Category Archives: Global Trade

the doctor’s Guest Posts: The Year in Review II

Since last year’s summary of my guest post contributions (in June), I’ve blogged a number of guest posts over on eSourcing Forum [WayBackMachine] as well as authored or co-authored a significant number of wiki-papers over on the eSourcing Wiki. I’ve also contributed articles to the EyeForProcurement monthly newsletter as well as Efficient Purchasing.

e-Sourcing Forum

December 2007 to June 2008

Regulations Unlimited
Strategies for Supply Chain Finance
Customs & Security
The Seven Scruples of a Sourcing Sensei
Discovering Your Leverage Points
Seven Risk Mitigation Strategies You Can Do With Smart Optimization
If it ain’t Multi-Tenant, then it ain’t got SaaS (co-authored with David Bush)
Not All Free Trade is Equal
Best Practice Freight Bidding
CSI: Corporate Social Irresponsibility
Critical Skills of Supply Chain Leaders
Devising an RFP That Works
Core Capabilities of Supplier Enablement
Is it Center of Excellence or MindSet of Excellence
Successful GPOs Are About Value, Not Cost Savings
Don’t Swing the Wrecking Ball Unless You’re Prepared for the Falling Debris
Can you really afford to leave Millions on the table?
Are You Managing Your Talent Chain?

June 2007 to December 2007

Supplier Enablement
Confucious eSourcing Project Management Tips
Brunswick Corporation’s e-Auction Best Practices
Collaborative Negotiation
Seven Tips for SaaS Selection
Incentives Motivate
Optimal E-Tool Selection
Five Ways to Take Your Sourcing to the Next Level
A Global Trade Primer
Applications of Spend Analysis
The Benefits of Purchasing Consortiums
Optimization is the Future And The Future is Now
Some Low Cost Country Sourcing Insights
Twelve Steps to Purchasing Program Predominance
Ten Tips for Talent Retention
A Case for E-Sourcing and E-Procurement Integration
Nine Steps to e-Procurement Success
Key Challenges of Tomorrow, Part II
Key Challenges of Tomorrow, Part III
Ten Common Negotiating Mistakes

Articles

Why aren’t you optimizing?, Efficient Purchasing Issue 5, Fall 2007

Why Aren’t You Optimizing Your Sourcing Decisions? EyeForProcurement August 2007 Newsletter

10+2 Readiness … Beware! It’s strategic, not tactical …

Today’s guest post is from Matt Gersper of Global Data Mining,LLC (acquired by CUSTOMS Info, acquired by Descartes).

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, US 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 towards 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 US 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 twenty-four hours prior to loading a U.S. bound vessel. The filing must contain 10 data elements including 3 new data elements not currently required for US bound imports. The existing 7 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.

These are the data elements that will be required, their typical source and responsible parties:

Data Element Source Responsible Party
Manufacturer name and address Procurement/Sourcing Importer
Seller name and address (New) Procurement/Sourcing Importer
Buyer name and address Procurement/Sourcing Importer
Ship to name and address Procurement/Sourcing Importer
Container stuffing location (New) Supplier/Forwarder Supplier/Forwarder
Consolidator (stuffer) name and address (New) Supplier/Forwarder Supplier/Forwarder
Importer of record number Trade Compliance/ Import Importer
Consignee number(s) Trade Compliance/ Import Importer
Country of origin Trade Compliance/ Import Importer
Commodity HTSUS number Trade Compliance/ Import Importer / Broker

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 ERP system defines “Manufacturer” or “Supplier” as the party to which the company makes invoice payments. If a supplier has ten 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 requires a much closer relationship with fewer forwarders to assure 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 US 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 twenty-four hours prior to loading the U.S. bound vessel.

Each of these examples requires re-thinking and re-engineering current business processes. The scope of these projects extends beyond the responsibility and authority of the trade compliance department as cross-functional participation is required of the procurement, logistics and information technology departments at a minimum. Some projects will also involve third parties. Executive leadership should take notice. Lack of understanding and funding today may lead to dire consequences tomorrow.

The proposed 10+2 regulations state, “If the principal fails to comply with the proposed Importer Security Filing requirements, the principal and surety (jointly and severally) would pay liquidated damages equal to the value of the merchandise involved in the default”. If you have a $250,000 shipment that is in violation of the new regulations, you could be fined $250,000. Furthermore, the prospect of “scrambling” for data at the last minute will slow your supply chain, squander already limited resources, and erode profits from your bottom line.

However, 10+2 can be a hidden opportunity for strategic thinking companies. Optimizing currently inefficient business processes to meet the 10+2 requirements in the most direct, effective manner possible can improve supply chain performance, and potentially deliver a positive return on investment.

More effective management and visibility of additional trade data can:

  1. Improve supply chain planning
  2. Improve supply chain speed
  3. Reduce inventory requirements
  4. Improve visibility and controls of international transactions
  5. Create competitive advantage

One supply chain study has estimated the cost of each additional day ëin transit’ is equal to Ω of one percent of the value of goods. Improving supply chain speed by just one day would be worth $500,000 per year for a company importing $100 million annually.

I strongly advise executives of companies importing into the US to study the impact the newly released Importer Security Filing Proposal may bring to their companies. 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 processes, and creating competitive advantage in the process. Once you know the terrain, and have a good map of the road, you too can be traveling safely and efficiently down the new 10+2 highway.

Thanks, Matt!

Matt can be reached at mattgersper <at> gdmllc <dot> com

10 + 2 = 690,000,000

CBP. ACE. C-TPAT. SAFE Port Act. You’d think importers already had enough documentation and security initiatives. Apparently not. The U.S. Government recently announced the “Secure Freight Initiative” in an effort designed to help reduce the risk of terrorism by leveraging trade data, trade partnerships, host country governments and the latest technology to validate the security of goods in maritime shipping containers. Part of this initiative contains a more detailed Security Filing that is being dubbed the “10+2” because it requires 10 data elements from the importer and 2 data elements from the carrier that must be electronically filed 24 hours prior to loading cargo onto a shipping vessel ultimately bound for the US.

The goal may be to:

  • target high-risk cargo through the identification of actual cargo movements,
  • improve the accuracy of cargo descriptions, and
  • speed lawful international trade by recognizing low-risk shipments earlier in the supply chain

… but all it’s likely to do is increase trade costs even more. According to a recent Supply & Demand Chain Executive titled “102 – Whats a US Importer To Do?” article, it’s estimated that this new 10+2 program will cost importers $390M to $690M annually due to filing fees levied by the government and surcharges levied by cargo agents for generating the required information.

And, let’s face it – it’s not going to negate the risks it is intended to negate. All it is doing is letting a potential terrorist (who cracks the system) know well in advance which shipments are likely to be identified as “low risk”, and, thus, which shipments provide the greatest opportunity for smuggling his weapons. Furthermore, pre-filing data elements, even if it includes route information, doesn’t necessarily identify high risk shipments – all you can deduce is if a vessel stuck to plan, and you can only deduce that if other global ports are willing to cooperate in your initiative and indicate whether or not a vessel arrived roughly on schedule. In short, the only goal that will be realized is improved accuracy in cargo description – which is valuable, but is a slightly better description worth 690M (or more)?

Considering that most of the data elements are already being provided to customs for clearance and entry via the CBP 7501, why is a whole new initiative needed? Can’t the current programs simply be improved to capture the new data elements and allow earlier submission of the data? It seems to me that this would be a lot less costly to all parties involved for the same net effect, and make a lot more sense. Any trade pros care to chime in?

Blame Always Rests With The Importer of Record

Today’s guest post is from Jim Dickeson, a specialist in import/export compliance and a licensed customs broker from “Import Export Geeks”. The post is based on an article that originally ran in the Supply Chain Management Review (EH Publishing) on March 1, 2002.

The five myths harbored by US importers of record that the article highlighted were as follows:

  • Our risk exposure is limited to the Customs duties. An importer’s financial exposure is equal to the value of the imported goods, plus duty! U.S. Customs includes the value of the imported merchandise when determining liability and can assess penalties based on the liability.
  • Customs released our shipment, so we’re out of the woods. The statute of limitations is five years after the material misstatement or omission was made to Customs and the liability on an import continues for five years beyond actual release of the shipment.
  • The seller prepared the invoice, so mistakes are not our fault. The importer is responsible for what is reported on the Customs entry regardless of who prepared the invoice.
  • Our customs broker does all the work, so if there’s a problem, he will fix it. Even if you use a broker, you’re still fully accountable.
  • Our customs broker keeps all entry records, so we don’t need to. Importers are required to keep a copy of all correspondence related to import transactions for at least five years.

When you consider that average error rates in global trade processes approach 10% to 20%, that the effective control of global trade processes is often 100 to 200 times worse than accounts payable in an average company, and that Customs tends to reclaim $7 for every $1 that they spend on an audit, it’s critical that you banish the import (and corresponding export) myths today.

Thanks, Jim!

To All The Whiners …

For those of you who haven’t noticed, Jason Busch over on Spend Matters has found a new cause – Anti-Dumping Fever (because “Dumping is Code for We Suck, Help Us”. (Much better than the China Fever he had last summer and fall.) And I have to agree with him this time … but what’s really peaked my attention is how fast the “no-trade” protectionists who want to transform America into the Soviet Union or China of times past when the iron and red curtains were drawn tightly shut have jumped on him like a hoard of hungry jackals on a wounded rabbit.

Take yesterday’s comment from an anonymous poster offering one opinion:

You offer up an interesting argument but it is only one side of the story. What about the jobs that Leggett and Platt provides to its workers? Will they be sent to China? Shouldn’t US workers have a right to a job in global economy. It is not their fault that their employer has made business mistakes. And what happens when there are no inner spring manufacturers left in the US? What will we sleep on? Trade is a tricky subject with multiple perspectives.

Wow! What an argument! Maybe the government should step up every time management in a company screws up and “protect the jobs of the workers”! Can’t produce parts cheap enough? No problem, anti-dumping. Granted mortgages you never should have granted in the first-place? No problem, bail-out. Stupidly hired more workers than you can afford? No problem, tax-break.

While we’re at it, why not start “socializing” all of the businesses! The government can be a part owner in everything. That way, at the first sign of trouble, it can start creating and enforcing new anti-dumping and anti-free trade laws instead of waiting until things get too bad. That way, no jobs get lost and no massive bail outs are needed.

Aw, heck! Why stop there? Why not repeal all the free trade acts introduced by past administrations – you know, the ones that catapulted America to times of unmatched economic glory and solidified its place as the leader of the free world. After all, in a free market, there are always losers as well as winners, and the losers will have to lay people off … and even though many of them will be instantly snatched up by the winners, there’s always a few that might be out of work for a while – and we all know that it’s the good of the few, or the one, that matters, and not the good of the many – so let’s make sure their jobs are protected for life! That way, even the lazy and incompetent, a small minority but a minority nonetheless, will never have to worry about their jobs again!

And yes, I’m being very sarcastic. I don’t know how else to describe how backward-thinking or narrow-minded these individuals are. If they have their way, America would be the next socialist/communist regime – and one only has to look at Venezuela and Zimbabwe for some recent examples of how devastating that can be … and for those with longer term memories, the former Soviet Union or China before they started opening the iron and red curtains. Where people stood in lines for days just to get basic food and household items because the economies were in a constant state of collapse.

And it’s not like the US economy isn’t in a bad enough state as it is. The dollar is already worth less than its northern neighbor on some days and is now worth roughly half of a British pound. Closing the borders and finding new and creative ways to block free trade is only going to make things worse.

So what if some jobs go away? In a global economy, new jobs are also created every day. And for first world leaders, these are usually better jobs. If you’re a qualified engineer … you’re in demand. No more inner-springs? Okay. Make springs for automotive assemblies. Those get outsourced too? No problem – design springs for next generation automobiles. Remember, outsourcing intellectual tasks is always exponentially harder than outsourcing grunt labor. And leadership is one thing that just can’t be outsourced.

Furthermore, isn’t the US supposed to be a leader in education and accessibility thereof? Can you not only retrain for another job but also retrain to be a world-class designer and leader versus just a rank-and-file doer and follower? Then, not only will you always have a job in the global economy (though not necessarily the same one you have tomorrow that you have today – and that’s the point!), but you will be a leader in the global economy – and possibly one that manages R&D teams around the world.

So what do you want? A continued rise to glory? Or do you want to oppress the country into a state that would make even the dark ages of olden times look good? It’s your choice, and I hope the majority of you, especially at the polls in November, choose wisely.

And to the whiner’s, I dedicate this poem:

To the whiners on Spend Matters
Who moan about free trade spatters
I wish they’d all stay home
I dedicate this poem
To the whiners on Spend Matters

To the whiners who always moan
So much that they would fill a tome
On issues big and small
Their moans don’t enthrall
Oh why should we throw them a bone

The winds of change are always blowing
And every time you try to stay
The winds of change continue blowing
And they’ll just carry you away

To the whiners so full of strife
Go suck it in, it’s free trade life
We don’t live in a dome
I dedicate this poem
To the whiners so full of strife

To the whiners so pitiful
Who will cry you a bucketful
You’ll never get my heart
Even though you are a part
Of the populous resentful

The winds of change are always blowing
And every time you try to stay
The winds of change continue blowing
And they’ll just carry you away

To the whiners against free trade
Who always belch such long tirades
If you had just stayed home
I couldn’t dedicate this poem
To the whiners against free trade