CBP makes late push for 10+2 rejects pilot concept

U.S. Customs and Border Protection officials believe they still have a narrow window to release a rule requiring advance international shipment data from importers despite a general Bush administration deadline for agencies to wrap up new rulemakings by the end of October.

The agency has spent two years developing the so-called 10+2 rule designed to obtain more reliable information on inbound cargo that can be plugged into its automated risk assessment system for flagging containers to inspect. The international trade industry is split over the controversial rule, with many concerned that the burden of compliance outweighs any security benefit and could unduly impact smaller companies without the resources to track down information on overseas suppliers and logistics providers. Others see it as a better alternative than inspecting every container for terrorist connections and an opportunity for businesses to gain better control of their supply chains.

CBP had hoped to activate the Importer Security Filing rule by late summer or early fall after submitting it to the Office of Management and Budget for final review. Commissioner Ralph Basham, who held a roundtable interview Friday with reporters in his office to coincide with the agency's annual Trade Symposium, expressed hope that there is still time to issue a 10+2 rule.

We're still working, the department (of Homeland Security) is still working, OMB is still working on this issue. I think we've got about another week or so still to work this, he said.

The administration's self-imposed deadline is intended to make sure that new rules aren't easily frozen by a new administration. Many regulations do not take effect until 60 days after they are published and presidents in the past have issued moratoriums on last-minute rules issued by their predecessor. A new president will be inaugurated on Jan. 20, meaning a rule would have to be completed before Nov. 19 at the latest. It's not clear what the administration considers a final cut-off date.

Asked if 10+2 would automatically spill over into 2009 if not completed in the next few days, Assistant Commissioner Thomas Winkowski said, I wouldn't quite say that.

Winkowski, who is in charge of field operations at ports of entry, also said any rule would be in final, rather than interim, form.

Last week, House Ways and Means Committee Chairman Charles Rangel, D-N.Y., and other committee leaders asked CBP to issue an interim rule and conduct a limited prototype to test in a controlled fashion how importers can collect and electronically transmit the new data elements. An interim rule has the full force and effect of law, but allows agencies to gather extra public comment and make revisions before issuing a final rule.

Many shippers and their international agents are worried about programming costs, third-party filing fees, and cargo delays while importers track down origin and destination information that may not be readily available through normal business channels. Under the proposal, importers must submit 10 types of data about their overseas suppliers and domestic customers 24 hours prior to vessel loading in a foreign port. CBP has said it plans a one-year phased enforcement period to give companies time to adjust to the rule before penalties are issued, but concerns persist that many companies will find it difficult to comply.

Several industry groups have pressed CBP in recent months to first conduct a pilot, allow importers the option to pre-file repetitive information on an account basis rather than submit a filing for each transaction, complete a new cost-benefit and feasibility analysis, and give trusted traders in the Customs-Trade Partnership Against Terrorism extra flexibility to file data post-departure.

An interim final rule would allow industry to see the details of the data requirements and give them time to develop or adapt their systems and software to properly transmit the filing, according to proponents.

The trade associations have claimed DHS has underestimated the rule's full impact on industry. CBP's original economic analysis said the rule will cost industry from $390 million to $630 million per year, but import professionals say the analysis failed to account for indirect costs such as delays to consolidated shipments, cargo storage, new information technology systems and extra inventory holding.

Several weeks ago an industry coalition estimated in a letter to CBP that the rule could collectively cost the trading community more than $20 billion a year.

A contributing factor holding up 10+2 is disagreement within the administration about the rule's economic impact. The Treasury and Commerce departments, as well as the U.S. Trade Representative, are heavily involved in the discussions with the White House, and have calculated much higher costs than CBP, according to industry sources close to the situation.

Basham said CBP is not doing a new economic analysis, but is trying to refine the various cost figures presented for 10+2.

Agency officials last week warned again that if continued lobbying is successful in killing 10+2 then industry faces greater likelihood of 100 percent screening of all containers to meet a 2012 congressional mandate. The Importer Security Filing gives CBP the best case for demonstrating to Congress that it has eliminated information gaps in the risk-based approach to security and that a scan-all regime is no longer necessary, they argue.

Officials also forcefully rejected the idea of a pilot, or prototype, program that would enlist a group of volunteer importers and begin real data exchanges with them to perfect the system before universal implementation begins.

We just don't feel the pilot provides us any benefit, Basham said, adding that the ongoing Advance Trade Data Initiative has proven a useful test bed even though it represents a small part of the trade universe. The agency has received thousands of informal filings from about 100 companies in an effort to design optimal formats and transmission methods for filing the required data and program its systems. A key difference is that importers can submit the data in any form they choose during the test period as opposed to following specific filing requirements when the rule goes into effect.

A pilot just drags out the process without solving any issues, Winkowski argued.

How do you define a pilot? Who's in the pilot? You can't make it mandatory. And, then, when you come up with a pilot you'll always have a group of people saying, 'Well, that's a different supply chain. Mine's different than that,' he said.

He reiterated that CBP has demonstrated with the 24-hour rule, the Western Hemisphere Travel Initiative requiring use of a passport or other federal identity card at land borders, and other programs that it will take a flexible approach towards implementation to minimize the impact on travelers and commercial shippers.

We think it makes a lot more sense to just go ahead and approve a final rule and start having this period of implementation that is going to stretch on for a long time, so that we know we're dealing with real-world problems and we're helping people solve real problems, said Michael Mullen, assistant commissioner for international affairs.

We feel we can work through those challenges to figure out the best solution. But it's better to do it out there in the real world, not some pilot with (limited participation). Let's get on with doing it and we'll do it in a reasonable way to make it work, he said.

CBP is completely willing to work with the industry to come up with a manageable process for information transmission, Basham emphasized. The agency realizes smaller companies face greater compliance challenges and we would work with everyone of those to make sure that before we sort of put the hammer down that they're able to provide this information.

Some industry representatives involved in global trade management agree that industry has made its case and needs to let the 10+2 process unfold.

Although many large companies have systems in place and are ready to share all the data sought by CBP, small and medium-size enterprises are holding back from making preparations until they see a final rule published, Karen Lobdell, director of trade security and supply chain services for Chicago-based law firm Drinker Biddle & Reath, said on the floor of the Trade Symposium in Washington.

I think at this point it's probably time to just move forward. Delaying it further may not accomplish much more, she said. The likelihood is CBP would extend the informed compliance period if there are still many serious problems remaining.