'10+2' customs rule could bode ill for tech costs

A new rule proposed by the Department of Homeland Security would, according to some industry groups, kneecap the tech-manufacturing industry's "just-in-time" cost-management strategies.

The SAFE (Security and Accountability For Every) Port Act of 2006 is best known to many tech folk as the bill that hamstrung most online-gambling sites. However, US hardware manufacturers may soon feel the hurt, as new efforts to address potential attacks via the nation's ports and borders lead to claims that the changes the US Dept. of Homeland Security wants will add costs without raising safety.

The new "10+2" rules would require that all cargo entering the US have additional information on file electronically. The "10+2" moniker comes from the 12 pieces of data required: 10 facts from the importers (manufacturer or supplier name and address, seller or owner name and address, buyer or owner name and address, ship-to name and address, container stuffing location for consolidated containers, consolidator name and address, importer of record number/foreign trade zone applicant identification number, consignee number(s), country of origin, commodity Harmonized Tariff Schedule number) and two from the carriers (vessel stow plan explaining where each container sits in the ship, log of any changes to container locations or contents).

The 10 items in the "Importer Security Filing" section of the filing would have to be on file even before the ship leaves the port of origin, and it's the newer portion of the process; currently, Customs mainly uses manifest information provided by the carriers. In the case of just-in-time inventory systems, which thrive on multiple relatively small shipment sizes and as few impediments to the system as possible, the potential for records-keeping glitches combined with the need to file all the "paperwork," every time, for every transaction (no matter how mundane) is potentially disastrous.

The National Association of Manufacturers has been leading the charge against the new rules. NAM touches on security in its office public-policy position papers, saying, "The NAM believes that increased security at our borders and the efficient flow of goods across our borders are not mutually exclusive objectives. While fully recognizing the need for enhanced security, the NAM believes it is important to seek a better balance of trade and security objectives at US borders."

NAM officials indicate that they feel the logistics of implementing and following the new rules could cost the general US economy as much as much as $20 billion every year, without removing a compensatory amount of risk.

Comments submitted to Customs and DHS are for the most part displeased, and not only for NAM's reasons.

William Ma of E-Freight Technology pointed out that among Asian firms, "Many of the shippers and forwarders are worried that their businesses will be compromised because not only will the ocean carriers charge them much more for each...Security Filing, but also of the possibility of sensitive supply chain data getting leaked out as it exchanges hands in submitting each filing."

Kenneth P. Timmons of Western Overseas Corporation noted that rules currently in place, such as the 2002 Container Security Initiative and the C-TPAT (Customs-Trade Partnership Against Terrorism) program launched in late 2001, have made "significant strides" and accomplish, when properly managed, everything the new rules could. He also notes that the "simple" fact of addresses can be rather murky for manufacturers and importers with multiple facilities.

Organizations lobbying against the 10+2 system are asking that at the very least the implementation be slowed down to provide time for a pilot program to test things out -- no pilot program has been tried, and impact statements detailing the effect on business and trade have been sparse.

Mary Anderson of the Canadian Association of Importers and Exporters warns that it's not just the impact on businesses that hasn't been thought through, saying that the system as proposed "raises the concern that not only will additional costs and delays be imposed on business, but US Customs and Border Protection [CBP] will not be making the most effective use of its own limited resources."

However, it is believed that the program is being fast-tracked in order to put it in place before the end of the Bush administration.