Today’s guest post is from Matt Gersper, founder and president of Global Data Mining and co-owner of CUSTOMS Info. Matt has over 20 years of experience in process optimization and data mining in the business domain.
Failure to comply with the Importer Security Filing (ISF) regulations could bring financial disaster to unprepared U.S. businesses. There are three major reasons business leaders should assure their companies are compliant and each reason has direct bottom-line impact.
First is the risk of significant penalties for non-compliance. The ISF regulations, commonly referred to as “10+2”, state an importer can be fined $5,000 per filing if an ISF is not timely, complete and accurate. The penalty phase begins January 26, 2010.
This chart shows penalties that could be incurred in just the first 60 days of the penalty phase for 5 companies. Penalties of this magnitude would quickly get a CEO’s attention, and could have a devastating impact on any business. You can calculate your potential exposure based on the number of ocean entries you have.
|Import Value||Ocean Entries||Potential Risk|
|2 months of penalties (Jan 26 through Mar 25, 2010)|
Second is Custom & Border Protection‘s (CBP’s) renewed commitment to enforcement and revenue collection. CBP’s recently published Trade Strategy for Fiscal Years 2009-2013 makes it clear just how important revenue collection has become to the U.S. Government. Shockingly, CBP’s report lists “Enforce US Trade Laws and Collect Accurate Revenue” as its number two strategic goal ahead of “Advance National and Economic Security“.
Third is the impact supply chain delays could have on your business. A recent study by the National Association of Manufacturers (NAM) estimates the ISF regulation will create a permanent 2.8 day delay in supply chain speed.
This chart applies the cost model of supply chain delays from a Purdue University study and estimates the annual financial impact that would be incurred if these five companies suffered the 2.8 day permanent delay.
|Import Value||Delay Days||Estimated Cost|
While some importers hold out hope that the penalty phase will be postponed by CBP, hope is not a strategy. “I’d let my CFO know the penalty phase will be going into effect as scheduled and the implications could have tremendous negative impact on the bottom line”, says Beth Peterson, President of BPE. Peterson has been a strong advocate representing the interests of industry to CBP regarding the impact the ISF regulations could have on U.S. businesses.
American Shipper, BPE and the International Compliance Professionals Association (ICPA) conducted a research project to understand the current state of ISF compliance, the impact this regulation has (and will have) on the supply chain, the challenges that companies are facing in their attempts to comply with ISF and the best practices importers can leverage to comply with — and ideally benefit from — ISF compliance. Their study revealed 3 of the top 4 challenges importers are having with 10+2 compliance are related to data management.
DATA MANAGEMENT CHALLENGES
- Nearly 60% of companies have challenges providing timely ISF data.
- Nearly 40% struggle to collect complete ISF data.
- Around 20% have problems with the accuracy of the data they are providing.
These are the very three issues causing penalties to be assessed. To make matters even worse, the penalties estimated above could be twice as large since the regulations state that fees can be as high as $10,000 per filing if two or more violations occur. For example, the filing is not timely and is it not complete.
Modern database and workflow applications can dramatically improve a company’s data management efficiency and significantly bolster capacity to achieve ISF compliance. Web-portals, or central information hubs, allow parties around the world to collaborate and interact online, with the same information, though a single platform. Here are six tips that can help you select the right solution to achieve ISF compliance and improve data management.
- A secure website accessible worldwide by any authorized user.
It should provide control over multi-party collaboration and the ability to grant privileges by user and role.
- A centralized database that is the system of record.
A “single version of the truth” for 10+2 and other customs information about every item enterprise-wide.
- Easy upload of data from any system, business unit, or supplier.
It should provide easy to use features to normalize, view, sort, filter, and work with data.
- Easy integration with existing systems.
It must manage the data used by your various business applications that support your global trade initiatives.
- Leverage best-practice functionality in a manner that increases productivity.
Web-based applications can automatically update users about recent changes to the system and its data.
- Unparalleled visibility and oversight.
Automatic record keeping of the critical data elements created in each step of the workflow in every business unit around the world which is required to meet the reasonable care standards of modernized custom agencies.
Selecting a system that meets these requirements will dramatically improve a company’s enterprise-wide data management efficiency, help achieve 10+2 compliance and avoid financial penalties. In fact, 10+2 can be a hidden opportunity for strategical companies. Optimizing inefficient data management processes can improve supply chain performance and deliver a positive return on investment. For example, improving supply chain speed by just one day would be worth $800,000 per year to a company importing $100 million annually.
I strongly advise executives of companies importing into the U.S. to act with urgency. According to estimates by the CBP, “it takes sixty to ninety days to ramp up and be filing correctly”. Best-in-class companies are funding cross-functional teams to develop a strategic enterprise-wide solution, using 10+2 as a catalyst to optimize currently inefficient business processes, and creating competitive advantage for their company at the same time.