Vincent's Customs Compliance Blog Vincent's Customs Compliance Blog13 Novemeber 2008
A few nortes for tomorrow's AFI Town meeting regarding 10 + 2
If your perspective is negative, you will add costs
If you are open minded about changing your process you may get through this with lower costs
If your attitude is to just let the broker take care of it - you are adding costs.
Change your process to be responsive not reactive.
Become a team with your broker by developing some expertise in the entry process to lighten the load. This is a good thing since ultimately as an importer you are liable to customs, not your broker, for incorrect entries.
You have to know the people in production, shipping and accounting from personal visits and email communication.
We act as agents on some transactions and we have the relationaship and process to do for our importing customers what we do for ourselves.
Traditional receipt of a packet of documents has to change
In the age of email there is no need to consolidate. Get the packing report when the load is lined up on the loading dock ready to be packed in the container. If a loading accident oocurs a new list is issued and forwarded. I don't like invoices made up before shipment. They may not reflect reality.
We ask for more documents than traditionally provided becasue they are useful and easy for the packer to forward as scanned documents.
Has other names such as work order or cargo order
This is where you have to work with your broker
Years ago Gerry Horn of STR reviewed our imports and determined that we were the importer of record and that our customers were the final consignee. This was nt an intuitive determination to make. Have you made it with your import counsel?
Buying agents may volunteer to do the filing for your company overseas, but you have to trust them with the above information. I wouldn't.
Pre declaring is what we call our process
30 October 2008
Our preliminary observation on the CBP 10 + 2 test that we are participating in is the classic chicken and egg story. Which came first? Our customs house broker informs us that there is no software yet available that automates the security filing through ABI with CBP. The customs house software developers are reluctant to go forward until CBP really nails down the specs. Our test filings are being done manually. Possibly manual entries are a good thing as it gives our broker a clear idea of filing procedures that will help in the automated filing development.26 January 2008 needs repeating
Attached is our Entry Summary Sheet that we now present to our broker and which is our best guess on how to comply with 10 + 2. First, we are expecting that the entry if made before the cargo leaves the foreign port will comply by making the 10 + 2 Declaration a subset of the entry summary. With that in mind we added fields to the entry summary to differentiate the seller, manufacturer and consolidator. Entry for our account 20349 uses all three so it serves as a good example. All the information is actual in this summary, only the tax ID numbers have been obscured.
Let's start with us, the importer of record. Note that we included a field for our GLN number. It is our hope that in the future CBP start codifying according GS1 standards. This is the standard used by many companies through out the world to communicate between themselves. Regular importers could publish their codes to CBP's database and thus give clearer, specific and timely data to identify the Importer of Record, Final Consignee, Seller, Manufacturer and Consolidator. This database would be kept up to date by the importer so that contacts, current addresses and telephone numbers could be at CBP's fingertips if that is what needed to hunt down a security issue. The importer number based on a company's IRS number is a pretty poor way to find an individual knowledgeable about the importation so that a question from CBP could be fielded. I know that this level of communication between a C-TPAT importer and CBP is not practiced today, but it's something to work towards in the future. Everyone speaking the same language, much like what we are doing in the commerce today with GLN's is a start.
GLN's for the other entities, Final Consignee, Seller, Manufacturer and Consolidator would bring a huge advance in CBP's knowledge of the players in this process. The Manufacturer's ID is a joke. Different brokers code the same Manufacturer differently. That's bad enough but the other overseas players have no identifying codes. Instead of the current cockeyed Manufacturer's ID regulation, let's code using GLN's. Note that on our example the GLN's are 0's since we are not coding them until we have a place to publish to. Ironically the same entities could have various GLN's issued by various importers who publish to the CBP's database. As long as the importer keeps their database current CBP will be up to date. On the other hand if an importer can not publish GLN's, then they can not be CTPAT qualified and their imports fall into the same blind abyss as the Pakistani Rug importer.
As a final note on GS1, this standard information does not reveal more proprietary information than what a manufactuer selling to Walmart would reveal. Walmart would like to have an accurate description of the product being sold down to the exact dimension and weight. This information is useful to Walmart so they can determine what shelves for example the product could be displayed on. GLN's are a subset of GS1 standards describing locations very specifically. Walmart runs a very dynamic logistics chain (Note this is not from my actual experience, just what I read) where suppliers need to contact for delivery appointments and Walmart could contact to divert shipments at the last moment. I don't have a problem including CBP in that sort of dynamic loop, and I am a card carrying Libertarian.
Note that we use Lo-codes in the form. Location codes are kept by the U. N. and more accurately place the origin (Consolidator, or Manufacturer if there is no Consolidator, or Seller if there is no other Manufacturer or Consolidator) as ARBUE, which is the code for Buenos Aires, Argentina. The final delivery is to USHYE which is the lo-code for Hyde Park Massachusetts in the country of the United States. Aren't these lo-codes a little more specific and universal than MA for the State of Massachusetts? Also wouldn't a Lo-code be more universally understood as a port of lading and unlading than CBP's made up list of port codes that someone in Asia or Europe may find arcane? Let's all speak the same language when it comes to locations, Lo-codes kept by the U. N. no less.
2 October 2008
With the stock market in turmoil. I need a little bit of a pep talk, and I found it at Jonathan Schwartz's blog at Sun.
"You're not going to hear from any of our customers, "let's stop buying technology and hire more people to do the work." They're going to default to the opposite - automating work, and finding answers and opportunities with technology, not headcount. And in that process lies an opportunity for Sun - to engage with customers in driving down cost, driving up utilization, and driving the changes that yield immediate and long term benefit. The right question for every customer you meet is - "how can I help?" I assure you, they'll have ideas for us. And we have no shortage of ideas for them. Personally, I'm reaching out to customers and partners just to check in and offer help - I'd recommend you do the same."
From our perspective 10 + 2 will kill anyone who intends to hire more people to solve the problem. Enormous process changes are required in order to comply with the regulation completely and economically. Today, because we are in a test phase with CBP, we came up with a solution with our most intransigent ocean carrier, I'll let you guess who that is, so that they are now on the top! Our solution is that we, the importer and consignee, fill out the bill of lading! We issue ourselves the SEAWAY BILL. It's so elegant I am flabbergasted. We are going to turn the world on it's head.
29 September 2008
Unbelievable, thank you Ray at Peter Friedman's office for finding Magaret Rutledge, an outside contractor for CBP, looking for recruits for the 10 + 2 test. Believe me, it was not easy to find out about this test. I plan to keep the blog up to date on this new development.
22 September 2008
JOC's Peter Tirschwell hits the nail on the head with his "Industry can't have it both ways" editorial. 10 + 2 is going to happen.
We fall firmly on the side of the pilot project. We have been working hard recently teaching carriers in our trade lane what we would require of them if 10 + 2 were to go into effect. Principally we need bookings that show what the Bill of lading number would be. The best carriers already do this. The worst one informs us that they need a year to change their process to make such a thing possible, and only if Headquarters were to mandate it. Another point is that some trade lanes will work only if the right carrier offers service from there. We could envision certified depots in some trade lanes that would consolidate cargo and bring it up to CTPAT and 10 + 2 standards in some third world lanes. None of this can be figured out unless a good pilot program is set up using a mix of large and small, that would be us, importers bringing packaged goods from Europe all the way down to nuts in bags from Mozambique. I'm not sure that a data element is a familiar term in Mozambique but I know who to talk to in our food import association, AFI, to work it out.
28 July 2008
JOC's report this week that FDA will test third party certification of aquaculture imports is fantastic news. It represents a huge and positive change that will truly promote the public safety. I can't wait to hear more about this.
22 July 2008
Matt Gersper's declaration that 10+2 is Strategic not Tactical hits our point that this change required by CBP will force importers to work on solutions that integrate all the players. OTCS is ready now to do what is required and to do it cost effectively with the highest degree of compliance and security possible. Our systems pre-declare an entry and audit the transaction while it is in progress. We don't do post entry audits because we know they are perfect, think how much that saves us.
As a reminder of what I just said above regarding post entry audits read Womack, Jones and Roos' book "The Machine that Changed the World: The story of Lean Production." In it they give the example of how Toyota will stop the production line to make sure each car is built right. Detroit on the other was (is ?) more likely to fill a yard with a hundred thousand defective cars before recognizing a defect. That is a huge cost. How about a hundred thousand misclassified entries?
6 July 2008
"The Struggles of Detroit Ensnares its Workers" the July 3rd New York Times article by Bill Vlasic and Nick Bunkley illustrates the U. S. auto companies' lack of flexibility as the huge disadvantage they face now that the market has shifted so dramatically to small economical vehicles. Detroit's typical process requires big investments in single purpose machinery that makes large batches of individual components needed to make one sort of truck or automobile. This problem was identified by Mssrs. Womack, Jones and Roos, authors of the book "The Machine that Changed the World: The story of Lean Production" about twenty years ago. The Lean production techniques were developed by the Japanese auto industry and Honda was used as the counter example in the Times article. While U.S. Companies have to lay off workers as they spend months to convert, Honda has trained flexible people and systems to make whatever vehicle is in demand. Honda's sales rose in June while others had drops of twenty and thirty percent.
There is another article in today's Times regarding the missed opportunities for controlling gas consumption that were thwarted by Detroit and their friends. Never the less if Detroit had been practising lean techniques their workers and stockholders would be substantially better off. I mention this because I am a big fan of Womack, Jones and Roos and their machine. Making a cross border transaction is very much like constructing a vehicle. Many disparate resources have to be molded into one perfect entry. The process of pre declaring that we developed from their ideas so perfectly melds with the upcoming 10 + 2 rule that it may give us the Honda like advantage in our future transactions. Management that wants to survive and thrive in what appears to be our generation's financial and economic crisis will need the intelligence and courage to develop and adopt radically new processes. Answers such as, "That's the way we have always done it," just won't do.
3 June 2008
Philip Spayd's article "A Change in the Weather" in this week's JOC shows the importance of charting a clear long term course that cuts through the waves of government vacilation. Our mantra is to predeclare our shipments before they leave the foreign port for best compliance, security and economy. Phil mentions that in April its appears that CBP is heading back towards a compliance bias and apparently leaving security on the back burner. This observation has no effect on us at all since compliance is what we intend to do for best economy of transaction.
3 May 2008
Peter Tirschwell is right that "10+2 Should be a Go" in this past week's JOC, but as a slow voluntary development using ACE as the IT structure and therefore CTPAT membership as the minimum requirement for volutneering. It has always been our position that pre-declaring cargo before a shipment leaves the foreign port is a cost saving procedure! I am sure we are not the only ones who think in this manner. CBP should have plenty of volunteers who understand the cost savings and presently use ACE. After a few years of development more will join until a point is reached that the rest will have to participate by law. At that point the IT will be ready and the experience of what really is a new paradigm in cross border trade will have been assimilated by others.
The paradigm I mention is transparency. Anyone depending on secrecy to obscure the true source or destination of a trade does not get any sympathy from me. The next trade they unwittingly make may be with Osama Bin Ladin. I don't feel like protecting someone's right to be stupid.
24 April 2008
Congressman John Dingell's latest version summarized of his Food Safety Legislation is being circulated. It appears that the line item entry fee scheme is out and that extra funding for the FDA will be through licensing and registration fees for overseas producers and domestic importers.
15 April 2008
It appears that GTX is being set aside according to this week's JOC. I have been a big supporter of Custom's GTX initiative, but after attending an ACE session at the ICPA convention in San Antonio last month I have thought better of letting ACE slowly develop into GTX. I also found that CBP's current system is pretty creaky with them still employing the last of the COBOL programmers out there. It does not appear that 10 + 2 can be managed by CBP until the they augment ACE for that as well. From our experience a long unhurried development process is probably best. Lets keep on developing ACE.7 April 2008
The April edition of Scientific American has an article "Detecting Nuclear Smuggling" by Thomas Cochran and Mathew McKinzie that pretty well dams the idea of radiation monitors protecting our borders. Before DHS goes hog wild purchasing systems that are not effective I suggest that the General Accounting Office (GAO) do a war game routine similar to what the ABC news crews did in 2002. While Mssrs Cochran and McKinzie do not state it, I believe from their article that if GAO notified CBP that one container on a certain vessel contained sufficient low grade material to do catastrophic harm, that there is a good chance that it could not be found by CBP. If GAO advised that the material was on board one container among many vessels entering in one week into a major port, that the chance of its detection would be remote. In both cases I am assuming the paperwork for the loaded container would make it highly likely to be targeted for a thorough inspection, yet CBP would still be unable to isolate the load in a timely manner using outside detectors. Nor would the outside detectors indicate a highly probable container for an intensive examination.John Clancy could probably write a terrific thriller about a war game gone bad where the bad guys take the container from GAO once its entered and cleared. Thankfully the game can be played with spent fuel that poses no risk of a catastrophe. The article's principal point is that the money for detectors would be better spent eliminating and securing the sources of the lowgrade material mentioned in the article.
13 March 2008
Open letter to Christopher Shays, Congressman 4th District of Connecticut
Dear Congressman Shays:
As a member of the Committee on Homeland Security, I thought it would be use full to hear our opinion on Customs & Border Protection (CBP) efforts to comply with Congress's Safe Port Act of 2006 (The Security and Accountability For Every Port Act of 2006 (or SAFE Port Act, Pub.L. 109-347[1])) . CBP's program is presently called 10 + 2 referring to ten data elements to be provided by importers and two data elements to be provided by the transport companies. As a matter of record we applaud CBP's entry into the modern world and have no problem in working toward developing a process to make the Safe Port Act a reality. In fact we relish the idea of developing a cadre of professional importers who do this right and make it happen. Our vision is that of something similar to air traffic control being CBP in continual communication with the major importers (airlines) flying under IFR (Instrument) rules while the many outlier importers are flying VFR (Visual).
10 + 2 is a huge shift in process for both CBP and the import community. Knowing that, CBP reached out to the private sector and created COAC (An advisory committee established in accordance with the provisions of the Federal Advisory Committee Act. The committee provides advice to the Commissioner of CBP, the Secretary of DHS and Secretary of the Treasury on all matters involving the commercial operations of CBP and related functions within DHS or Treasury. It also plays an important role in not only improving supply chain security but also ensuring that trade is not disrupted in the process. COAC members include representatives from manufacturing, retailing and the high technology sector as well as transportation and logistics.) To help guide them through this immense task that requires close coordination between both communities. I am distressed to recently learn that CBP has formed this committee only to ignore it completely.
Presently 10 + 2 rules are under comment at http://www.regulations. /fdmspublic/component/main?main=DocketDetail&d=USCBP-2007-0077. We found it unbelievable that COAC had not been consulted for the development of this regulation and that it found itself as an outsider making comments on the rule. The entry we refer to in particular in the comments is USCBP-2007-0077-0046.1, which was developed by COAC. We believe that rolling out 10 + 2 on a trial basis is an absolute necessity. We volunteer our company, a company referred to by CBP as a SME, small to medium size entity. We are ready, unlike many others and certainly no other SME, to help develop the process with CBP, but we recognize this program will not turn on the flip of a switch.
You may recall in your district that Oxford Health almost went out of business because they had installed a new accounting system without really having tested it. What CBP proposes is a similar change and implementation, except the order of magnitude is many times larger. The regulation has been put forth without any clear definition of the data elements required, in other words we find ourselves with a regulation where we have set aside funds to convert our IT systems, but we can not spend a nickel for the conversion until the elements are described in a very technical computerese type language understood by our people. Computers do not understand a tower of Babel!
I believe that CBP is pushing this through because the will of Congress is that it be implemented as soon as possible. On the other hand the wrath of Congress will be fierce if this ends up as a train wreck discrediting the whole Safe Port Act and the 10 + 2 Rule.11 March 2008
I think this COAC response is so devastating to CBP and it's unilateral approach to 10 + 2 that I am just plain pissed off. Why create a private sector advisory board so that it can be ignored. Ignored completely!!!!!.
10 March 2008
I am at the ICPA (International Compliance Professionals Association) annual convention in rainy downtown San Antonio Texas and I don't believe the change in opinion I am having about 10 + 2. Bruce Leeds, the Chair of COAC and a Boeing Executive, did not want to say the the words "train wreck" at his presentation, but he said it at least twice. Regarding the COAC position, I had not realized it had not been submitted to Customs and that being the case I believe CBP is entering into this precipitously.
10 + 2 has the look of the disastrous FBI database of several years back that eventually was canceled for being a run away freight train. Whenever a complex process that depends heavily on IT is put into practice at the flip of a switch there is sure to be an ensuing crisis that will put into question the whole program. We believe in 10 + 2 and we are prepared for it with just a tweaking of a few elements in our database system to comply perfectly. We would like to volunteer to be guinea pigs for an early version as suggested by COAC. For CBP's benefit we are a SME (Small to Medium size Entity?) that Customs predicts will have problems with 10 + 2. If we do well, than CBP can claim that other SME's can do it thereby clearing up some objections. It will be unfair, but true.
I remember Oxford Health almost going out of business when switching from one database program to another without giving the new one a year at least of running in tandem with the old to see that the details were firmly transferred from one system to the other. Visualize it as a relay runner handing off the batan to the runner in front during which both runners have a grip on it. We see the 7501 entry form as the old system and that complying with 10 + 2 would come from making an early entry using a modified version to encompass the extra data elements much like we suggested in the January entry with a linked .pdf of what we presently submit to to our Customs broker. I believe the community is going to have enough of a problem integrating our simple suggestions that it should be run in tandem to work out the bugs.
CBP may invoke Congress's will when declaring it has to act immediately, but if they create a fiasco they may invoke it's wrath. Be careful CBP, we support this effort, but you created COAC to guide you through this difficult process. If you choose not allow their cooperative and timely suggestions to flow through, then be prepared to suffer the consequences. Congress won't like a smoking hole in the ground.
25 February 2008
I recently commented on the 10+2 rule. Peter Tirschwell's JOC article "No reason not to do it" notes that the Retail Industry Leaders Asscociation plans to comment with the attitude of not opposing as declared by Al Thompson, Vice President for Global supply chain policy.
Mr. Thompson's association is the perfect one to direct CBP towards being an integral part of the communication between vendors and buyers in the market place. Global supply chain policy has to be directed to getting all the players to speak the same language. Why not include government entities, such as CBP? I consider changes in a process to adapt a universal language between traders as an investment not a cost, much like an individual wanting to participate in world trade deciding to invest in learnig English. It's not a secret that once again I want it said loud and clear,
"GS1"
15 February 2008
Attached is a Comment report on 10 + 2 that has that "its impossible flavor" referred to previously in this journal. The best point is that the filing should be harmonized with World Customs Organization's framework of standards to Secure and Facilitate Global Trade. My suggestion to use the U N Lo-codes for location identification in the entry summary is a good example of that. There is no need for CBP to maintain a list of port codes for world locations when lo-codes would be understood throughout the world and be just as effective for CBP's purposes.
5 february 2008
R. G. Edmonson's article "Not up to snuff" in this week's JOC makes it clear that I am a voice in the wilderness asking CBP to look into GS1's data structure. Too bad. With regard to the GLN number's referred to in our mock entry summary attached in the previous message on this blog, I am not sure it is clear that if the Global Location Number (GLN) is used that the rest of the field could be blank, in other words no name, address et cetera. Since the GLN would be published only to CBP's database the other players in the field do not have to know the specific details of the address, such as the contact, their cell phone number et cetera.. The result would be transparency for CBP and obscurity for those who think they need to keep specific details such as these from their trading partners. I feel like the AFLAC Duck!
Once again COAC and CBP, but this time with real feeling:
"GS1"
26 January 2008
Attached is our Entry Summary Sheet that we now present to our broker and which is our best guess on how to comply with 10 + 2. First, we are expecting that the entry if made before the cargo leaves the foreign port will comply by making the 10 + 2 Declaration a subset of the entry summary. With that in mind we added fields to the entry summary to differentiate the seller, manufacturer and consolidator. Entry for our account 20349 uses all three so it serves as a good example. All the information is actual in this summary, only the tax ID numbers have been obscured.
Let's start with us, the importer of record. Note that we included a field for our GLN number. It is our hope that in the future CBP start codifying according GS1 standards. This is the standard used by many companies through out the world to communicate between themselves. Regular importers could publish their codes to CBP's database and thus give clearer, specific and timely data to identify the Importer of Record, Final Consignee, Seller, Manufacturer and Consolidator. This database would be kept up to date by the importer so that contacts, current addresses and telephone numbers could be at CBP's fingertips if that is what needed to hunt down a security issue. The importer number based on a company's IRS number is a pretty poor way to find an individual knowledgeable about the importation so that a question from CBP could be fielded. I know that this level of communication between a C-TPAT importer and CBP is not practiced today, but it's something to work towards in the future. Everyone speaking the same language, much like what we are doing in the commerce today with GLN's is a start.
GLN's for the other entities, Final Consignee, Seller, Manufacturer and Consolidator would bring a huge advance in CBP's knowledge of the players in this process. The Manufacturer's ID is a joke. Different brokers code the same Manufacturer differently. That's bad enough but the other overseas players have no identifying codes. Instead of the current cockeyed Manufacturer's ID regulation, let's code using GLN's. Note that on our example the GLN's are 0's since we are not coding them until we have a place to publish to. Ironically the same entities could have various GLN's issued by various importers who publish to the CBP's database. As long as the importer keeps their database current CBP will be up to date. On the other hand if an importer can not publish GLN's, then they can not be CTPAT qualified and their imports fall into the same blind abyss as the Pakistani Rug importer.
As a final note on GS1, this standard information does not reveal more proprietary information than what a manufactuer selling to Walmart would reveal. Walmart would like to have an accurate description of the product being sold down to the exact dimension and weight. This information is useful to Walmart so they can determine what shelves for example the product could be displayed on. GLN's are a subset of GS1 standards describing locations very specifically. Walmart runs a very dynamic logistics chain (Note this is not from my actual experience, just what I read) where suppliers need to contact for delivery appointments and Walmart could contact to divert shipments at the last moment. I don't have a problem including CBP in that sort of dynamic loop, and I am a card carrying Libertarian.
Note that we use Lo-codes in the form. Location codes are kept by the U. N. and more accurately place the origin (Consolidator, or Manufacturer if there is no Consolidator, or Seller if there is no other Manufacturer or Consolidator) as ARBUE, which is the code for Buenos Aires, Argentina. The final delivery is to USHYE which is the lo-code for Hyde Park Massachusetts in the country of the United States. Aren't these lo-codes a little more specific and universal than MA for the State of Massachusetts? Also wouldn't a Lo-code be more universally understood as a port of lading and unlading than CBP's made up list of port codes that someone in Asia or Europe may find arcane? Let's all speak the same language when it comes to locations, Lo-codes kept by the U. N. no less.
5 January 2008
Attached the Proposed 10+2 Rule just released this past week. I gave it a quick read and just can't get over the verbiage devoted to the cost analysis of the rule's implementation. Our perspective is to take on the rule and reduce costs by streamlining the import process. If you fight this, you are coming from the side wanting to add another buggy whip to make your cart go .
23 December 2007
I found the report made public in late November and to which I referred in my 4 December entry, it's "FDA Science and Mission at Risk" a report by the Sub Committee of Science and Technology.
Our food import business is regulated by the CFSAN section of the FDA and represents a small portion of FDA's responsibilities, but the report's criticisms hit squarely on our experience with the agency. I don't know how many times I have mentioned in this blog that FDA's IT is miserable. To the point that countless man hours are wasted on regularly forwarding identical information to clear product that was previously cleared. Their IT does not learn that yes, this Facility Registry Number combined with that product code generally result in a cleared entry. One egregious mistake in their system, is that it does not cross reference FCE number address with Facility Registration address when reviewing an entry. We know of a situation where an old facility was transferred to a new. The factory had a correct facility registration address but had not gotten around to getting a new FCE number and a process filing approved. Anyone at the FDA could tell you that a correct FCE and approved processes are considerably more important to the public safety.
A note to the New York Times. I read about the release of the report by reading the paper. Its disappointing to go to the online version and not find a link to the .pdf of the document being reported about. I finally found it using old time search engine, Altavista. So take that Google!
9 December 2007
Attached today's New York Times article listed under bright ideas, "The Team that put the Net in Orbit" by John Markoff. The article is about how "NSFnet remained a powerful example of how a handful of government bureaucrats in concert with an equally small number of scientists made a set of carefully considered federal policy decisions, in this case leading to the modern internet." My point is that the development of the CBP's super GRTX database could have the very same effect. Peter Tirschwell's complaint that GTX has no economic purpose seems trite when reading this article.4 December 2007
I am desperate to get a look at the report of the flaws of the Food and Drug Administration released last Friday. It's conclusions that the FDA is desperately short of money and poorly organized counterbalance each other nicely. Poor organization requires infinite amounts of money which then fuels even poorer organization and the need for more money. We are customers of FDA services on the food import side, and we can see how badly organized they are. It begs for a well organized rational (and not necessarily all that expensive) IT solution that ties, now get this Peter Tirschwell, into CBP's Proposed GTX super database !
3 December 2007
I think that Peter Tirschwell is on the wrong end of the GTX debate in his "A New Worry for the Trade Community" in this week's JOC. First it's not a new worry! Every time he mentions it's a problem, I disagree. Reviewing this blog shows its happened a few times this year. Second if CBP would study how Walmart does it then it could bring the ancient pieces of this global trade community into the 21st century. Getting us all to talk the same GTIN and GLN language because government requires it is the biggest economic benefit that the GTX system would bring. Peter, you are fighting for the ostriches right to keep their heads in the sand.
27 November 2007
Wired magazine's "What Went Wrong" article in its December 2007 issue is about the battlefield network developed by the military for more effective combat in Iraq and Afghanistan. While effective at the beginning against concentrated and well identified enemy combatants the network is not effective against insurgents. The reason? Not enough nodes.
CBP's super database and C-TPAT partners have to link and talk to each other. Each point of contact, node, has to be exercised. Wars games have to be played much like disaster relief is practiced in several states. Government and private companies have to learn how to communicate so that the many sensors of trade and private enterprise communicate to the center and alert it to danger much like the sensory system in living tissue. It's a truism in networks that the more nodes, the more powerful and resilient the network. Let's make it so!
20 November 2007
I am rewriting our corporate policy manual with the idea of incorporating many of the lean production ideas of Womack and Roos. For example:
2.1.1 Simplicity
"Since cross border transactions are our principal activity and one we are codifying in our OTCS program, we strive to think as a customs auditor. For example, value comes from arms length negotiations. We resist invitations to form partnerships with foreign entities, because the exercise to determine related parties transaction values is difficult, arcane and subject to interpretation. None of this additional work for determining value benefits our customers, so we avoid such entanglements."
This point is antithetical to conglomerators! If you have a vision of synergies when combining I'll give you back the hinderances that mash ups create. When I consider the legal and executive talent necessary to make a related party value determination in a consulting position, I will ask is this relationship necessary? Does it add value to the final customer that it exists?
2.1.2 Pre-declare
"We prefer to invest in actions to prepare and audit a shipment before and as it occurs, rather than test a percent of the transactions in a post audit. If all the issues before a shipment are known and simple to understand, then the company can proceed in a lawful manner. Compliance is a matter of fine-tuning as the import proceeds so that we achieve absolutely correct entries within the ten-day entry period. We do this to economize the import process and facilitate honest reporting."
Lean production techniques are all about making sure the individual parts are perfect. We like to think of an import process as an assembly. We continually test each part as we put together the transaction and the final result is perfect.
It is the last three words that catch an interesting characteristic, honesty. In production if you have built a 100,000 defective cars the only salvation for the company is to push the iron out making what ever claims necessary to do the job. It is not a very honest position for the company to take and moral within will suffer. The cynical view that action engenders in the company will take a long time heal, if ever. Naturally the customer base dwindles in such a case. Post entry audits unnecessarily test a company's honesty by letting so many defective assemblies reach entered status that economic considerations temper what was initially an honest predisposition.
12 November 2007
The Peru FTA passed in Congress last week, but I am very disappointed to see that our visit last May to New England's Congressional delegation did very little to convince legislators as to the widom of free trade. Peru is a tiny economy in comparison to ours. We have much more to benefit from free trade with Peru and yet the vote went very much along the party line as per the attached New England Peru FTA pdf.
22 October 2007
CBP Commissioner Michael Jackson's resignation will probably slow down the development of the CBP's super database. I call it that because it really has to be a complete enterprise wide application built upon ACE. I think the database's development is a good thing as long as it is designed to streamline the interface between the public and government by using data elements already used in commerce, such as GTIN, SSCC and GLN from GS1, location codes from the United Nations and finally Incoterms 2000.For example the entry summary should be redesigned to take into consideration the new 10 + 2 regulations by combining the two so that a shipment with certain key elements filled in can proceed to be exported and then other elements necessary to make a complete entry can arrive and fill out the electronic record. While this redesign is done, why not think globally? UN locodes for example could be used for the export and import port codes. Its useless for CBP to maintain its own codes for domestic and foreign ports when a global one already exists that would coordinate perfectly with customs in other countries.
Not knowing what Commissioner Jackson had in mind in the design of the database, I am not sure whether a delay is good or bad. I sure would like a peek.
7 October 2007
I just had another telephone conference call with my AFI brethren regarding Food Safety and imports. The issue is on the forefront of our association of food importers because of Congressman Dingell of Michigan and his recent bill to increase FDA funding with import user fees. The fee would come from a per entry line fee of $50. Another part of the bill would be to certify foreign manufacturers with the FDA. Our conference call was to see if we could pre-empt mandatory certification with a voluntary program which also seems to be part of the bill. Also we hope to direct increased funding through the general treasury and not through the institution of user fees.
The user fee debate I will leave to others who can make a more compelling cases against. Certificates, whether voluntary or mandatory, have been commented on in this blog for a long time now. My point of view is that a document that reflects an accomplishment versus a process is less desirable and effective in promoting the public good. Generally government require certificates of accomplishment and that those that reflect process are developed in the private sector. A current example is the Topps tainted meat and recall in today's headlines. Meat and poultry come under the USDA's supervision and this is true for imports and as well as domestic production. The USDA has been in China certifying meat and poultry production plants there for years now. It is very much a mandatory government based certification program envisioned by some in Congress as to what the FDA should do. Unfortunately for those proponents of such a program the USDA is presently looking less than stellar with the Topps' tainted meat problem. Same program overseas and domestically and yet we plan to lecture the world how to process food safely?
My point is that Congressman Dingell ought to understand that the Constitution of the United States is such a strong document because it describes a process instead trying to micromanage. I just finished reading a book by Michael Lerner called Dry Manhattan: Prohibition in New York City. One conclusion was that passing the 18th Amendment was similar to taking a sledge hammer to kill a flea. Laws that micromanage instead of letting local authority determine what is best tend to be the greatest failures. Congressman Dingell's bill should concentrate on increase funding to the FDA with the mandate that they promote research in detection of adulterated foods, develop a voluntary best practicing cadre of importers and reach out to develop global food safety standards. Telling the FDA how many labs are needed and what ports the inspections can be done in is not where he and his committee should mettle.
31 August 2007
You may think I am nuts, but I'm tired of the "Not in My Back Yard" syndrome. Our mayor just gave out a call to arms in our local paper to stop the FAA from shifting more flights over towards our community. Here is my response.
Let the planes fly over where the poor people live.
Why did Evonne Klein's, our First Selectman, call to arms against the FAA's plan to increase air traffic over our area make me want to paraphrase Leona Helmsley? Well, I routinely have been stuck in airliners on the tarmac waiting for air control to give our pilots a landing slot at JFK. There has certainly been enough news recently about the air traffic control system being stretched to its limits. And finally the popularity of private jet travel has added further congestion in the airways around the metropolitan area. A good percent of travelers in those problematical jets live right here in Darien. It's a bit hypocritical to ask the FAA to not pollute our sky with the noise we make because of the political influence that a less fortunate community may not have.
While I am at it, let me complain about Fairfield County and Connecticut's resistance to improvements in the infrastructure to deliver the energy we demand. A local underground power line has been killed, yet I see enormous houses with voracious appetites for electricity built around us. There is a proposal to put a liquidfied gas receiving facility at the mouth of the sound, which is in trouble. The underwater electric line between Connecticut and Long Island is in trouble as well. I think it perfectly reasonable that our less fortunate neighbors who have pipelines and power lines going through their neighborhoods dictate a diversion away from those who do not share the burden of distributing what we demand.
Just for the record I have no connection with the local utilities and airlines. Not even as an investor. If I did, I couldn't afford to live here. Nor have I ever traveled on a private jet, but I would like to.
28 August 2007
This past Monday Congressman Christopher Shays hosted a small breakfast gathering of CONECT and WESTCOM members at his club in Bridgeport Connecticut, which I attended with not more than a dozen others. It was a low key, informal and educational event for all, even the Congressman. Its refreshing how willing he is to exchange thoughts on various subjects and as I have blogged before the give and take at this meeting as well as the larger town meetings he conducts yearly to be a terrific exercise in democracy. I can't help repeating myself about this.
A topic that came up was that Custom's C-TPAT initiative is a program difficult to sell to upper management because the cost benefit does not seem to jibe. I found myself defending C-TPAT for an entirely new reason, the dissemination of best practices in cross border transactions. What set me on this course was that the Congressman had ask what local institutions of higher learning taught logistics and trade courses that prepared us for the work that many of us seemed to have accidently gotten into. The truth is that many us had no formal training, we pretty much learned on the job. One had been a customs inspector and flipped into the private sector by taking the customs broker's exam. That seemed to be the most thorough a training that one can get in this business, but very few of us have the opportunity to do it this way.
Our entry into CTPAT was cost free. Instead of hiring a consultant I took it on myself to study the application and think about the security and our method of operation. We were in so early, it was apparent that Customs was feeling its way around as well. We learned together. The validation process is an education for Customs where they get to see and experience the enviroment of our foreign supplier. Also our shipper got a first hand briefings on Customs security concerns. The way I see, it was a three way win win for us all, the importer, exporter and the referee (Government). With regard to costs, I can't identify any that is beyond the scope of tracking and protecting assets in a prudent manner. We did modify and further refine our process to accomodate CTPAT, but once they are assimilated as they have been it comes out cost free. By making us think hard about the process a case can made that CTPAT actually saves us money.
At the end of the meeting I thought I made a pretty good case to one of the members who asked me on the side, to go ahead and start the application process with CTPAT just for the educational experience alone.
23 August 2007
"GTX Concept moves forward" as reported by R. G Edmonson in this week's JOC indicates the trade community is cool to the idea of Custom's Global Trade Exchange. I am all for it, but only if our business process can use it and its global in scope so that foreign governments and commercial entities can work with it as well. The principal difficulty will be designing the structure of a database project with global scale, which is why I keep preaching GS1.
A thorough examination of GS1 coding of products, addresses and individual shipments give all the elements that a database requires. These same elements can be used in the private sector as well the public. Customs GTX could have there own private database and cross border operators (Importers as well as Exporters) will publish their product and addresses to CBP much like suppliers to Walmart do today. The database in this case can be solely CBP's. Actually I believe ACE would be the perfect repository.
The principle behind the universal structure of this plan is that foreign govermnets could us the same elements and develop identical databases of their own which would have cross border operators publishing to them. With this unifying process taking place GTX makes sense as everyone gets on board and makes GS1 coding part of their process. Ah, nirvana.
22 August 2007
On 24 September the Association of Food Industries will be having their Town Meeting in Washington DC. Attached AFI registration Information. It promises to be THE meeting if you are in food imports.
17 August 2007
Congressman Dingell of Michigan in reaction to the Chinese imports that have been generating headlines this year drafted a bill called the Food and Drug Import Safety Act of 2007. Attached it's draft summary.
I find the draft poposal curious in that the lawmakers in this instance seem to consider government agencies to be inept, if not worse. It appears that Congressman Dingell wants to micro manage the Food and Drug right down not letting it shut down any field office what so ever! Anyways I am attaching my response that the Association of Food Industries may be forwarding to his offices. My principal points are that there is a good body of law and regulation in place already and for efficiency, consideration should be given to outsourcing to other government agencies some of the remedies described in the bill.
14 August 2007
Peter Tirschwell's "An endless pursuit?" in this weeks JOC is too pessimistic! We have been able to deal with the 10+2 rule for several years now. We do it because it makes our entries efficient and compliant. We prefer to do the work ahead of time and not let the dirty laundry pile up. And yes, life is a continuum and the end game is when you are dead. What's wrong with working out the ill definded global data exchange proposed by DHS Secretary Michael Jackson? Once CBP finds GS1.org it will have a useful and economical means for communicating between the private and public sector. Walmart uses this protocol with all of their suppliers which is proof enough that it scales well. Walmart is bigger than many governments.
Peter what are you saying in this article? Things are at the best they can be and that there is no use in trying to improve?
11 August 2007
Senator Schumer just may get that 25% countervailing duty for Chinese imports in the form of a dollar devaluation. If you consider BNP Paribas's run for cover this past week as the canary that drops dead when taken into the mine full of methane, then you have to think how badly burned the world's dollar holders may be.
China bought a position in June's IPO of Blackstone, the New York Hedge fund. That indicate's to me that their central bank has bought heavily into current ideas of increasing yields slightly over what they could get from U.S. Treasuries. A few blogs have gotten out from China describing senior officials as dupes for having bought into Blackstone. I wonder what these individuals would think if they could see their central bank's portfolio. It may look a lot worse than BNP Paribas'.
I am for free trade and I have continually blogged that this business we have in the U.S. of printing little green pieces of paper that we trade for real goods built with hard work from others is fantastic. That they lend us back the little green pieces of paper so that we can build lovely houses and fill them with more articles built by others so that the green pieces of paper go back overseas to complete the re-lending cycle is terrific. But once the outsiders get the feeling of having been swindled the gig may be up on this wonderful green paper business of ours. Naturally the un-intended consequence is that our trading partners may require more sweat work and effort in the products we exchange for theirs.
This is not a pessimistic entry in my blog, just a reality check.
2 August 2007
We are food importers and also I am a director of the Association of Food Industries, a group made up of domestic members who are food importers and foreign members who are food proccessors and exporters. As a director I have participated in various telephone conferences recently about food safety issues and I find myself preaching our "Do it Sooner" point of view versus increasing inspections.
Inspections are so after the fact! Lets say a million units of a product is produced and is found to be dangerous once it reaches these shores and is inspected by the importer and or the FDA. A factory that built a million units of a dangerous product without detecting and stopping it is a very flawed supplier. They probably made other just as dangerous products that were not detected. So inspections, particulary late ones coming after the product has been imported, allow defective product to be made! Once the defective product is made there is a financial incentive to deny a problem in order to avoid short term losses. So the poison lingers.
"Do it Sooner" is of the opinion that you make it difficult for the defective product to be made in the first place. The principal method employed is to audit a supplier before ordering from them. The expense of this due diligence is quite high so it is only interesting if both parties have a long term perspective in pursuing the business. Mr. Shabby Producer won't make the cut since the problems that cause them to make dangerous product are evident well before product is produced. Believe me, It does not take rocket science to predict who will be a problem producer. And hopefully because of lack of demand Mr. Shabby never gets the opportunity to make the dangerous product, certainly not in the million unit level.
Custom's CTPAT program only works for importers who have strong relations with foreign producers who have a quality and safety perspective. FDA ought to glom on to CTPAT in the manner that Gerry Horn and Lauren Perez allude to in the article linked below in the 24 June posting. And for the record China, the source of recent headlines on food safety, has not allowed United States Custom's offcials to enter China and make security inspections. Open transparent systems is not a Chinese trait and its a precursor to problems. I can think of other countries with similar opaqueness, but they are not our largest supplier of finished goods.
4 July 2007
My developer is now working on the part of the new OTCS where we make a mock entry summary for our broker to follow. This gave me the opportunity to modifiy the current version to include missing data elements that the importer must report to CBP in the upcoming 10 + 2 regulation. I took the opportunity to include GLN (Global Location Number from GS1.org) and LOCODES (Location Codes) from the United Nations. I hope to post my proposal shortly and that CBP considers its format and the logic of using international standards such as GLN's and LOCODE's when designing the entry summary to be used to unify the 10+2 regulation and the entry. They are going to unify it, aren't they?
24 June 2007
It occurred to me after re-reading the Association of Food Industries 2007 annual that the article "Why C-TPAT Participation, More Than Ever, Is critical for Food Importers" by Gerald B. Horn and Lauren V. Perez of Sandler Travis and Rosenberg has changed my thinking recently and is reflected in some of my previous blogs. Attached it's .pdf link
18 June 2007
"FDA Weighs shift in Safety Checks on Food Imports" is the title on The Wall Street Journals June 14th article describing FDA's shelved risk based system. It was a scoop as the FDA held back from disclosing it since 2002.
As I have mentioned before, I am not impressed with the follow through on the Bioterrorism initiative. A lot of data has been sporadicially gathered with prior notice and there is no good evidence FDA knows what to do with that information. Frankly it looks like a perpetual make work program with no purpose.
If the FDA is truly serious about doing its job, then it should outsource. Prior notice should become soley a Custom's obligation to gather the data. When FDA has a concern about a foreign source or product then it should query it's ACE account. With regard to risks, FDA could flesh out some requirments to Custom's CTPAT partners who also happen to be food importers. We use Good manufacturing practices audits as a good way to qualify our foreign sources security measures. It's the old two birds with one stone method which actually gets implemented.
12 June 2007
"U.S. Tariffs On Shoes Favor Well-Heeled Buyers" by Adam Davidson is a NPR "All things considered" broadcast today that perfectly captures the interest of the few versus the many. The problem with shoes is that there is no intense interest of the few left and the dissipated interest of the many does not get noticed. Take a listen to Story ID 10991519 and hear Conressman Joseph Crowley of New York perfectly capture the debate at dinner and "by the way pass the turkey." Brilliant.
2 June 2007
"A Miracle-Worker Highway Man Rides the Bonus Train" an article in today's New York Times is about C. C. Meyers a contractor in California who rebuilt the oil rig fire damaged freeway ramp in Oakland in seventeen days! I salute Mr. Meyers and the California Department of Transportation who hired him. What they accomplished was truly a miracle.
I recall my amazement when traveling in Southern California about six months after the 1994 Northridge earthquake to see the roadways well underway towards being fixed and usable after having suffered in Connecticut about twenty years of interminable road construction. We laugh sometimes about California and Moonbeam - am I seeing more of Jerry Brown in the media recently or is that a figment of my imagination? - but boy have they got this rebuilding after a disaster down cold. State and Federal governments take note.
21 May 2007
Why are FDA inspections too late to be effective? I think the general public has the belief that FDA or anyone else for that matter check for everything in their tests! The truth is that they check only for a few rudimentary things. We have certain products tested by independent laboratories that are quite complex and beyond FDA's expertise. These tests approach $1000 per in cost to us and that is because we know what to look for. In the case of the non food melamine spiking, the simple test gives a positive extra protein higher value to the contaminated article while a costly lab analysis would give a low food value reading. There is no way that the FDA can protect us and our pets from that type of fraud and contamination. Our best protection is to know your supplier and have a deep long standing relationship with them. If you can find it cheaper elsewhere, be prepared to spend the time and money checking that source.
20 May 2007
About ten years back I took up motorcycling again and in preparation read all the literature on riding technique that I could. I must say I did a triple take on the section of a book that described steering a motorcycle quickly and effectively required the operator to do exactly the opposite of what I thought and felt. When you want to steer right you push forward on the right hand side and steering left requires pushing forward on the left hand side. Pushing harder makes it turn faster. Well frankly it took months of riding and testing before I thought there was something to the technique, but I was never quite sure until I took a Super Bike Class directed by the author of one of those books I read. The instructing was done at a race course where the speeds are high enough that you are required to brace the force you exert on your right hand by crossing it with your left foot hard on it's peg! The force needed was truly enormous and left no room for subtlety. It was only then that I was convinced of the effectiveness of the technique and now I use it consciously slow or fast with great effect.
Today I still find experienced riders who don't believe me when I explain the technique. The general non riding public think I am nuts to be riding so that the counter-intuitiveness of the technique is lost on them. So why am I talking about this?
Last week I was in Washington doing the rounds of New England Senators and Congressman with CONECT pitching the counterintuitive message of free trade. The program was brilliantly put together by Peter Friedmann, CONECT's counsel in Washington, and I followed along in a small subset led by our very able and articulate President, Karen Kenney of Liberty International. Everyone of the legislators and staff we met repeated that they never get constituents pleading for free trade, its always from those who oppose it.
Free trade like counter steering on a motorcycle is hard to believe, especially when taken from the individual versus macro levels which I would equate to a motorcycle at slow versus high speed. At the individual level one's intense hurt when losing a job versus everyone else's minute gain makes a politician's life defending an ethereal concept such as free trade difficult if not impossible. Never the less the more often politicians capitulate to the individual nay-sayers the worse for the greater good. Its difficult to detect and counterintuitive as well, but the more Free Trade the harder the push on the handle steering us towards a greater prosperity. See what I mean about ethereal?
15 May 2007
There is no doubt that the FDA is going to have to increase its vigilance on imported foods and ingredients. Some talking points may be:
- Inspections at the border are often too late in the import process to be effective.
- Best practice is to have outside auditors audit food preparation facilities on a yearly basis and give detail scores with evaluations and list of improvements to comply with FDA's good manufacturing practices. Those facilities with high scores and compliance are kept as suppliers and those that are not are dropped by responsible importers.
- Countries that discourage transparency in their food manufacturing practices, China, should be on high alert list for FDA testing, while those that are transparent, European Community, can be a on the lowest alert level.
On that second point, maybe FDA should develop a CTPAT program for those importers practicing good qualifying and auditing practices.
8 May 2007
I previously blogged that if you do cross border trading and depend on secrecy to keep your buyer and seller apart, then your business has a short term outlook. Custom's 10 + 2 data elements will bring a greater transparency and ultimately security in our transactions. Like I said, if you don't know who your supplier is, then maybe it's Osama Bin Ladin.
Sunday's front page New York Times article 'From China to Panama, a Trail of Poisoned Medicine' is another case in point. The article details a transaction from Guangdonng Province in China of pure glycerine meant for medicinal use which was switched with diethylene glycol, a prime ingredient of antifreeze. Each trader along the trade route relabeled the the drums and the certificate of analysis at each stop in Beijing, Barcelona Spain and finally Colon Panama. Each trade was marked up by about 10%, The final result is that forty drums were transhipped, very little money was made at each stop and hundreds lost their lives in Panama. Everyone along the path was careless because the product was cheap, testing too expensive in relation to its value and finally no long term relationship established between buyer and seller. "Its just a commoditiy and I can find it cheaper elsewhere."
We deal in cheap commodities, but at least we know and have a relationship with our suppliers. Some have been with us longer than others but they all get vetted personally. It's low tech and involves a lot of travel time but there is no substitute for personal visits. And there is no substitute for knowing the seller, manufacturer and consolidating point on every transaction, and with more certainty than "to the best of our knowledge."
30 April 2007
Carl Soller, partner in the law firm Cowan, Liebowitz and Latman made a short update presentation on 10 + 2 at the AFI (Association of Food Industries) Convention at Long Boat Key this past weekend. Carl concentrates on Customs, International Trade and Transportation law. From the various conferences he has attended he has found a lot of friction between CBP and TSA. It's incredible that two agencies under the Department of Homeland Security can not get their turf battles behind them and transmit the required information between themselves. I have previously blogged that CBP and FDA should coordinate better as well, though Carl corrected my mistake that FDA is in the Department of Homeland Security, it's not.
With the on set of 10 + 2 CBP finds itself gathering a lot of data with repetitive elements. Carl suggests and I concur that this data should all funnel through one entry system and that all agencies draw the information they require from there. The FDA's prior notice has many elements that are already in the entry summary and is already entered through the Customs Broker's ABI system. When 10 + 2 comes into force we plan to keep on doing what we are doing now, which is making the entry before the shipment leaves. Its' a pity that FDA's prior notice has to wait until five days before the arrival of the vessel, when it could be submitted at the same time when we make the entry.
Carl also speculated on what the data is being collected for. Is FDA Prior Notice data being collected for the sake of collecting data only? We have not heard of anyone being detained for lack of prior notice, much less an incorrect one.
25 April 2007
Tim Donney's "Protecting your Cargo" article in JOC this week brings up important points regarding security that go beyond his Cargo Insurance perspective. I have certificates in house showing that our cargo is sealed at the factory and then driven directly to the port where it remains secure. We have never thought of hiring a security firm to spy on the driver and see if the normal course of business meets what is described in our certificates. I am prepared to be disappointed.
This blog has long derided the dependence on paperwork for security. CTPAT evaluations that are passed out to suppliers, duly filled out and returned are a start, but if that is it in your security arsenal, then you are not really secure. We keep emphasizing communication with a strong database to back us up. The "Hand Shake" between buyer and supplier is a complete purchase order. The buyer asks the supplier if the purchase order can be met in every detail. The supplier responds that no, the product description is slightly different and the shipment date will be as well. A revised Purchase Order is sent with the changes, which also triggers the database to the expected changes. Finally the supplier agrees and is able to complete a packing list that exactly matches what is expected in the database. With this synchronization "hand Shake" process in place the 10 plus 2 data elements are in place, the entry can be made before shipment and the communication required would caused an interloper trying breach security to become apparent. Now isn't that more secure than relying on static certificates?
25 April 2007
HTS 2005.70.06.00 Olives, Saline, Green, Not Pitted, for Repack. This item is a quota item, it requires a live entry. A live entry brings our electronic system back from the future into the stone age. Okay, some items are going to be quota and there is no political way around it, but this one? I doubt that the condition that made this one a matter of quota interest has existed in the last 50 years! HTS 2005.70.16.00 is another one.
My point is that as a part of 10 plus 2 CBP ought to review quota HTS numbers for their relevance inorder to streamline electronic entries. The country's security is not enhanced by having a CBP employee rifle through a lot of irrelevant paperwork for Plain Green Olives whether they are to be repacked as green olives or not. The industry has moved on to stuffed, pitted or sliced olives a century ago, but no sir that quota statistic has got to be researched! Seriously those eyeballs should be concentrated on more important issues.
19 April 2007
I continue to be amazed by the number of times that the confidentiality issue is mentioned in the various industry newsletters and alerts on 10 + 2. Here is a recent one off the i.e.today.com web page What about confidentialty issues ? What importer wants to bring in a box from which they are not sure where it came from ? Get me off this boat.
18 April 2007
We are all horrified by what happened at Viginia Tech this past Monday. The normal conclusion is that this shouldn't have occurred and that the people in charge of the school and law enforcement are at fault. The truth of the matter is, that it was an unpredictable event. No system worth living in could have prevented it.
When the unpredictable happens the only solution is strong well tested lines of communication to make the best of a bad situation. In the cross border castrophe to come it has been this blog's point of view that a strong line of communication should be in place with the C-TPAT private community and the CBP public administration. These lines of communication should be tested in war game scenarios using private and public participants. Unlike the fire fighters and the police of 9/11, let's all get on the same frequency.
15 April 2007
Reading about Governor Corzine's accident on the New Jersey Garden State Parkway got me thinking about seat belts.
My quick retort to any Princess Di conspiracy theory is how can you factor in the accident equation the fact of her wearing or not wearing a seat belt? She probably had never worn one in the latter regal part of her life, but never the less an impulse to put one on once she saw how crazy the driver was is not out of the question. I suspect that John Corzine hadn't worn a seat belt for a long as he has been a public servant and that shortly he will come to realize that he is not above the law. The law of physics, that is. He is a big guy and there is an awful lot of room in a Chevy Suburban to develop momentum before it all suddenly reverses with an unyielding stop.
It's a grim subject, but a great illustrator of managing risks. Putting on a seat belt costs nothing! Not putting it on has cost John Corzine six months of extreme discomfort and a lifetime of some. It will tax the health care system to care for him, he can pay one hundred percent of the expense without any problem, but if any resource was denied to another deserving patient because of his care than that is a cost that has to be considered. Finally and most importantly to New Jersey he has left his Governorship in a leaderless position during a time of peril and uncertainty in New Jersey Politics. The point is that this accident was like the reverse "Power-ball" lottery for Governor Corzine, instead of a millions of dollars return on a low cost purchase he got priceless damage to himself and those around him for failing to select a no cost alternative.
So what has this got to do with cross border compliance and security? Simple, I do not want to play the game with importers who refuse to put on their seat belts. One standard is that an importer should be intimately familiar with the exporter. If you are not, the seat belt is not on. Yet CBP on their 10 + 2 data element definition is coming up with sloppy rules with terms starting with to "The Best of your Knowledge." The costs are too high to suffer when basic common sense is ignored. CBP shouldn't bow to pressure from the "Its Impossible Letter" crowd.
13 April 2007
Joseph Cox, President of the Foreign Trade Association of Southern California wrote a well reasoned and lengthy comment regarding "10 + 2" to Richard DiNucci of U. S. Customs and Border Protection, copy of which I attach here.
I have been searching for this letter, because I knew an officious response would be forthcoming from somehwere. It is what I would call the "Its Impossible Letter" written by industry to slow down, nullify and or beat back a regulation that would be incovenient. Incovenient because it would have to change the way it did things. My God imagine, we have to equip airplanes with two way radios so that they can follow flight plans!
If you are in this weblog through our OTCSYSTEM home page, you know that we consider filing an entry before shipment simlar to pilots filing a flight plan before taking off. The exercise causes us to pre-think the whole shipment through down to the very last detail. It cause us to use a database where we can file repetitve information and keep it up to date. The end results are compliant secure entries that very economical to do. Mr. Cox may actually be doing us a favor helping keep our competitor's heads in the sand. There are two ways around a problem, either fight it or change the way you do things. The last time I checked airplanes have two way radios in them to help monitor the progress of flight plans. Can cross border container movements be too far behind?
9 April 2007
Reading over the definitions of the proposed data elements, Definitions, I get the feeling that the data to be collected is going to be pretty loose. The manufacturer, seller and consolidator all have easy outs of "to the best of your knowledge." As an importer I want to deal with more than to the best of my knowledge. I want to know! This blog is all about raising the bar on the import community and a declaration that "to the best of my knowledge this import is not from Osama Bin Ladin" is not good enough.
COAC and CBP ought consider professional importers versus the non-professional and maybe CTPAT is the way to differentiate. I can't believe that a CTPAT compliant security filing and entry would have any elements in it that the importer did not know the name, address, telephone and contact. Certainly a solid SF and entry should command benefits that sloppy one would not. Besides, in this world of high tech precision, loose data has less meaning than precise data that can allow computer security models to be quite prescient.
25 March 2007
On page 5 of CBP Proposal for Advance Trade Data Elements it states that "Because of the similarity of the ten data elements of the Security Filing and entry data, importers may be interested in fulfilling both Security Filing and entry obligations at the same time by filing 24 hours before vessel loading."
Reviewing some of the data elements I note that there are some that are not in Customs Entry From 7501. Just like Importer of Record and Final Consignee are separated, it may require three fields for the selling side, Seller, Manufacturer and Consolidator. In many cases for us its the same entity for all three when the product was sold, manufactured and loaded at the same point. In Argentina we find it is typical to need all three. The seller in an office in Buenos Aires. They bought the goods for sale to us from a manufacturer in Mendosa and since ocean carriers do not let their containers get inland, because of the long, (1,500 mile) inland transit points, it usual for the stuffing of the container to be done at a consolidator near the Buenos Aires port. I hope as part of the 10 + 2 initiative that CBP uses the entry summary as the final document of both the security filing and the entry and therefore modify the entry summary form accordingly.
While they are at it, CBP should use the opportunity to slowly convert the way they code entities to a more global system, such as the one developed by GS1, the UPC code people. Instead of tax ID numbers CBP should convert to GLN's "Global Location Numbers." While tax ID numbers do a pretty good job of identifying domestic entities, what about foreign ones? Note the messy instruction set for coding foreign manufacturers! Until we settled on one broker to do all our entries that code was all over the place. In many instances the same broker has various codes for the same manufacturer and address. The data elements for the seller, manufacturer and consolidator will be pretty messy if they rely on the present code constructing scheme. The beauty of GS1 is that the various entities can publish their GLN's to the U. S. Customs database as well as he Canadian, Mexican, European........ Globally yet individually. These databases could have the entities tax ID number if required, but would not have to be in general distribution for any old terrorist to see. A European Tax ID is different from a U.S. based one but the GLN would not have to be.
Once again Deputy Commissioner Jackson, but this time with real feeling:
"GS1."
18 March 2007
Watched on CSPAN last night the February 28th celebration of Lincoln's address to the Cooper Union in New York City with Newt Gingrich and Mario Cuomo as speakers. This is the presentation in which Mario Cuomo invites Newt Gingrich to run for President in 2008 as a Republican. I believe that the former Governor of New York's spur of the moment remark came from the Speaker's acknolwedgement of how Gorvernment can work and his call for ideas and civil decency when debating among political rivals.
While this blog is focused on customs compliance and border security I want to digress into politics. The contrast between what I consider the very successful former administration and the failed present one has nothing to do with ideology. It must break a good Republican's heart to come to the conclusion that the Grand Old Party is coming down because of poor management, pure and simple. It is inexplicable to me that the Clinton Adminsitration ended with the threat of no bond market for government debt in the foreseeable future because of huge government surpluses and that it took the Republicans to fix that aberation.
Popular leftist folklore is that war is good for the economy. It probably comes from the idea that World War II got us out of the depression. Never the less that sentiment would never pass a good empirical study since defense expenditures provide little measurable return and excessive defense expenditures must be a drag on the economy and not a stimulant. Clinton's years in office saw a reduction in military expenditures as well as they should. The Berlin wall had come down after the previous build up, and frankly right now we have not got an enemy that requires a fleet of hundred milion dollar fighter jets and billion dollar nuclear submarines to combat. What we need now more then ever is intelligence on the ground and less expenditure on gadgets for an enemy that does not exist.
Apparently war is very easy to get into and it's very expensive. This war in Iraq is not doing our economy any good at all. Taken from a private sector managerial point of view those in charge should have been fired a long time ago. This abysmal and unilateral foray into the Middle East will cost us dearly. If Vietnam, for example, gave us a pretty miserable fifteen years with the economy, by my count, seventies through mid eighties, then this one in Iraq will do worse because our demographics are stretched much more toward the elder side of the curve. What was refreshing about Newt's presentation was that he was willing to present ideas to economize and make government work better. Given the hand we have been dealt we are going to need much of that type of thinking.
14 March 2007
"New Systems Help Track Virulent Veggies" in today's Wall Street Journal hi-lighted Dole Foods' efforts to track and trace produce from the farm to the grocery shelf. "If a food borne outbreak occurs, the processor could end up holding the bag, facing the prospect of lawsuits and even bankruptcy.
The Bioterrorism Act of 2002 requires food processors and shippers - but not growers - to keep records showing where they get their produce and to whom they sell it. But such records often fall short in helping determine the source of contamination.
Moreover with different companies using different record-keeping systems, "it's almost like 9/11, and all the different frequencies so they can't talk to each other ," says Andrew Weisbecker, a lawyer at the Seattle law firm , Marler Clark, which represents victims of food poisoning and has filed lawsuits related to the spinach outbreak."
We have given much thought about tracking and tracing and use it to comply with FDA Bioterrorism as well as customs compliance. We have a patent pending, yet the more I think how to monetize the patent when and if we get it, the less valuable I believe it will be. Tracking and tracing takes cooperation among various and distant entities and anything that smacks of exclusion because of nonpayment of fees will probably not reach critical mass for it to be effective. One lesson learned though is that we need one language and the structure of that language comes from GS1, Global Standards One, the former UPC Code Council. Through GS1 we can all be on the same frequency using GTIN's (Global Trade Identification Numbers) and SSCC's (Serial Shipper Container Codes).
27 February 2007
I had the privilege of attending a CONECT conference in Boston last fall at which U. S. Customs and Border Protection Commissioner W. Ralph Basham spoke. I recall now because he is listed in the 4th annual JOC leadership roll. What I recall about Commissioner Basham is that he has got his mission down just right. When he was the head of the Secret Service he considered it a failure of his office to stash the President in some underground bunker. Sure, he would be absolutely safe there, but the Presidency would wither and die in such a scenario. With homeland security the same easy assumption of sealing the borders shut to create absolute security would wreck our economy and ultimately makes us less secure. Commissioner Basham has done a terrific job of turning around those who doubted his capabilities when first nominated.
26 February 2007
Recently I have been working on a project in a less developed country (LDC) with low wages for sure, but ultimately high costs. Uneducated manpower creates a huge percent of product waste. Capital equipment is difficult to acquire and maintain. The uneducated workforce breaks the equipment regularly and then fixes it poorly. I witnessed a fork lift being taken down to the pistons outside at night in a blowing desert air. Tools were rudimentary and sand was everywhere. The next day it ran intermittently, with lots of head scratching by those standing around when it stalled out from over heating.
My point is that corporate America seeks out low wage countries at it's peril. There is a type of work ethic that has to be factored in. Asian countries such as China have low wages combined with a fanatical attention to detail that brings great value to a product. I experienced a situation with low wages combined with sloppy attention. It's a mind boggling awful combination.
11 February 2007
Just returned from an overseas project that lasted over two weeks. It was no picnic. I had no free time to think or write. Reviewing incoming mail I was gratified to see our C-TPAT validation letter. We applied in August of 2002 and were finally validated last December. Since we are a tiny operation in comparision to others in the program the delay was to be expected.
The 5 Feb article in the journal of commerce about the ISO Security Standard ISO 28001 "Best Practices for implementing Supply Chain Security" gives hope for much bigger and better C-TPAT coverage. Our validation was essentially an audit done by CBP personel done at Government expense. The ISO standard opens up the field to outside auditors who can diseminate these best practices to a much bigger universe and do it more thoroughly. We are asking our foreign manufacturers to take on the ISO standards for security and it is easy for us to do, since most of them already are ISO certified in other aspects. We are a small player with little economic power to force our suppliers to do anything, but these standards give us the power to demand security consideration from our suppliers.
15 January 2007
"Who will provide the manufacturer's name and address if the importer is buying through a selling agent overseas who wants to keep that information confidential?" is a question posed by Drinker Biddle Gardner and Carton about the 10+2 proposal by CBP for advanced data elements in their January client memorandum .
I don't think CBP is going to give that question much consideration since the confidential source may be Bin Ladin himself. A good business pratices is to check out your overseas source, we even make it a practice to check them personally with a visit. In most instances we are regular visitors. These trips are expensive, but confidential sources are not only less secure but they invite fraud as well.
I have little sympathy for the plight of the disorganized and hair triggered. If you think you can build a business based on secret sources and large market price differences, then you and your company are most likely to be part of that scary scenario of an WME entering a port. You are also going broke, you may deny it, but you are.
24 December 2.006
The Food and Drug Administration is seeking comments by Jan. 19 regarding the extension of certain information collection requirements associated with the Public Health Security and Bioterrorism Preparedness and Response Act of 2002.
(Comment) One comment noted that ``Standard Manifest'' data elements must be transmitted to CBP prior to arrival in order to clear a regular shipment, and the ``Preferred Manifest'' data elements must be transmitted to CBP in order to clear a low risk FAST/C-TPAT shipment. In addition to these CBP transmissions, a separate prior notice transmission to FDA, with a different data set, is required to meet the prior notice requirements. The comment suggested that, to minimize the burden of the collection of information on respondents, FDA and CBP should work together to develop integrated data elements for both regular and FAST/C-TPAT shipments which would meet both FDA and CBP requirements, and the information required should be submitted once and then transferred to the other agency as required.
(Response) FDA disagrees. FDA's Bioterrorism Act and CBP's Trade Act of 2002 have different statutory requirements. For example under section 801(m) of the act, FDA, not CBP, must receive prior notice. In implementing these laws, the agencies require different information and use different targeting and screening tools. FDA and CBP have discussed interfacing with the Automated Manifest System (AMS) (the module of ACS through which carriers, port authorities, or service bureaus transmit electronically the cargo declaration portion of the inward foreign manifest to CBP) for manifest data and determined that the general cargo data in AMS are not suitable to accommodate the detailed information requirements of section 801(m) of the act. For example, AMS does not collect the country of origin. In addition, its collection of the identities of the article of food and its manufacturer differs from the way those are collected under the prior notice interim final and final rules in such a way that the data would not meet our needs in carrying out the purpose of section 801(m) of the act. Therefore, the information collection burden may not necessarily be reduced as the manifest data could not substitute for certain prior notice requirements.
The FDA's report shows that over 6 million Prior Notices are submitted every year through CBP's ABI/ACS and only 1.5 million through the FDA's web portal. The difference is even greater in actual terms since the commercial method is uniquely through the ABI and those through the FDA's portal are generally samples. It was like pulling teeth to get FDA to accept PN's through ABI back in 2003. Now it's the principal conduit of information for FDA's obligation with bioterrorism. Was FDA so traumatized by CBP when developing the ABI link that it can't schedule another meeting just to improve the data elements? I mean are not both agencies under the Department of Homeland Security? Is it too much to ask them to coordinate?
In a previous blog about CBP's 10-2 initiative I said, accept our early entries into the system and we would fullfill the importer's 10 data elements on or before shipment. We can do the same for FDA's prior notice except for one thing! Its part of FDA regulation that a Prior Notice can not be entered until five days before the vessel's arrival. Why? If we can make a prior notice when the cargo is loaded overseas, why can't FDA accept it then?
16 December 2.006
My first try using a text editor and selecting CSS, cascading style sheet and wow! What a difference! If you are interested I am using BBEdit instead of Dreamweaver.
4 December 2.006
The "Truck Train" like the "Auto Train"
We are in a transit crisis mode at this time of year so that we are off loading west bound cargo from Europe in New York for final delivery in LA in team trucks with two drivers giving us a three day cross country delivery. It's very costly. This week's JOC article about consolidating railroad traffic into large blocks negotiating for rates and service made me think of an economical alternative to our costly problem. I am throwing out this idea for free because I have not got the time or resources to pursue it, but it's a Malcolm McLeanesque idea. We need truck trains like the auto train betwen Virginia and Florida.
The first corridor would be between New York and Chicago. We need a straight shot that would leave from out of the way consolidation points east of Chicago and west of New York that would guarantee an 80 MPH average speed between points. The train would leave at 8:00 pm every night from one of these points and arrive ten hours later at its most westen or eastern point every morning. Truckers would arrive and drive their rigs on board without reservation. Those who don't make it would have to drive on, those who made it would get to sleep on their rig until discharge the next morning.
Other corridors between the west coast and and Chicago could be developed just to take care of the trucker can't drive beyond a certain number of hours a day routine which the rail road could take up. I think it would be fun to flesh out this idea.
3 December 2.006
I have been a traveling a lot recently and not attending to this blog, but I can report I was on an overseas C-TPAT Validation visit last week with our major supplier. It was a positive experience. I do recall that I expressed to my both my CBP C-TPAT validators that we have gone through more rigorous overseas audits for FDA Good Manufacturing Practices and that there is room for consolidating these requirements into one global set. I believe ISO 9000 whatever would be a great framework to use.
While meeting with our overseas counterparts, we asked if any EU initiatives had been announced for developing a "European" C-TPAT like system. They had not heard of any yet. We explained that the WCO was developing something like that which would be taken on by EU countries shortly, but our manufaturer indicated that they did not know of it. Since they are usually right on top of these initiatives, I have to believe the WCO's suggestions are in the early stages.
2 December 2.006
"10 + 2" hits the the fast track in this week's JOC talks about "Customs presses ahead with a plan to require additonal cargo data from shippers and ocean carriers." With our OTCS System we say "CBP, bring it on!" We are consistently filing entries before shipments leave their foreign port and there is nothing in the 10 points required from the importer that are not on the entry summary we produce for our broker to submit. One question. Why doesn't CBP's sytem take in the early entries we submit. Our broker says that the ABI system does not take in the entries until five days before the vessel's arrival.
The cover story "Cracking the Code" regarding the overhaul of the tarriff system needs a little study on our part. I have the feeling that we are not affected by it in a big way, but with the system that we have in place I kind wish we did. I mean it would give us a big advantage over our competitors if we all had the same problem. We could resolve it within a week. Who else can?
1 December 2.006
I looked at this web age on a PC recently and I am really disgusted at how bad it looks. The print looks like it was done on a printer where the ink was applied unevenly. On an Apple OSX platform the presentation looks fine, it unacceptable on a PC. It looks like I have to buy Dreamweaver, learn it and change the presentation of this web domain, this blog included. I don't mind telling you it's a pain.
3 November 2.006
My wife and I were checking in on a flight to Paris about ten days ago. It was with American at JFK. The wait at the check in counter was an hour. It was awful and will make us not consider using American in the future on foreign flights, we already do not use them in domestic flights principally for that long check in process.
Now, why does American have this drive away the customers type of service? A simple answer is that they did not have enough check in personnel manning the desks. Maybe, but I did see one customer chew up the whole hour we were waiting with one attendant! This poor fellow for American was on the phone most of that time probably inquiring about whether he could reserve seat 23A for flight XYZ on final leg to Kuala Lumpur. I thought the customer was a plant from a competitor determined to gum up the works. During the actual check in I was able to discern the crux of the problem.
Why was it that it that our E-ticket with assigned seats etcetera required such a long time for check in? Our friendly check in person was tickling the ivories on her keyboard for what appeared to be about five minutes. Those keys were tickled at a furious rate. While developing our OTCS program I attended a seminar that proved to me that data entry via the keyboard without ever using a mouse can be the fastest form of data entry. My question is what was this poor women entering into the systems to register a e-ticket that was all set at the get go?
My point is that American's bureaucracy can justify the need for that intense data entry at the check time, but its not necessary. For a company that invented SABRE, I can't believe they let IT drop to such an abysmal level. My experience is that Jet blue did a lot of work on speeding up check in using self checking electronic systems. American has too few and is too late. I know that foreign flights are more complicated, but certainly some of that complexity can be cleaned up by automated systems. For the life of me I can understand why that women was working that keyboard so hard on a direct flight where everything was already pre-entered in the system anyway. Finally I consider checking in to be the point the that colors the rest of your travel experience, if its quick and efficient you are prepared to be pleased for the rest of the trip and if its slow and tedious then the rest of the experience never gets out of the funk even if the service is exemplary and on time.
Good IT improves service, security and customer satisfaction in the cross border services industry as well! And the most gratifying result is reduced costs. The bar is being raised every day by CBP and other government agencies to regulate and control cross border transactions. The way I see it you have three choices in this business. You can leave things as they are and let service degrade. You can keep your usual process and hire more people to keep up with the requirements. Or you can continually recheck your process and see what can be automated to increase through put and thereby service. If it ain't broke, break it. Nothing is so good that it can't be made better.
17 October 2.006
Today's Wall Street Journal left column article titled "Heavy Load" is about port security and the ID program thinning the ranks of low wage truckers, many who are illegal. There is no doubt that this is a security low point in everyone's supply chain. The money is awful and will not support well paid drivers, serviced rigs and insured operations. Most of these operators go out of business every other year when they have accumulated an un-supportable load of receivables and late charges that the consignee will not pay for only to reopen under another name. I am a free market libertarian so it chokes me to say this, but as long as this point in the supply chain is characterized by no cost entry type of competition it's always going to be a security problem. Loosing your right to service a loser business gives no incentive to hire legal citizens, service the rigs properly and to insure the operation adequately. This is a sector that requires a professional licensing set up which will increase entry barriers and allow above market compensation rates. I can't believe I am writing this!
28 Sep 2.006
I just looked over a post in the C-TPAT portal reminding importers to file "Entries At Least 24 Hours Prior to Arrival." We are talking about filing entries before the shipment has left the overseas port and yet there are those who are not organized enough to get their entries in at least a few days before arrival! Those importers don't deserve C-TPAT consideration. They don't deserve it and and are probably not getting it since decisions about what is to be inspected have been made long before these importers ever get around to filing.
22 Sep 2.006
What struck me the most about my presentation last week was the number of disbelievers. I got a terrific reaction to some of my suggestions, but many put them in the great for a small company category and moved on. I repeat, know your product. Whether you trade thousands of products or just a few every product must be classified and valued long before it crosses a border. If you are dealing with new products, then it's classificiation must be part of the design specifications. Big or small there is no excuse not to have your product classified ahead of time.
The resistance to that idea is palpable. We are a small company and it is not expected that we would have the capabaility to predeclare our entries. Since we do many attribute the fact to how simple our busines is. We have every opportunity to make our business difficult by engaging in unecessary joint ventures and going forth with grandiose schemes involving synergy and other feel good lose lose propositions, but the fact of the matter is that our business is simple because we work hard at keeping it that way. Whether it's a million or billion dollar cross border operation, it should be expected that each company's IT system scale to handle the transactions involved. We are firm believers in ERP systems that unite an enterprises processes. The ERP we are developing will cover medium and small companies and if you are really in the big leagues, I agree with one of my co-presenters in the pharma chemical business to stay and develop SAP's system in cross border trade. They to pre-declare. We are not alone.
17 Sep 2.006
Joe Rees, Director of Importer Self Assessment (ISA), kindly asked me what it was going to take to get the food import community into a manageable enough state so that it could be considered for ISA. This was at the Marcus Evans Advance Import Compliance Forum held in Chicago last week and my answer is that we are a long ways off. The principal problem is that in food import we tend to be a lot of importers amounting to a big part of the import pie, but we are not the really big entities that are typically sought after by ISA. Which got me thinking.
C-TPAT is a lot more inclusive right now than ISA, but it still hasn't gone retail! We joined in 2002 and we still haven't been validated. The problem is that we are too small and it would be a waste of time for CBP to validate little old us. But I am a director of the Association of Food industries who have a bunch of C-TPAT members who are small and not validated as well. I think we could arrange a group validation effort using the AFI. The initial validation meeting could be done in a group setting under the AFI's auspicies and then many members have suppliers in common which could be surveyed and validated by CBP. I can think of the Spanish Olive exporters concentrated in Seville Spain using the port of Algeciras (Which I believe is a CSI port) as a place where a CBP visit could find many places that have significant exports to the U. S. and which could be used to validate many of the AFI's C-TPAT members. I have no doubt that the AFI could identify other such areas for CBP to visit and validate that would cover a large percent of imports done by many importers.
Only after C-TPAT got comfortable working in this manner would the lessons and processes developed there possibly be useful in getting ISA to eventually go retail as well.
4 Sep 2.006
"Along with pushing for Compstat, a program that measures crime and responds in force, Chief Bratton has advocated for a culture in which community policing is part of the overall strategy" A Tough East Coast Cop in Laid-Back Los Angeles, New York Times Published: September 3, 2006.
I suspect that CBP would like something similar to Compstat to make sense of the import data they are getting from Advanced Manifest Reports issued by ocean carriers twenty four hours before ships leave foreign ports. They haven't given much thought to the community policing in the above mentioned quote. From my perspective we are not seeing anything from CBP indicating that they have a database in development that is more than the HTS lists nor do inspections generate any communication prior or post about events as known by the importer and carrier that may add to CBP's knowledge base. What knowledge can be added? From the importer's response does it appear that they know what they are doing? That is a legitimiate score that CBP could make.
The article speculated about future jobs for Chief Bratton. Head of the Department of Homeland Security sounds like a possibility to me.
31 August 2.006
I just checked out of the OmnisCentral conference in Palms Springs this morning and the attendant at the front desk asked, "what are you guys a bunch of scientist or what?" I took it as a compliment.
This week's tragedy in Lexington Kentucky as just reported
August 31, 2006 Last updated 4:54 p.m. PT Plane crash puts focus on new technology
By DUNCAN MANSFIELD
ASSOCIATED PRESS WRITER
LEXINGTON, Ky. -- A cockpit warning system used by only a few commercial airlines might have prevented the deadly Comair jet crash last weekend if the plane had been equipped with the $18,000 piece of technology, a former top federal safety official says.
"To have 49 people burned up in a crash that is totally preventable is one of the worst things I have ever seen, and I've seen almost everything in aviation," Jim Hall, former chairman of the National Transportation Safety Board, told The Associated Press in a telephone interview from his home in Chattanooga, Tenn.
What's wrong with this report? My blog is mostly about more eyes and ears reporting on a cross border transaction and I think the FAA has got it exactly right, no more under manned towers. The most resilient security comes from lots of eyes checking from many different parts. Its hard to anticipate every disaster and design equipment necessary to avoid it. It is much more practical to make sure a flight controller has his eyeballs on the scene and casually report to the pilot that a mistake was made, just like a pilot may report back to control that a mistake was made on their part. The point is that mistakes will be made but the system should be responsive enough to catch them before tragedy strikes. The same case can be made for a WME coming in a container.
Dare we make an economic analysis of acquiring an 18,000 dollar box for every airliner, commuter and private jet out there? Would we be safer with that gizmo and undermanned flight towers? Is technology the only answer for every problem?
11 August 2.006
"9/11 Live: The NORAD Tapes" by Michael Bronner in the September 2006 edition of Vanity Fair re-emphasizes one of the principal lessons that I took from the original The 9/11 Commission Report which is the need for better communication between the private and government sectors.
NEADS' (Northeast Air Defence Sector) fog during the morning of 9/11 was palpable. The FAA was only reporting to NEADS to get planes in position to follow a hijacking, but their primary call was to call the FBI! American Airlines was contacted to confirm if their plane was the one that hit one of the Twin Towers and they would not comment but United confirmed in minutes when their plane hit the other tower. Because of this NEADS was looking for a phantom plane headed from New York to Washington. No one can be blamed because 9/11 was a conspiracy that was well executed. The planes beacons were all turned off and they disappeared in the fog of lights in the radar's florescent green fishbowl. The conspirators knew how to do that and you can expect them to get more sophisticated at counter measures in the future. Many think this uncoordinated response stems from a lack of imagination of the authorities to consider all the possible scenarios
On the contrary what is needed is the resilience provided by a well developed communications channel between the private and government sectors. NEADS was alert for an attack on the U.S. from another Government, cold war Russia principally, but today's enemy is a band of individuals. As I keep stressing in this blog CBP should be communicating with trusted C-TPAT members about what cargoes they have in transit. Ocean going container cargo has the advantage of ten days or more of being questioned and analysed. Compared to a plane being spotted six miles from the White House giving the authorities a one minute reaction time, ocean carrier time is almost glacially slow.
The AMR (Advanced Manifest Rule) under the Advance Cargo Information part of the Trade Act of 2002 requires ocean carriers to declare to CBP their ships manifest twenty four hours before shipment from a foreign port to the U.S. If a trusted C-TPAT pre declared their cargo before this ship's manifest was forwarded, then CBP would have something very valuable to aid in the screening of questionable containers. They would have company X declaring cargo on board and they would have the steamship line confirming that yes that expected cargo is on board. Naturally the beginning of this process would be a long learning curve fixing the anomalies, like who didn't report what was normally reported? Importers and Steamship lines would get graded on the accuracy of their reporting. Naturally the lines of communication would develop between CBP the Ocean Carriers and the trusted C-TPAT members that are doing the pre-declarations. Conversations such as "Do you recognize this load?" "No, but let me check into it." would become routine, automated even. But if two days later the trusted consignee reports back that no how and no way is that load theirs! Wouldn't that be interesting?
A study called "Innovators in Supply Chain Security: Better Security Drives Business Value" Issued July 2006 by The Manufacturing Institute and written by Barchi Peleg-Gillai, Gauri Bhat and Lesley Sept of Stanford University and available as a pdf at a link provided by Strasburger & Price's International Trade Law News, points out on page 30 third paragraph that terrorist are likely to use security program participants as a cover. The type of communication described above has a better chance of uncovering such a scheme than the government trying to imagine all possible scenarios and then working unilaterally.
11 August 2.006
Forbes magazine's article on Larry Ellison has the database business growing at "only 3% a year, according to Citigroup. Just about every big company that needs a database has one. "We have already got what we want" says Nationwide Insurance Vice President Richard Wohleber. Michael Vincent of Dutch bank ING adds: "If anything our spending will decrease." Insurance and banks are pretty old business. Banking has gone though a revolution in tech spending and database building. What is as old as banking and insurance? Shipping! Has shipping gone through the tech revolution? UPS and FedEX have, but Ocean Carriers? Not even close. BTW Nationwide ought to rethink their position, they sound like the Patent Office holder who did not say "Everything that can be invented has been invented." Did not say because on looking it up for this blog I find it is a famous misquote which people want to be true just to prove this very point.
Another industry that the public wants which will take up a staggering amount of database volume is the tracking and tracing of consumer product, in our food induustry the rule for tracing a fruit from tree to jar is so far from reality and yet so do-able that any thought of the database business declining is ridiculous.
10 August 2.006
Reading "The Limits of Reason" by Gregory Chaitin in the March 2006 edition of Scientific American about Gottfried W. Leibniz's philosophical essay "Discours de Metaphysique" regarding complexity and scientific laws. According to Leibniz "theory has to be simpler than the data it explains, otherwise it does not explain anything. The concept of a law becomes vacuous if arbitrarily high mathematical complexity is permitted, because then one can always construct a law no matter how random and pattern less the data really are. Conversely, if the only law the describes some data is an extremely complicated one, then the data are actually lawless."
I am not a scientist, and Scientific American is summer reading, but Mr. Chaitin's article is describing something quite profound, especially if you strip away mathematics and science. A complexity describes a lawless state! For example, the beauty of the Constitution is it simplicity and the horror of the tax code is its complexity. The image this observation gives me is that of tyrant playing a judicial role where every question of law is brought before him and in an officious, gracious and courtly manner the decisions are rendered in a seemingly even handed manner. It is all a charade. There is no consistency in the results and therefore no law to follow, whether good or bad. It is a lawless state.
The Congress ought to consider this phenomenon when drafting laws. The regulatory agencies ought to consider it when drafting rules. A first start should be the tax code as mentioned before. A simplified minimum income tax on individuals and corporation would do a lot to reduce the cost of collection on the government, individual and corporate sides. Those tax attorneys can be quite bright, can't they be used more productively elsewhere in our economy? In the meantime I haven't thought through what this means for compliance and security, but it's coming.
22 July 2.006
On September 14th I'll be speaking at the Advanced Import Compliance Forum in Chicago. The principal point I'll be making is "Simplicity." As the CEO of a small import firm, I find myself in the position of being head cook and bottle washer. My left shoulder holds the CCO (Chief Compliance Officer) while my right holds the CEO. As I have blogged before I am in a unique position to consider operations with compliance when negotiating with overseas suppliers. Bigger companies can practice the same procedure but it requires several executives.
Many of the problems in compliance and security come from the lack of knowledge and vision of the CCO in the negotiations. A request by the foreign supplier to price CFR so that they can lock in a little freight commission on the side can be nipped in the bud with a no. Directing the forwarding business toward your favored firm is easier if you can explain the operational reasons why the are favored versus accepting the supplier's counter from his son in law's firm. The point is that many of these little issues can be settled on the side of compliance simplicity versus complexity without ever really jeopardizing the relationship. However once a position is negotiated with complex compliance characteristics, its difficult to reverse. When years of imports build up a nice pile of noncompliance the expense, worry and tension it builds might make you rue the day the boss negotiated the deal he did. One of the characteristics of our business is that there are many suppliers, if you can't come to agreement with one, you probably can with another. Keeping that point in mind and deferring to your CCO on the left shoulder will go a long way towards making your operation secure and compliant.
19 July 2.006
It's time to raise bar on the import community. My 2 May blog about a chestnut importer who got into trouble because of a tariff misclassification and who deserved very little sympathy because their problem came from lack of professionalism in importing. If a WME arrives in the States and the final consignee claims complete ignorance and lack of fault, then the whole U.S. Economy will pay for their ignorance as everything is stopped, congressionally investigated and then slowly reinstated. Obviously I am not counting actual casualties. Professor Cohen's paper is bugging me.
The C-TPAT Portal is where we get to check off what we have done to insure security as well as commentary about how well we have done it. I am not re-assured by this exercise. Yes it is a process that should be done just so that Management puts it on the check list of things to look for. As I have blogged before this registering exercise developed by C_TPAT it is a static form of certificate security. "Yeah we got all the papers filled and yet there is still no good expalantation about why that WME got through under our name" is the quote I am expecting hear when the worst happens.
The consistent theme of this blog is that we as trusted C-TPAT partners need to have a communication channel with CBP. We need to have an automated way of telling CBP what we expect on the water and when. When the unexpected appears on those early carrier manifests, then everyone should concentrate on figuring out the anomaly. This sort of communication requires big and small importers to be well organized with great IT, that's right I am selling here. OTCS is what is needed by those who have not got anything better. The point is that sloppy cross border practices are costly to a company's bottom line as well as to the nation's security. CBP ought to demand more of the community.
17 July 2.006
I just read Professor Stephen S. Cohen's working paper 169 "Boom Boxes: Shipping Containers and Terrorists." It was posted at brie.berkeley.edu/wp169.pdf. Its marked "Review draft. Do not quote, copy, cite or distribute. It appeared as the sixth entry of google search for "poorly packed ocean container." If it wasn't meant to be distributed, its too late.
The professor hasn't been reading this blog. Who has? No where was there a mention of a collaborative communication between government and trusted importers mentioned. We practice a process of interdependence with shared responsibilities and procedures. It requires a well developed database fed by many. Anomalies become apparent when data does not fit. A shipment reported to the system that does not have a purchase order created by someone else in the network draws immediate suspicion. The point is to avoid conspiracy by making it necessary to involve too many people. Shouldn't government be part of that network? Trusted importers such as C-TPAT members should be in communication with CBP in an automated way. If CBP gets a manifest from an ocean carrier for a load to a trusted importer that is not pre-declared then CBP should have a the ability to communicate through an informal channel, email, and ask about that shipment. An alert or no reply may be a call to action.
16 July 2006
Captain Emad Samwell's article "E-Commerce: Does anyone care?" in the July 10 JOC brings up the point that many are demanding web services from the ocean carriers, but no one wants to pay a premium for it. Our experience is that carriers with the best IT systems still have shortcomings that caused losses on our account. Incredibly the wheels fell off on both our carriers last March just as we were finishing our contracts and the less capable competition came in with much better rates. I was mad as hell at both and came to believe that their great IT didn't save us from the shear stupidity of the expenses incurred. So what was it worth to us to use carriers with great IT? At that time not much.
After some time had passed and I reflected about our direction I have to admit that our process truly requires good IT communication for the most minute details of the shipping process. For example Seals. We can note seals that are fixed at the loading of the container and the unloading here in the States. In between its a black hole. No one, not even the best can give me an exception report when a seal has been changed officially or unofficially. I Look at the C-TPAT requirement on seals and throw up my hands in exasperation.
What is it worth to me to have an IT service that approaches one hundred percent accuracy and can be the data bases for our dashbord system? $250 per box. That is what we throw in as a fudge factor, so any system that can eliminate the guess work of what it will ultimately cost to deliver a container is worth at least that to us. On the flip side good IT can save money for the carriers as well. It might give an unfair advantage to know what is suicidal and what isn't when pricing against the cheaper carriers.
Good IT increases security as well. Presently I do not believe there is an Ocean Carrier that provides the seal service demanded by C-TPAT. Nor do I believe that if a carrier offered that service that it would find a perceptible increase in business and pricing power. If DHS demanded the seal service for itself, then it might provide the impetus for the carriers to provide the IT services that we are looking for as well.
8 July 2006
The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson is a fascinating book and example of Joseph Schumpeter's theory of creative destruction. In this case it was the corrupt Union and Political alliance holding together the port legacy in New York. New York City is much better off for having rid itself of the traffic and corruption that the docks brought to the city, but the benefit was not recognized at the time. Political and Union leaders did eveything possible to keep the NYC docks working and it took the steamship container to destroy that economic pit and create a new order with world trade expanding thousands of times over.
The curious thing about the box was that it happened without creating a lasting financial legacy. Malcolm Mclean gambled on U S Lines and lost in the end. The barriers to entry evidently are not that high in the shipping business. It appears to be a competitve market, sometimes an insane one.
4 July 2006
If there is any doubt that CBP should be an early adopter of GS1 product data standards for their product database, just check out their GSDN Quality Assurance Document.
28 June 2006
While working on our integration with BSM we found that they too use the United Nations Codes that I blogged about last August and before. The thing is is that we forgot about them. No harm though, because after reviewing our application we found we have the perfect method to incorporate the UN LOCDES into OTCS. Once again we have found a common ground with an outside program that re-asserts our feeling that we are on to something.
23 June 2006
Stewing over SKUs by William Hoffman in the 12 June edition of JOC covers a topic where I think our application OTCS has the problem solved. Also I have been blogging for a while now that the SKU reference as GTIN should be the bases for CBP product database. The HTS number product is much too general. While the GTIN database is very very specific giving size, weights dimensions material etcetera and it is manageable. If Walmart can use it, then it should be manageable for CBP to access the very same published data!
8 June 2006
I just discovered a wonderful document. When my packers in Spain load a container they sign off a booking sheet with the trucker's name, driver's ID, trailer's license plate, container and seal number. We get it scanned and emailed to us to register these pertinent details in our database. It is a start to getting the seals under control where presently there is none.
22 May 2006
That SAP INFO issue I read this weekend reinforced my feeling that IT is the essential tool necessary for good borders crossing. A company's import procedures manual is meant to be a document that is referenced when questions arise as to what to do in certain situations. Custom's wants consistency as well documentation. The truth is that a procedures manual is put on the bookshelf and not usually looked at again. The danger of such a situation is that if customs finds a process place that is not accurately described in the manual, then the penalties are severe.
Our enterprise program brings to lfe the process and procedures described in our manual so that we live with them day by day. As the program fills in we see places to put in business rules that automatically direct the operator towards the correct path. Problems? If they happen it causes the operator to ask the CCO (Chief Compliance Officer, me) what to do. Thus we get a high level decision on what may have been considered trivial, but that turns out to be the shortcut that bites into the company big time.
With regard to security our enterpise program is meant to give our transactions a lot of transparency with the authorities that regulate us. The mentality behind our security is not the armor plated fortress type, but the featherweight flexible nimble actor that quickly detects unexpected activity and reports it. This is only possible when the data is alive and designed to alert.
Dashboards have become a popular topic for databases recently. Imagine one designed like one in an airplane cockpit. Fire in the aft compartment of the plane, demurrage piling up on account 19609. Fuel on board, Cash and credit available. Climbing, profitable. Descending, not profitable. Bogey twelve O'clock high, unexpected shipment. We could make the business work like a computer game.
19 May 2006
"Jerry, Jerry, Jerry" your "Supply-Chain Security's value proposition" in this week's JOC was close, but not quite. The value proposition is to make security part of the process so that there is no additional cost. In many instances a hard look at process can reduce cost while incorporating security. Our point is that good process requires an advanced shipping notice (ASN) that is complete and simple to prepare in a collaborative manner, yet difficut if not impossible to do otherwise.
A well prepared ASN gives a company the opportunity to make an entry before the shipment has left the foreign port. An entry made before shipment is similar to a flight plan made by airliner before a flight. It gives the pilots the opportunity to economize the plan as well as make the flight visible to the regulatory authorities so that reviews and inspections are minimized. The possible costs are reduced yet without any increase in cost that makes sure an accurate ASN is prepared at the of loading of the container at the shipper's facilty.
In Jerry Peck's article in the JOC the complete focus should be on the first point he mentions, Quality control. The other points such as consumer and Wall Street support are irrelevant. Corporate responsibility is nice, but it's tough to get extra spending for that. If security can be had for free as an additional benefit that comes from good process, then security is enhanced. Isn't that what we want?
Along with this week's JOC I got SAP INFO. I am really looking forward to studying "IT makes the difference: The Intelligent Enterprise."
10 May 2006
John Dillon of Navis LLC has a problem when he said in this week's JOC that "The Marine terminal industry is highly competitive and based on customer loyalty. Cargo owners want to receive their cargo on time, and they don't want their trucks to sit in long lines. They will instruct their ocean carriers to call at the terminals that gives them the best service."
The problem is that the Ocean Carriers are the terminal's customers, not the cargo owners and their truckers. Secondly the cargo terminal industry is operating at pretty near capacity and it's a sellers market. So it must be a pretty tough sell for Novis and their supply chain execution software for marine terminals. I know, because the software we are developing is geared to accomodating many of an importer's service providers, government being a principal one, but most companies are focussed on their customers, not their service providers.
We could resort to scare tactics. For example last week's chestnut importer with entries reclassified by Customs and with the subsequent duties, penalties and legal fees that could have been