An emerging efficiency dividend

An emerging efficiency dividend

Ever since Customs and Border Protection Commissioner Robert Bonner first announced the 24-hour rule in August 2002, the program has faced a steady barrage of criticism that it fails to protect the nation from weapons of mass destruction that could be hidden in ocean cargo containers. Chief among the criticisms is the supposed weakness of the cargo information that ocean carriers must file with the government 24 hours before U.S. import cargo is loaded on a ship at a foreign port.

The information comes directly from bills of lading - a transport document that has historically been rife with inaccuracies because of sloppiness or intentional misrepresentation by shippers seeking a lower freight rate. "CBP's strict reliance on manifest data provided by the shipper creates an enormous hole in our port-security system," Sens. Susan Collins, R-Maine, and Joseph Lieberman, D-Conn., wrote in an Oct. 28 letter to Asa Hutichinson, undersecretary for border and transportation security.

Some have argued that the Department of Homeland Security should base its targeting on information contained in the import declaration, which traditionally has been more accurate and information intensive.

Yet some are saying, "Not so fast." Despite weaknesses of manifest data, the required use of the information and the computer system the data is being funneled through - Customs' Automated Manifest System - is beginning to yield tangible, systemic benefits to the importing process. So much so, some argue, that an elusive efficiency dividend - widely anticipated as a result of new security requirements but long in taking shape - may finally be emerging.

What is happening, some say, is that AMS is becoming an industry-wide visibility tool. That is a result of Customs' requirement that AMS be the system through which shipment information is submitted to comply with the 24-hour rule. Information on individual shipments, not just consolidators' master bills, must be entered into AMS. Use of the system is being opened to additional parties in the intermodal chain such as non-vessel-operating common carriers, truckers and container freight stations. Some go as far as to say that the industry is seeing the creation of a de facto information technology standard for carriers, importers and logistics companies.

"AMS may not be the best mousetrap for security, but it's what we have right now, and it is certainly providing order," said Tom Outwin, vice president for strategic planning at IES Ltd., a Midland Park, N.J., company that provides software for NVOs, forwarders and customs brokers. "The key message is that the industry's varying attempts to standardize things have invariably failed. This one might succeed in standardizing the process, because it's by regulation."

Because the information about individual shipments resides in AMS, it's available to be reused later in the supply chain in the creation of documents such as in-bond forms. The ability to use existing electronic data to create documents increases their accuracy and reduces the odds that cargo will be delayed. The fact that the 24-hour rule requires shipment information to be entered into AMS earlier in the supply chain makes the data more useful in facilitation of imports.

The in-bond process provides the most vivid example of how AMS is beginning to grease the importing system. In-bond movements are estimated to account for over half the cargo entering at key container gateways. Uncleared ocean containers moving inland via truck or intermodal rail almost always do so under an in-bond entry, in which customs duties are guaranteed by the carrier's bond. A key benefit of in-bond is that it delays official customs clearance and therefore the deadline by when importers have to pay duty.

But difficulties with the in-bond process have cropped up frequently. Those problems, however, are beginning to be rectified on a large scale by the expanding access to, and use of, AMS. A key problem was that AMS was limited to users with a direct connection, such as customs brokers who access AMS through the Automated Broker Interface. Few other key parties in the intermodal chain, such as truckers or container freight stations, invested in software to achieve direct AMS connections. They usually had no reason to do so because ocean carriers handled in-bond documentation themselves.

When CFS stations created documents to transfer uncleared containers out of the marine terminal, they had to do so with information provided to them by brokers via telephone or fax, an imperfect system that often resulted in documents with errors.

Three things have changed. First, Customs used to care little about the accuracy of in-bond documents, but since Sept. 11 the agency is much less tolerant of errors in key in-bond documents such as the Permit to Transfer. Even a small detail in a Permit to Transfer document that differs from the information in AMS will be enough for the transfer to be denied. That was made evident in late October when harbor truckers in Miami nearly staged a strike over fears they would be turned away from the port after waiting hours in line due to increased scrutiny of documentation.

Second, since a headquarters directive was issued August, the handling of in-bond documents by Customs officials is being made uniform around the country. Previously, the level of scrutiny applied to in-bond documents differed significantly among the various Customs districts.

Finally, CFS stations and truckers are obtaining direct access to AMS over the Internet, using software provided by IES, Nashua, N.H.-based TradePoint Systems and other software firms focused on the NVO and customs market. Truckers can get similar access for the Form 7512 in-bond document they generate, and can use software services to submit the forms to Customs and obtain an immediate approval. Because the underlying data about the shipment has already been keyed into AMS, the documents the truckers generate can be produced largely error-free. "All we do is match up the in-bond to the AMS bill that Customs already has, so there is limited data entry," Outwin said.

Trade industry leaders agree the automation of in-bond documents, an area that had been largely left outside the broader Customs automation trends of the past 20 years, will improve the overall importing process. The bottom line is one to which any logistics manager can relate: Delays will be minimized and cargo will move more swiftly. The use of electronic data for in-bond shipments will be required at land borders early next year under provisions of the 2002 trade act.

"Certainly things are going to start with AMS. The ability to connect other, allied organizations - truckers and CFS stations and so forth - is going to allow for much more transparent dealing with the data elements and should result in smoother processing and delivery," said Peter Powell, president of C.H. Powell & Co. in Westwood, Mass., and chairman of the National Customs Brokers and Forwarders Association of America. "The more folks that are electronically connected for the use of the data, and the one-time input of the data can only help moving the cargo at a quicker pace."

Others agree the adoption of electronic tools in the in-bond area will provide lasting benefits. "In-bond always seems for whatever reason to be a stepchild that doesn't appear to be part of the mainstream," said Jerry Peck, president of Global Trade Management Systems in Chicago. "But intermodal is such a vital part of this industry. It's a natural and obvious step in this whole evolution of trying to go paperless."