fuel vehicles worldwide with a variety of hybrid, electric and natural gas technologies, making UPS the leader in logistics sustainability,” said Myron Gray, president of U.S. operations for UPS.

Supply chain executives have one less thing to worry about this year: the United States Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) have reportedly reached a tentative labor contract agreement. A strike would have shut down ports along the Eastern seaboard, which together handle 110 million tons of import and export cargo.

Finally, the Import Security Filing (ISF) — more commonly referred to as “10+2” — is back in the news. As reported in a Supply Chain Management Review article:

Earlier this year, the National Industrial Transportation League (NITL) cited customs and international trade law firm Sandler/Travis’s reporting in its Daily Report that “CBP is expected to issue by the end of May a proposed rule that would make various changes to increase the accuracy and reliability of the advance information submitted under the importer security filing, or ‘10 + 2 rule.”

It added that while fines for non-compliance were set at $5,000 per incident, Sandler/Travis said that CBP has not strongly required full compliance and that the proposed rule could set forth the agency’s intention to do so and establish standards under which full compliance could take place.

As I wrote back in November 2008 in “10+2: A Beacon of Hope for Software Vendors and Freight Forwarders,” nothing gets software vendors more excited than new government regulations because it often translates into increased demand for their compliance solutions. I expect to see many more blog postings, white papers, and press releases about this topic from software vendors and service providers in the days ahead.

Ah, look, the snowflakes are here. Time to go.

Song of the Week: “Judy Staring at the Sun” by Catherine Wheel with Tanya Donelly

(Note: C.H. Robinson, Con-way, Descartes, HighJump Software, and LLamasoft are Logistics Viewpoints sponsors).

The Audiovox Global Supply Chain

Global Trade Management Solutions | By Steve Banker • 09/29/2009

Audiovox Corporation is a publicly-traded company (NASDAQ: VOXX) headquartered in Hauppauge, New York. The company generated about $600 million in revenues in its last fiscal year. Audiovox started in the car radio business but its product portfolio has expanded over the years to include satellite radio, vehicle security, remote start and other mobile products. The company has made several significant acquisitions, including Thomson’s Americas consumer electronics accessories business (the RCA brand) in 2007.

Audiovox’s supply chain usually starts in the Pacific Rim where it purchases goods for sale, largely to North American customers, from overseas manufacturers. The company works directly with its suppliers to design and test the products. A large percentage of its products are sold to the automotive OEMs.

Following the acquisition of the RCA products, Audiovox recognized that it needed to streamline its global supply chain. Pat Moffett, Vice President of Global Logistics & Customs Compliance at Audiovox, helped to initiate two changes to streamline their processes. First, the company initiated nonstop, long-haul, team driving from its primary port of entry (Seattle-Tacoma) to its main distribution centers in Indianapolis and Memphis. Prior to this, the company relied primarily on rail shioments from the port to its DCs. However, because ship and rail schedules did not always sync up, lead times were often unacceptably long. This led the company to spend too much on costly air freight. Today, of the 4,000 forty-foot ocean containers Audiovox imports each year, 500-600 trailers now move by road.

Secondly, Audiovox implemented a global visibility solution called POET (Purchase Order Expediting & Tracking System) from E2E. Visibility for goods shipped by ocean (the company is not using POET for air shipments) begins with the purchase order and ends with delivery of the goods to a DC in the U.S. A foreign manufacturer notifies the freight forwarder when the goods are ready for pick up. The freight forwarder is in charge of entering the key data that drives end-to-end visibility into the system, and it also knows how long it will take to move the goods from port to port. It is the freight forwarder’s responsibility to keep track of schedule changes and enter the new data into the visibility solution. According to Pat, POET is a good solution that is reasonably priced, but having freight forwarding partners with the right “discipline” is critical to making this solution work.

POET is both a trade and visibility solution, as key information entered into POET is also used for Importer Security Filings (“10 + 2”) with customs.

Visibility from POET has given Audiovox more flexibility in how it routes goods from the port to the final destination. Planners can now make routing decisions later in the process. For example, if it looks like a ship-to-train shipment will take too long, a planner can changeover to a truck shipment as long as he notifies the ocean carrier 72 hours in advance. This process allows Audiovox to move goods from Hong Kong to Memphis in just 14 days. There are also rare instances when air freight from Asia is still necessary. Having advanced visibility allows Audiovox to marry up a 500 piece air shipment into Seattle, for example, with inbound ocean freight and then consolidate these into one truck shipment to Indianapolis. Or, if it looks like securing a timely rail shipment out of Seattle will be a problem, a planner might chose to ship to Los Angeles instead and use rail from there.

These changes have led to two main benefits: First, even though shipping by truck is more expensive than shipping by rail, the reduction in air shipments (along with other factors) was a major contributor in logistics costs dropping from 15 percent of revenues in 2002 to just 4 percent in 2009. Secondly, logistics personnel are now spending about half as much time answering the “when will this shipment arrive” question.

Audiovox has been a highly acquisitive company and its product line continues to expand. For example, the company will introduce a handheld TV in October. However, Pat is convinced that POET will scale and allow them to respond flexibly to whatever situations arise in the future.

IBM’s Solution for Global Trade Management

Global Trade Management Solutions | By Steve Banker • 08/25/2009

IBM’s global trade operations are massive in scale and scope. The company conducts business in 170 countries and moves about $25 billion worth of goods across borders. It ships about 2 billion pounds of goods per year globally (78,000 products with 2 million configurations) which translates into 500,000 customs declarations annually. IBM also conducts cross border consulting which can be subject to export regulations, including denied party screening, regulations focused on insuring that advanced technology does not fall into the wrong hands.

Overseeing trade compliance in North America is Sally Meier, Foreign Trade Compliance Manager for the Americas. Global trade is part of IBM’s Integrated Supply Chain organization, although two governance offices which report to Legal—the Import Compliance Office and the Export Regulations Office—provide essential checks and balances.

A key task for IBM is keeping up with new regulations, like the new Import Security Filing (ISF) regulations. ISF, also known as “10+2”, requires importers to submit 10 data elements, and ocean carriers 2 data elements, to U.S. Customs electronically no later than 24 hours prior to the loading of cargo onto a vessel destined to the U.S. These regulations went into effect on January 26, 2009, with a twelve month delayed compliance period to allow the industry to comply with the new requirements.

The trade press has written a lot about how complying with ISF will be difficult for many companies, and how many businesses will need to implement a Global Trade Management (GTM) solution or outsource global trade compliance to brokers and forwarders that have good systems in place.

So, it was a bit surprising when Sally didn’t seem fazed by IFS compliance. She is confident that within two months IBM will have successfully modified its internally-developed systems to facilitate complete automation. Further, IBM will have done it in a cost efficient manner that also takes a global approach to compliance. The global strategy recognizes that other nations will likely follow the U.S.’s lead and implement similar requirements, so IBM’s systems will be capable of providing this data in a timely manner to all customs organizations around the world!

According to Sally, while many companies shy away from internally-developed solutions, IBM, as a technology company, has a unique advantage in this department—“building these kinds of solutions is in our DNA.” The trade organization believes that even their legacy trade applications exceed the capabilities of best-of-breed GTM software.

IBM’s internally-developed solutions, which are used by all IBM trade people around the world, include:

An Electronic Invoicing System: This system passes electronic invoices to brokers and carriers. It also gives IBM control and visibility and it is the key solution for “10+2” compliance. This system, along with many others in the IBM landscape, makes use of IBM’s middleware gateway that acts as the focal point for the exchange of all electronic data with IBM’s trading partners (brokers, carriers, vendors, etc.).
A global classification database: IBM keeps this database up to date itself. While in the global process a broker may have a “one off” classification that needs to be done, IBM has workflows and processes to verify the classification before putting it in its database. Thus, even though IBM calls this a database, it is also an application. The application also has logic, particularly around parametric data, to help guide users to a correct classification.
A Shipping Procedure Instructions application: A web based solution that contains the appropriate procedures, documentation, and labeling to ship anything to any nation in the world.

Sally made the point that in trade compliance, as opposed to operations, the focus is not the physical movement of goods; it is the accurate and timely movement of data. This is why “10 + 2” is not keeping her up at night. The IBM systems were developed from the beginning to support the transmission of this type of data. (For more on the role of data and 10+2, see “10+2: A Beacon of Hope for Software Vendors and Freight Forwarders”).

In the area of global logistics, IBM made news in December of last year when it announced that it had sold its internal global logistics operation to Geodis (see “Geodis and IBM: A New Strategy in Logistics Outsourcing?”). In turn, Geodis became IBM’s lead logistics provider. IBM’s internally-developed GTM solutions also offer new business opportunities. The company is exploring the possibility of commercializing this technology.

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