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Managing Customs and PGAs - A Total Perspective for Importers

There is a complex relationship that exists between traditional full service customs brokers and their customers (the importer), and technology is beginning to dramatically impact this relationship.

Ned Blinick

Chief Product Officer

This past Thursday, we hosted a webinar for importers on Managing Customs and PGAs - A Total Perspective for Importers.  The webinar registration went well beyond our expectations and we ended up in an oversubscribed position.  While we are thrilled that the topic was of such interest we are disappointed that we could not accommodate everyone who tried to attend and were turned away.The topic was presented by Gregg Cummings, the managing partner of Strix LLC.  What makes Gregg a great speaker on this topic, besides the fact that he is articulate yet folksy, is that he is in the atypical position of being a LCB, running a full service customs broker and a major ABI self-filing service provider.  From his position, he has a unique perspective on the complex relationship that exists between traditional full service customs brokers and their customers (the importer), and how technology is beginning to dramatically impact this relationship.

How the changing CPB ACE Single Window is impacting the Importer - Customs Broker relationship

  • As background, Gregg pointed out how several key factors taking place at CBP and the PGAs (Partner Government Agencies) are changing this relationship.  ACE Single Window: On February 19, 2014 President Obama issued an Executive Order mandating CBP and the PGAs to implement the International Trade Data System (ITDS) through the ACE Single Window concept.  This action mandated that business file all customs and PGA related activities through CBP and that information is then disseminated to the proper PGA.  The ACE Single Window is in the final stages of implementation and when it is fully effective it will change the way government agencies are able to interact with, monitor and profile the importer, carriers and other trade partners.
  • CBP is ramping up its role on enforcement.  Enforcement had taken a back seat to import and trade security following the tragic 9/11 terrorist attack.  Prior to 9/11/2001 CBP reported to Treasury and their main focus was on enforcement and collection of duties and taxes.  Post 9/11 when they were moved to the Department of Homeland Security their focus switched to security at the expense of enforcement.  That is now changing and enforcement and revenue collection are moving back into focus.  This means that the importer can expect greater scrutiny from CBP and PGAs at the border (physical exams) and revenue collection and penalties for lack of compliance.
  • Mod Act puts the responsibility on the importer to exercise Reasonable Care.  The Mod Act is not new.  However, with the implementation of Ace Single Window and the reupping of trade compliance enforcement by CBP the ground is shifting under the importer.   More and more, CBP expects that the importer is the party responsible for what happens to their products and the declarations made on the entries when clearing the goods.  Less and less responsibility lies with the Customs Broker although they are still regulated and held accountable if they don't manage their business affairs correctly.  This shift changes the dynamic of the import/customs broker relationship.  The thing is that, today most customs brokers and importers don't recognize how much the relationship is changing and how technology is accelerating this change.  But that is changing.

Data Control is foundational to managing trade compliance ... well

Gregg then went on to discuss how the amount and quality of data required to support a Single Window entry directly impacts the relationship with, and the cost structure of the customs broker/importer relationship.   He paraphrased a James Carville comment "It's the economy stupid!" (do you know James Carville? ... https://en.wikipedia.org/wiki/It%27s_the_economy,_stupid) to 'It's the data stupid' to emphasize the critical importance that controlling data has to the importer in insuring that the information submitted to the customs broker, and ultimately customs, is correct.The two elements that are foundational to trade compliance data control are the Account and Product records.  A major challenge is that most enterprise, financial, or PO systems don't have account and product record tables that are robust enough to support the requirements of trade compliance which include not only CBP information but all the PGA details.  Without a system to centralize corporate trade compliance data and automate trade compliance process the need for using off-systems tools such as a spreadsheet becomes the de-facto fallback position.  While spreadsheets are powerful tools, they are notoriously poor at ensuring data is controlled and well managed.   With comprehensive internal account and product record control the importer is able to consistently and accurately manage the information they provide to their customs brokers, or customs and PGA agencies.Taking charge of the account and product records is critical to really managing and controlling trade compliance data.  With it you exercise the highest levels of "Reasonable Care" and can really own the relationship with the customs broker.

How does CBP ACE One Window and Data Control change the Importer - Customs Broker Relationship?

Gregg then neatly explained how the importer, with the ability to control trade compliance data centrally and accurately, can change, to their advantage, their relationship with the customs broker.  A customs broker, like most professional services companies basically base their fees on time and material.  The more time it takes them to manage the information related to the accounts and products ... the more they charge.  The more time it takes to prepare and entry ... the more they charge.  The additional time it takes to correct entries ... the more they charge.  So, to change the relationship, the more the importer can reduce the amount of  time a customs broker needs to spend on their entries the greater the advantage for the importer to renegotiate the fees per entry.  Simple enough, but often difficult to implement.The first thing Gregg laid out was how with real data control the importer increased the number of options available to interface with CBP's ACE One Window. He laid out 3 basic options for dealing with a customs broker:

  1. Continue using the customs broker in a traditional way - preparing and filing the security (ISF), Customs (Entry and PEAs) and PGA filings. - This is the option for most companies.  Our experience shows that most importers are not yet comfortable with the concept of self-filing.  However, even in this traditional relationship the opportunities for the importer to take control are significant.
  2. Provide complete and updated account and product records to the broker regularly so that their staff will not have to do this work.  If you can supply it through an electronic or spreadsheet upload - even better (more leverage).
  3. Provide a comprehensive broker advice along with the supporting documentation.  This should include all the account, product and logistics information needed to support the entry for security purposes, customs and PGAs.  The information required includes Product descriptions, proper customs and PGA units of measure (UOM), HTS codes, Special program control, PGA specific profiles, etc.  With comprehensive product and account records in a centralized data repository this is really simple (more leverage).  Spreadsheets make it nearly impossible to control adequately (less leverage).  If you can supply it through an electronic or spreadsheet upload -much, much better (substantially more leverage).
  4. Provide an electronic entry feed for all security, customs and PGA entry files along with PDF copies of all supporting documents so that the customs broker does not need to enter any information - (dramatically more leverage)
  5. Become a self-filer, excluding the customs broker Submit an electronic entry feed for all security, customs and PGA entry files to an ABI service provider eliminating the customs broker.  File supporting e-documents in your automated solution. - Total control, lowest cost
  6. Create a hybrid approach where a customs broker is used in certain more complex situations and self-filing is executed in simpler shipments.

The Take-Aways

  1. Technology is providing opportunities for the importer to take control over their trade compliance processes in a way not possible several years ago.  The move to the CBP ACE Single Window by CBP and PGAs is a manifestation of the current state of technology.
  2. The importer now has access to trade compliance technologies that allow them to review their processes to better control and manage their customs and PGA information.  For trade compliance, control means being able to centralize and manage both the account and product records so that all necessary Customs and PGA information is available to support an import entry through ACE Single Window.
  3. Solutions, such as 3rdwave, are now available to importers to allow them to provide all required information in an electronic format to the ACE Single Window through a customs broker or directly through an ABI interface.
  4. With control over the account and product records and the ability to provide comprehensive information electronically to customs the relationship between the importer and the customs broker can and will change substantially over the coming years.  The way an importer structures this relationship will depend on their comfort level in dealing with customs.
  5. CBPs ACE Single Window and current trade compliance technologies provide the importer the ability to dramatically reduce the cost of customs clearance while substantially increasing the importers level of trade compliance.

At 3rdwave we are continually putting on webinars to inform and educate the trade community.  We hope that you were able to attend the webinar or see the recording and that you got value from it.  If you have any comments or suggestions for future webinars, please don't hesitate to let us know.

Ned Blinick is Chief Product Officer of 3rdwave.co.  He has been involved in global trade for too many decades and he loves making the global supply chain simpler for everyone.  If you would like to engage with Ned he would really enjoy the opportunity of communicating with you or your boss.  He can be reached at (416) 510 8800 ext 234 or at eblinick@3rdwave.co