January 1, 2004

Nowhere to run, nowhere to hide

By DC Velocity Staff

Nothing's exempt from U.S. Customs' scrutiny these days. Up until last month, only oceangoing cargo arriving at U.S. ports was subject to advance security screening, while exports and materials moving by air, rail or truck got a free pass. But that's all changed. Rules took effect last month that require that advance manifest information be transmitted to U.S. Customs for cargo coming into the country by air, rail and truck as well as for exports. The rules represent the next step in the Department of Homeland Security's efforts to prevent terrorists from using the international freight system to sneak weapons into the country or to smuggle strategically important materials out.

In the short term, at least, the rules mean shippers can expect to put in longer hours as they scramble to meet new and strict timetables. The U.S. Department of Customs and Border Protection says it will process the advance cargo information through an automated targeting system linked to various law enforcement and commercial databases. The result will be additional pressure to hit the deadlines, says John Urban, president of global supply chain software maker GT Nexus. "From an internal processes point of view, you will have to tighten up the processes so you have 100 percent of the information on time."

How difficult will it be to comply with the rules? That will depend on how well shippers are already prepared to move data to Customs electronically, says Beth Peterson, a vice president of Open Harbor, a company that provides Web-based international trade services. "Companies that are already providing advance manifests should not have any problem," she says. "Those without that ability may find their cargo has to sit for several hours. That could cause huge delays."

The problem could be especially vexing for importers with a complex supply chain involving unsophisticated vendors. "If you don't do something right, the freight won't move," Peterson says, "but if you comply and have the right duty rate, Customs will expedite the shipments." She urges companies to make sure their product descriptions comply with terminology acceptable to Customs. The days of "freight—all kinds," she notes, are gone.

As with any new system, it could take some time to work out the kinks. Urban says that when the ocean rules were first implemented, they added two to four days to the supply chain to ensure compliance. "It took some time to squeeze those days out," he says.

And although companies are likely to incur added costs—both through processing expenses and through the inevitable delays—Urban believes that the new demands for accurate advance information could result in greater supply chain efficiencies for those businesses that rise to the challenge. "In the long term," he says, "what ends up happening is that as shippers are forced to invest in their supply chain capabilities, they end up gaining efficiencies as well."

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