Proposal intended to transform customs clearance for highly compliant firms.
UPS is shopping around to customs authorities a new process for accelerating cargo release at the border as a carrot for companies with excellent compliance profiles, but it’s unclear yet whether the proposal has broader industry support or is considered viable by government regulators.
The Atlanta-based parcel delivery and logistics company developed the concept and has enlisted the Global Express Association, which represents the four main express carriers in international forums, to provide a bigger megaphone for its idea.
The Accelerated Border Clearance model, or ABC, essentially would create a super “green lane” for pre-certified companies by streamlining the clearance process for those that provide advance information, and basing release decisions on a company’s account history, not each import transaction.
U.S. Customs and Border Protection, for example, is gradually implementing account-based management as part of its business transformation effort, but that approach is mainly applied to a company’s overall performance supplying post-entry documentation related to duty calculations and monthly revenue collection rather than for release of goods into commerce. Nonetheless, trade experts are thinking of ways to implement account-based clearance processes.
“What we need is a system that gets us out of the transactional clearance process to a true account-based process,” Norman T. Schenk, vice president for global customs policy and public affairs at UPS, said in early May at a supply chain summit hosted by the U.S. Chamber of Commerce in Washington.
As a third-party logistics provider that ships freight as well as parcels through its own express delivery network, UPS is hugely concerned with moving cargo faster to customers. Speed is the company’s value proposition. While large companies may be best suited to meeting criteria for accelerated clearance, UPS and others are also lobbying Congress to reduce barriers to small business commerce by raising the minimum value at which customs duties are imposed on imported goods. The current threshold is $200 and trade advocates want that bumped to $800 or $1,000 to spark exports from companies that fear the complexity of customs compliance.
President Obama’s recent executive order setting a Dec. 31, 2016 deadline for dozens of federal agencies to have their systems ready to regulate import and export transactions through a common, government-wide data-transmission pipeline is a step forward, but doesn’t go far enough, Schenk said later in an interview.
The single window data exchange, technically known as the International Trade Data System, is designed to streamline communications and save time for shippers and the government. Having one information clearinghouse for traders and release decisions by the government eliminates the filing of redundant information to multiple agencies with inspection, revenue-collection and statistical functions.
Under current practice in the United States, imports go through a four-step government process. Advance security filings for ocean shipments (ex. Importer Security Filing) and air cargo (Air Cargo Advance Screening program – voluntary but soon to become mandatory) are electronically transmitted to CBP prior to vessel loading, or aircraft departure, for security targeting. The customs entry is then filed prior to arrival along with any forms required by other government agencies, depending on the product, to secure release of the goods. CBP reviews the entry data and releases the goods under its jurisdiction, or inspects them. Other agencies do the same for goods they oversee, although each operates separately and on its own timetable, which means goods could get the green light from Customs and still wait for entry approval from other parts of the government. Finally, the importer or its agent must file an entry summary within 10 working days of entry with additional data about the commodity so CBP can assess duties, collect statistics and determine whether other requirements of law have been met.
The single-window system will enable intra-agency entry documentation and release decisions to be consolidated, eliminating one step from the process.
But UPS says the process can be further streamlined for best-in-class traders by eliminating the need for clearance when goods arrive at the U.S. port.
Companies would still submit advance data for security purposes, but those that have undergone intensive pre-certification of their organizations, commodities and supply chains would be eligible to receive umbrella clearance for their goods at the overseas port of origin. Freight forwarders and customs brokers like UPS would transmit the ISF/ACAS filings, as well as their customer’s trusted trader number, or flag. Importers or their service providers would then roll up several weeks of entry summary data into one document filed monthly or quarterly and make deferred duty payments. The concept is inspired in part by foreign trade zones where companies are authorized to make bonded direct delivery from the port to warehouses in the zone and then submit a consolidated, weekly entry summary to Customs for goods taken out of the zone.
To qualify for ABC treatment, importers would have to participate in a nation’s voluntary supply chain security program based on World Customs Organization standards, such as the Customs-Trade Partnership Against Terrorism in the United States. Companies would also have to be certified as authorized traders, meaning they belong to programs such as Importer Self-Assessment that offer less bureaucratic scrutiny if strong internal controls to ensure trade compliance and self-reporting of violations to customs authorities are in place. Lastly, importers would have to file all clearance documentation by electronic means.
C-TPAT is a form of account-based processing as it relates to risk management. Companies that have passed reviews of their supply chain security infrastructure are granted reduced scores in the targeting system for their cargo. But clearance is still granted at the shipment level.
Accelerated clearance would also incorporate other government agencies that would pre-screen shippers.
“The account model is applied to risk management through risk assessment models that consider the full historical context of all that is known about the importer and other parties associated with the shipment—across government agencies. These models are much more effective at risk detection and mitigation than static, rules-based regimes that assess the import transaction in isolation,” a team of IBM consultants wrote last year in a white paper on collaborative border management.
When shipper account data, including compliance history is shared in centralized repositories, then advanced risk analytics can be performed with fewer false positives and negatives and result in more rapid discovery of relationships and patterns of noncompliance that can be used to improve detection rules and models, according to the paper. Under one scenario, “the combination of Customs and agriculture performance data from the importer and carrier could reveal a level of risk not detected in either agency’s system, producing an inspection that detects a noncompliant shipment posing a bio-security risk to the market.
“Account-based clearance processing extends the traditional single window philosophy because it gives a single view of the customer to the government, rather than give a single view of the government to the customer,” they said.
Such a system is important because an importer’s compliance history might raise a red flag even if shipping documents appear low risk, according to IBM. Furthermore, it recommended that shipment analytics utilize all available data across government about each specific trader to get a complete picture.
Schenk, who has briefed CBP Commissioner Gil Kerlikowske about the ABC concept, said new U.S. Customs initiatives aimed at simplifying the import process and reducing costs aren’t connected in a way that brings material benefit to shippers. And C-TPAT and ISA have plateaued in membership, falling far short of expectations. Schenk suggested expedited clearance would make it worthwhile for importers to join the industry partnership programs.
“This really is a win-win-win all the way around. It will allow Customs to stop spending so much time on each transaction for highly compliant companies. It would also allow them to shift focus onto higher risk companies and shipments,” Schenk told American Shipper.
“I’ve been in the business over 35 years and this is the first thing I’ve seen that would truly be transformational and drive economic growth because it will reduce bottlenecks at the border,” he added.
Schenk said the base architecture of CBP’s Automated Commercial Environment (ACE) can support any new ABC processes, but would require some modification.
The World Customs Organization, and customs authorities in the United Kingdom, Russia, New Zealand, Ghana and Canada have reacted positively to the proposal and UPS is now trying to identify countries willing to set up a pilot program and test the ABC concept with live shipments, Schenk said.
A WCO spokesperson referred inquiries to the Global Express Association.
ABC bears similarities to a Certified Importer Program previously envisioned by some large shippers that would allow vetted companies with strong compliance regimes to obtain consolidated releases at the port of final departure from all agencies with jurisdiction over imports. The release would resemble a pre-admission privilege that could be overturned upon arrival if any agency suspects a problem with a shipment.
The idea remains valid given CBP’s sophisticated automated targeting system, although it’s possible that certain commodity groups or origin locations wouldn’t be eligible for expedited, pre-clearance, according to a former high-level CBP and industry official who didn’t want to be named because he was unfamiliar with the UPS proposal.
A “green lane” would primarily benefit large importers that tend to control their supply chains from beginning to end, but it would only work for routine shipments, Susan Kohn Ross, a Los Angeles-based international trade attorney, agreed. Some products would not be good candidates for blanket clearance.
“The key is setting the criteria for the program so the benefits are available to a company based on its compliance efforts and not its size,” she said.
Creating a government-wide advance clearance system, Kohn Ross added, would be difficult until other agencies with import oversight have trusted trader programs of their own. The Consumer Product Safety Commission would be a good candidate for such a model because it has partnered with CBP on a limited ISA-style pilot program modified to vet companies for their import safety practices, she said.
Meanwhile, CBP is already working to couple C-TPAT and ISA into a true trusted trader program (See “U.S. agencies to test integrated trusted shipper program”), which seemingly would address some of the trade facilitation improvements sought by UPS.
And it is running a pilot program in the air cargo environment to test the filing of simplified entries that require fewer data elements to get one’s cargo released at a port of entry. Shippers or customs brokers only need to submit about half the information required on the standard customs entry. By doing so early they can get before take-off a “conditional release” for cargo pick-up in the United States. That is followed by a final release message to the filer once the carrier has transmitted the manifest and flight information. The trial’s goal is to give shippers more predictability about when they can claim their cargo by clearing up any data shortcomings or questions early in the supply chain to avoid costly freight delays upon arrival. It also benefits cargo security efforts by electronically delivering more advance cargo information to CBP’s targeting center to analyze for clues about potential smuggling by criminals or terrorists.
CBP is building the simplified entry filing into the ACE system because it plans for simplified entry to become a regular part of cargo release.
Schenk argued that simplified entry is still geared toward transactional-based clearance. UPS rarely uses it because it has no tangible benefits, he said.
CBP’s public affairs office could not provide anyone familiar with ABC to comment. In the past, officials have been adamant that they need data for each transaction.
Michael Mullen, executive director of the Express Association of America, said ABC has not been discussed within the organization, but said it’s an approach that seems to make sense since so much customs data is already required before departure.
But a customs broker familiar with the UPS proposal said it is fraught with risks for the government and of questionable benefit for transportation providers.
CBP, for instance, needs more underlying commercial information closer to the release period to make good decisions about admissibility, explained the broker, who asked to remain anonymous so as not to jeopardize relationships with the agency and express carriers. The value, entry type, more detailed tariff number, and whether a product is subject to antidumping duties are examples of data not included in the ISF or ACAS filing, or are given in preliminary form since CBP asks for the best available information at time of transmission, followed by updates with more accurate data. Also missing from the security filings is any information collected by other government agencies as well as low-value parcel shipments that are only listed under an express carrier’s manifest filing.
Separating the release from the entry/entry summary would hinder the ability of Customs and partner agencies to make risk determinations for intellectual property violations and product safety, especially since some agencies rely on the entry summary and can’t wait weeks for a summary filing to get a clear picture of what is being imported, according to the broker.
(Not all agencies have release authority, but have authority at a later time to take action related to issues such as licensing or distribution of goods within the United States. They, therefore, are not linked to the entry information.)
“Is it classified correctly, is the valuation accurate, does it qualify for a trade preference program—those things can be done later. But if the car seats coming in are not safe, that’s not something you want to find out later,” the broker explained.
“And this quarterly filing—you’d have a hard time making that fly with Treasury because it would impact the flow of money,” the broker said. “Sureties aren’t going to go for that either.”
UPS also touts ABC as a cost-saving measure because of the reduction in entry summary filings, but the broker said the amount of work that goes into filing an entry is essentially the same because brokers have to account for the same number of commodity lines whether they file daily or periodically.
“So it’s not going to reduce the level of work that I’m going to have to do. It’s not necessarily going to be cheaper for importers. And if Customs has a concern about this large filing then it has to dig down through many levels to figure out which shipment has a problem, so it’s not necessarily easier for them either,” the source said.
The trade specialist noted that after the Sept. 11, 2001 attacks, CBP scaled back the line release program for truck and rail on the northern border, which essentially allows repetitive, high-volume shipments of things such as concrete from the same origin to the same destination, that aren’t subject to any other government agency authority, to be released with a simple scan of a bar code affixed to the commercial invoice. The bar code includes information such as the name of the importer, type of commodity and tariff number so they don’t have to be keyed in each time. But CBP discovered that carriers were slapping the bar code on paperwork for all kinds of shipments.
ABC “is a kind of line release for international shipments and I don’t see it working properly,” the broker said.
Line release has also become less important in recent years with more information transmitted earlier by the importer and carrier through the ACE electronic manifest.
“I really see this [ABC] as trying to limit the information for release, which doesn’t make sense when Customs is going in the opposite direction, trying to get more data about the parties involved and the commercial aspect because they want to combat copyright infringement, fraud and antidumping duty evasion. They are trying to prevent that before the goods get in the country because once they are in they can have an impact on health, safety and the economy. They want to determine these things more accurately and efficiently without imposing undue burdens on the trade,” the broker said.
Brokers are likely to view ABC as a threat to their business model because it would reduce the amount of document preparation and handling they do for clients.
This article was published in the August 2014 issue of American Shipper.