Obama puts agencies on notice to be team players, join unified trade data system.
In less than three years, many bureaucratic headaches associated with importing and exporting cargo could be minimized if the U.S. government follows through on its goal of implementing new information technology for modernizing how trade is processed to ensure it meets trade, safety, security and environmental standards. At its heart, the changeover is much more than a technological upgrade; it’s a business process transformation that essentially creates a one-stop shop for trade transactions.
President Obama in mid-February issued an executive order setting a Dec. 31, 2016 deadline for four dozen federal agencies to have their systems ready to regulate import and export transactions through a common, electronic, government-wide, data-transmission pipeline.
The International Trade Data System (ITDS), which has been in development for more than a decade, is designed to streamline trade and save time for shippers and the government by eliminating the filing of redundant information to multiple agencies with inspection, revenue-collection and statistical functions.
Equally important, according to Customs and Border Protection (CBP) officials and trade professionals, is that the executive order institutionalizes, and expands, a three-year-old inter-agency body, the Border Interagency Executive Council (BIEC), formed under CBP’s leadership for coordinating risk assessment and inspection activities. Previously, the BIEC was limited to 10 agencies focused on import safety.
CBP and partner agencies are responsible for annually clearing more than 50 million containers and $3.8 trillion worth of goods across the border. But trade industry officials say delays are frequently caused by agencies with a much smaller presence at the border, even if Customs has approved a shipment.
Ted Sherman, director of global trade services for Target Corp. and chairman of CBP’s Commercial Operations Advisory Committee (COAC), called the executive order a “watershed moment” for the trade community.
“This is the first significant government-wide attempt to create harmonization. Basically it says, you have to come back and create one way of facilitating trade,” Eugene Laney Jr., head of international trade affairs for DHL Express in Washington, said in an interview. “It prevents agencies from going off in their own lab and creating their own systems.”
While a “single-window” data exchange and one government point of contact is expected to reduce paperwork and transaction costs on both ends, the biggest benefit international shippers will enjoy is predictable movement of freight as cargo release decisions become faster and more consistent, using an automated decision-tree rather than manual checklists or random inspections, Customs officials and industry representatives say. Knowing when cargo can be picked up at the port, or exported, gives managers better ability to schedule truck deliveries, deploy inventory and make other supply chain decisions.
“What this will do is expedite trade through the supply chain,” CBP’s then-Acting Commissioner Thomas Winkowski said in a briefing for reporters.
ITDS depends on the completion by CBP of its Automated Commercial Environment (ACE), the next-generation enterprise system for interacting with importers and their agents, and automating internal data analysis for inspection and enforcement purposes. CBP plans to complete the transition from its legacy system and require all transactions to be completed through ACE by Oct. 1, 2016.
Customs is also re-engineering and incorporating the Automated Export System into ACE for all export manifests, commodity, licensing, export control and export-targeting transactions. Under current practice, the export manifests filed by carriers to CBP are usually on paper. For a large container vessel the manifest can be as thick as a stack of telephone books.
The modernized ACE export commodity platform is scheduled to be launched in April, providing a single window for CBP, the Census Bureau and Commerce Department’s Bureau of Industry and Security to process export shipments and licenses.
The World Bank recently estimated that automating customs processes can save about $115 per container.
The 2006 SAFE Port Act requires a single electronic data exchange for cross-border trade once ACE is completed, but the executive order raises the urgency and creates a roadmap for agencies to do their part.
There are 168 different forms that agencies now collect from importers and exporters, depending on the type of product they buy or sell. The Fish and Wildlife Service, for example, requires import and export permits for certain types of plant and animal species. Many forms require much of the same information, like an address, with a few additional fields specific to an agency’s area of oversight. Information will be transmitted through ACE and be automatically sorted and distributed to each relevant agency, or agencies can pull the data from the ACE Data Warehouse through a web-based interface.
The object is to enable traders to transmit information once and have it used multiple times.
Through ACE/ITDS, Customs will collect the data required on forms, as well as scanned documents via a document-imaging system, if paperwork, such as a foreign government stamp, must accompany an import or export declaration.
“It’s basically taking the regulatory requirements of 47 government agencies and converting them to a capability that can be collected through one pipe,” Brenda Smith, executive director of the ACE Business Office, said at the press briefing.
Document imaging and the interface that allows the transfer of data between CBP and other agencies are two of the capabilities that support ITDS. The third is the universal message set – data elements defined by the agencies and an ITDS board – that will be collected, stored and shared, as well as outbound codes participating agencies will use to communicate back to CBP when they make a decision to release cargo, hold it for inspection or seek additional information from the shipper.
Agreeing to a common set of data ahead of time eliminates the need for shippers to chase down a paper document to verify the product while it sits at the port of arrival, Laney said.
The standard message set continues to be refined during the programming process in close consultation with COAC and other industry experts.
The trade community for more than a dozen years has pressed the government to step up the development pace for ACE and a single window for reporting imports and exports. ACE is years overdue and well over budget, with an estimated final cost of about $3.5 billion, but CBP restructured its development team in 2011 and has since made strong strides getting the program on track.
The ITDS executive order, which was in the works for more than a year, grew out of the White House’s January 2012 National Strategy for Global Supply Chain Security, which was co-developed with the Department of Homeland Security. The document sets a goal of integrating federal efforts to promote the secure and efficient movement of goods by developing similar requirements, streamlined processes and enhanced information-sharing practices.
The National Security Staff realized that in order for the vision to become a reality, agencies needed better, more timely data to verify the contents of shipments without causing unnecessary delays, Smith said.
CBP has been leading a “One-Government-at-the-Border” initiative to develop an enterprise-wide approach to risk assessment, cargo release and trusted shipper programs, so that agencies with “release-and-hold” authority use the same decision-making criteria and tools for processing international shipments. Customs has even invited other government agencies with border interests to use its automated screening and targeting systems. ITDS serves as the foundation for that strategy, but getting other agencies to agree on a common message set and invest in systems that talk with ACE has been a slow process, according to current and former CBP officials and industry representatives advising the agency.
Trade advocates say other agencies often ignored CBP, because it didn’t have enough authority beyond its own ACE program.
The National Security Staff jumped in to direct agencies to work as a team and with the private sector to minimize red tape after Customs “identified that the inter-agency collaboration needed some support,” Smith said.
The order requires relevant agencies to transition from paper-based to electronic data collection, and provide greater transparency into their progress by public posting of implementation plans and schedules.
Customs stands ready to assist other agencies with the transition, especially smaller ones that process much smaller shipment volumes, Winkowski said.
“Some of the participating government agencies are going to need some help. And we’re willing to work with them. We’ve been in this business a long time with the Automated Commercial System and with ACE. And we’ve learned a lot over the years” about how to manage data and apply it to risk models, he said. “So we bring a lot of expertise.
“And I look at this way: If by December 2016 everybody is not up on the single window then we’ve all failed, to be frank with you.”
Customs must sign a memorandum of understanding with each agency spelling out how they will share the data and ensuring that proprietary data is protected before they can get access to ITDS. Only a dozen agencies have signed up so far, according to the ITDS board’s 2013 annual report to Congress.
The single window is actually an international principle or best practice. The United Nations and World Customs Organization are trying to push single-window harmonization around the world. Japan, Singapore, and South Korea are among the countries with a unified import/export data exchange. In North America, Mexico already has a similar system in place and Canada’s system is expected to go live by the end of the year. Officials said President Obama’s executive order signals to trading partners that they too should follow through on their World Trade Organization commitments to simplify trade. Just as ITDS standardizes reporting requirements within the U.S. government, an international movement is trying to standardize electronic data formats and customs processes across countries. Globally recognized international standards could reduce costs for traders who now must use a different format for each country and invest in different software for reporting to each country.
Two agencies — the Environmental Protection Agency and Food Safety Inspection Service — will begin testing transmissions through ACE/ITDS this spring. More agencies and users will be brought on board in the spring of 2015, according to Homeland Security officials.
Customs deployed the functionality for the two agencies to receive data in ACE in November, but they had to iron out some operational issues before the pilot program could start. The EPA will test processing of data for two forms related to vehicle engines and ozone-depleting substances at the ports of Long Beach, Calif., and Newark, N.J., while FSIS will accept certificates in Houston, Philadelphia and Champlain, N.Y., according to Smith.
Working with COAC, the EPA team was actually able to weed out some questions previously on its forms and reduce the number of data elements it will collect, Roy Chaudet, an EPA technology manager, recently remarked at CBP’s annual Trade Symposium in Washington.
Industry and government sources say EPA and FSIS are having trouble getting companies to volunteer for the pilot projects. The difficulty is partly because of the limited scope of the demonstration programs, Smith said. The commodity types are relatively narrow – the EPA form, for example, basically involves engine data for vehicles such as golf carts and snowmobiles because most auto manufacturers are exempt; FSIS is asking for certifications on dairy and meat – and there are only a couple ports where those goods can enter U.S. commerce. In addition, importers, or their customs brokers, need to have software that has the new electronic data requirements programmed into their systems that communicate with ACE, she added.
(The EPA and FSIS are among eight agencies that now receive CBP-collected data through an ACE interoperable web service. The pilot addresses collection of unique information required by those agencies.)
ACE is the automation component of the streamlining effort, but the BIEC is the senior leadership body where differences in policies and enforcement processes can be ironed out so field inspectors are operating from the same playbook. It is tasked with developing risk management principles for segregating cargo, ensuring efficient processing of shipments, furthering automation and elimination of redundant tasks, studying greater use of electronic payment of duties and import fees, and undertaking other trade facilitation measures.
“Achieving the kind of broader trade transformation [desired by industry] requires enhanced cooperation among border agencies,” Timothy Skud, deputy assistant secretary for tax, trade and tariff policy for the Treasury Department, and chairman of the ITDS board of directors, said at the Feb. 20 quarterly COAC meeting.
The full benefits of ITDS will only be realized if agencies are following a risk-based approach in line with CBP’s operating model and the National Strategy for Supply Chain Security, which could result in some release decisions being reduced from days to hours or minutes, Ellen McClain, deputy assistant secretary for trans-border policy at DHS, added.
“We see ITDS as being just as important as ACE because companies run into delays and incur costs primarily due to other government agencies, not Customs and Border Protection,” Marianne Rowden, president and chief executive officer of the American Association of Exporters and Importers, said in a statement.
The problem is not limited to the United States. According to the World Bank’s annual survey of logistic professionals, they typically are much more satisfied with customs than other border management agencies in a particular country. Customs directorates often have employed IT systems to process declarations, use some form of risk analysis to target inspections where needed, recognize the need to balance control functions with keeping trade flowing and are guided by international standards developed by the WTO and WCO. But many other agencies with border responsibilities have not updated their processes and procedures for the modern world.
Industry groups have complained that the Food and Drug Administration, for example, stops too much legitimate traffic without good reason because its automated screening engine has its filters set too high. The PREDICT system assigns risk scores to products based on factors such as their source, type and history, but mismatched information often triggers delays.
About 40 percent of FDA-regulated products are held, mostly for administrative reasons, an industry working group said in a 2012 report to the agency.
Separately, the Express Association of America – representing the four large integrated express carriers – identified 52 percent of 16,000 regulated shipments moving through member networks during a one-week period that year were held for review. One-third of those were subsequently released, usually within several hours, without any further action by the importer or communication from FDA, such as a request for additional information.
Sixty-eight percent of the holds resulted from requests for missing documents, which resulted in release once they were provided. Only 2 percent of the shipments were actually inspected and only 0.2 percent, or 14, of the 8,327 detained shipments were refused entry because they violated health or safety regulations. Non-compliant shipments represented 0.1 percent of the total volume of FDA-regulated goods transported during the week, according to the Express Association of America’s data.
The average delay for release was two days.
Having agencies manage imports in a way that is not compatible with CBP’s system “creates confusion at the border,” Laney said. The executive order gets agencies out of their silos instead of waiting for Congress to pass a Customs reauthorization bill, which has been stalled in the Senate for four years, he added.
“Where overlapping regulatory authorities exist, so do opportunities to streamline. Safe, compliant trade moved faster across the border and across the country will support a vibrant and resilient economy,” Winkowski said in his address to 800 industry representatives attending the Trade Symposium.
ITDS makes it easier for agencies to consider account-based processing instead of scrutinizing every shipment, Laney said. Several business groups are pushing to create certified importer programs loosely modeled on the Customs-Trade Partnership Against Terrorism under which companies that provide more commercial and security information about their products and supply chains ahead of time get their goods cleared faster. For some within the trade community, ITDS, while a nice step forward, is still too focused on processing cargo by the sip.
Much work remains to achieve the vision of “One Government at the Border,” those involved in the effort say.
“It is imperative that the trade community and government agencies establish a mutual understanding and expectations for the future of data exchange and cooperate to achieve the appropriate risk-based standards that secure cargo movement and facilitate trade at the speed of business,” COAC member Susan Hoeger, director of global trade compliance and policy at Abbott Laboratories, said.
One thing importers should bear in mind with full automation is that brokers will likely key in data now for forms that previously were completed by the shipper and handed to the broker to deliver to Customs with the entry, Susan Kohn Ross, a Los Angeles-based trade attorney at Mitchell, Silberberg and Knupp, said in an interview. Brokers may start charging for that service and there also could be normal data entry errors, she explained.
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