[Cindy’s Version]: Data flows between trade and U.S. Customs and Border Protection (CBP)

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Hello. Today is August 22 2005 I’m Cindy Allen, CEO of trade, force multiplier. Welcome to simply trade Cindy’s version, where I take an international trade update and base it on a Taylor Swift song as the unique appointed Taylor Swift of trade. I feel it’s my responsibility to update you based on a Taylor Swift song. Today, we’re going to base our update on Dancing with our hands tied, which appears on Taylor Swift’s reputation album, one of my favorites. I’m going to get into a little bit about how the data flows on the back end, from the trade to CBP, and why you might not feel like you have the full story without knowing that, so you are dancing a little bit with your hands tied. But first, what’s going on? What’s happened in international trade for the past week? Well, shortly after our last podcast was actually posted, the US government announced over 400 tariff numbers that were added to the section 232, steel and aluminum tariffs at a 50% level. It created a lot of confusion and created some interesting headlines in the news, both in the trade and in some in the mainstream media news things like there are now tariffs due on milk products, there are now steel and aluminum tariffs do on products that have absolutely nothing to do with metal. And really, those htss were added on things that aren’t normally made of aluminum steel, but may encompass aluminum steel, especially in the packaging. So in the case of milk, if you have some milk product, or things like beer or other things that are actually packaged with aluminum and are coming in those some of those items are now subject to the 232, steel and aluminum tariffs for the value of the steel or aluminum. So if you go buy a beer, it’s $5.10 of that is the cost of the can. You’re now paying 50% on that 10 cents of aluminum. This has created a lot of confusion for customs brokers who had to implement those tariffs that were announced on Friday and took place on Monday. Took a lot of programming over the weekend and a lot of outreach to clients. It’s still creating a lot of confusion among the customs brokerage and importer community, and we are working with customs to try to clarify some of that. We do expect some FAQs come out on this item in the next week or so, so hopefully we’ll that will smooth out, but that was the latest tariff update that we’ve had in the last week. This week, we also got some trickled details of the EU trade deal. EU specifically is looking to lower the automotive tariffs on autos retroactive to August 1 so that they can ease the pain that the EU producers are feeling bringing cars into the United States that has not yet been implemented. So we are in a wait and see mode, like much of the rest of the tariffs, also in anticipation of the demise of de minimis, a lot of companies have been looking at Foreign Trade Zones in bonded warehouses, not specifically to do manufacturing in those Foreign Trade Zones, but to ease the tariff burden. So a lot of companies who dealt in de minimis to date have determined that duty rates are too much and they can’t pay that on a full container load. They’re looking to reduce costs in other areas, so they are consolidating freight coming in via ocean, via air as well. And they don’t want to pay all of the tariff burden upfront, so they’re putting it in a Foreign Trade Zone and then withdrawing weekly based on the orders that they receive from either a Foreign Trade Zone or a bond warehouse. So those if you’re in the warehousing business you might want to look into that. Give us a call and let us, let us help you navigate your way through that. CBP is also grappling with how to move from a very data intensive type 86 environment where every shipment had to be listed as a house airway bill and every shipment had a release request for every package that was sent in to those larger consolidated loads, an o1 entry, a traditional o1 entry, many of these de minimis marketplaces are going to that type of environment, especially the medium sized guys, they’re determining they don’t want to pay brokerage fees and they can’t. They don’t have all of the data to do that. So they’re consolidating their their shipments into an o1, supplier to us, based importer. Oh, one entry. When that happens, there’s. No longer a requirement on a formal entry to list each and every package that is coming into the United States if the sale is between that overseas shipper and a US importer of record, and those goods are going to a warehouse where an additional sale is taking place to the consignee, and that will then be shipped out. So CBP is not getting that full, enriched data for targeting, and they’re grappling with how to how to deal with that moving forward. And that really rose, raised some questions for a lot of people in the community to understand what, what are CBP challenges in this area, and why is that important? So I thought I’d take a few minutes here on today’s episode and give you that behind the scenes look so you don’t feel like you’re dancing with your hands tied. So we all know Ace. Ace is a system that is actually customs, own operating system that information collects all the international trade data from the carrier as well as from the broker, and makes available that information via an ace portal. What that ace does is it’s kind of like the baseline. It is a baseline for everything that goes in and out of CBP and international trade. So you have components within ace. You have the manifest system, you have truck, air ocean and rail, air courier, those are all separate components within ace. Then you have entry summary on the other side, and that is where the broker interfaces in between that you have entry or release. And what is interesting about this is to get information into ace, the International Trade community, has to utilize a pipeline to get information in, and that’s known as the automated manifest system for a carrier, and it’s known as the automated broker interface for a broker. So you have these two pipelines of information, and they go to those components within ace. So the manifest data goes to that manifest in Ace through AMS, and then the entry summary data and the entry and release data go to the entry summary side of ACE, and that ace portal pulls from the entry summary side. And the ACE portal is merely a representation of the information that’s in Ace at any one given moment. So it’s basically just a reporting tool. That’s what it’s become, a reporting tool for the information there. CVP has a direct interface into their own a system, but they have limitations. And if you think in old school, and I’m going to simplify this to a great degree, it’s much more complicated than than this, but I want to make sure that there’s a high level understanding of how all this data works. So for CBP purposes, the officers that determine, are you, are we going to let you in as a person? Are we going to let you as a master of the conveyance? So a truck driver, a pilot, the ocean pilot, are we going to let you in? Is are we going to let this conveyance in? Is there any issue with the conveyance? And then finally, are there any issues with the goods or the companies that are involved in that transaction, either the buyer, the seller, the manufacturer, the the in consignee. So customs on the on the enforcement side, looks at that, and they look at that through the manifest system, then on the trade side. And again,

there are some overlaps here. On the trade side, the trade people who are doing the entry summary reviews, the centers of excellence and expertise, those individuals, the trade folks that are in the ports that are doing the trade work, have access to the entry summary and to the release. So when they’re looking at information, they’re looking at it in different ways. The officers are looking at on a shipment basis, based on a manifest, and the trade folks are looking at it based on entry summaries, that then affects how the actions that they take and how they can hold your goods. So sometimes you get a manifest hold, you get it at the master level, or sometimes you get it at the house level. That’s generally done by an officer at the manifest level. Hold, if you get an entire entry summary. Hold, that’s generally, very generally, done by a trade individual who only has the ability to hold something at the entry summary level, and that’s because there isn’t an availability for those individuals to hold things on a line level. The ACE structure and Ace programming doesn’t allow for that, so they can only hold on the entry level. Other. Agencies or participating government agencies only have access to the entry summary, so that’s why all of their holds are done on an entry level and not on a line by line level, most of them don’t have access to the manifest. So it creates some challenges for CBP trying to understand all of this data behind the scenes underneath ace, if you look at ACE as the baseline, underneath that for CBP, sits targeting systems and the targeting system for security, which was one of the first pieces of Ace to be built after 911, actually has its operates as its own little component, and that’s where a lot of the officers do their work. They get information. They get information from Ace. It comes from AMS. Comes from abi. Drops into ace, drops into the targeting system, and they do all of the magic of targeting and risk segmentation. That information is also supplemented by intelligence feeds and some other data that the government shares to ensure that they are not letting in bad things, bad people, bad products. That’s how they protect the United States and the consumers in the United States so they it’s a full, robust system that the trade doesn’t have access to after after 911 there was a couple of laws passed. The government was concerned that bad things and bad people will come into the United States. And at that time, manifests were being filed, but they didn’t necessarily have to be filed before arrival. So one of the laws that they passed said that you had to have an advanced manifest. And there were timelines set out, 24 hours for ocean, 12 for air. Those have, have you know, been updated somewhat, but that information allowed the manifest to come in earlier, into ace and then into the targeting system. So CBP could look at that as well for carriers, for ocean containers, the importer security filing came into effect, and that information has to be filed before the ocean carrier leaves the foreign port before arrival to the United States that comes either through AMS or it comes through abi, into ace, into the targeting system, one of the components of that law indicated that CBP could not use that security level information for commercial purposes or trade purposes. So that established a fine line in the ACE system where this was for security and this was commercial or for trade, before then the components kind of did that themselves within ace, but there was shared information. Now that law required that information and essentially, the targeting system to be kept separate, which made sense at the time. A lot of importers were concerned about that raw data, information that wasn’t yet perfected by the importer when it came into the United States, and they didn’t want that to impact their release, or they didn’t want that to impact their compliance when they hadn’t had an opportunity to perfect that data. And when you file an entry summary, you file that within 10 days of release. Why? Because it allows you to perfect the data. So there was that concern. But this is, you know, almost 25 years ago now that this happened, and lot of things have happened since then. However, the law remains the same. On in the early 2010s there was what’s known as the Yemeni bomb plot, and this is where someone in Yemen sent printer cartridges that actually had bombs to a synagogue in Chicago. The goods were stopped in the UK based on the fact that they had some available information before the flight arrived in UK, because it was routed through their airspace, and so that was stopped. The goods were taken off safely and no one got hurt. However, this happened on an air courier, or a series of air couriers, actually. And the government reached out to the Big Four at the time air couriers, UPS, DHL, FedEx and TNT, and said, Hey, we have this in ocean. We need this in air. We need more information earlier in the process so that we can identify anomalies like this. And so they looked at it and said, How can we do this quickly? How can we do this to get the best available information into the system as quickly as possible? And what was determined was that the targeting system, which. Fits underneath the main ace functionality, the targeting system is much more open. Ace in of itself. It’s 20 year old. Infrastructure to 25 years old. It’s very structured, it’s very heavy. It’s very confined in how the information comes in and how it goes out and how it interacts with all the components within ace. However, targeting has always had to be very nimble, able to address threats immediately and take that information in. So it’s a little more amorphous in its in structure, and what was determined it was best was to send a cast data directly to the targeting system and take that in, because, as I said, the targeting system had other connections within the government. So it had a pipeline, an available pipeline for the trade to input data. That’s also why, if you participate in Ace as an air carrier, you may not get as robust communication from a cast it goes through AMS because there’s no there’s not a lot of interaction or interactive functionality in the targeting system itself. So that a cast data comes into the targeting system, you get feedback through AMS, and it allows the carriers to file very early data in the process. However, the the

fine line between the security data and the commercial data stood and it applied to a cast as well as to ISF, because the language of the law was broad enough to incorporate any type of security filing. So the officers are the only ones who have access essentially, again, very simplified, essentially, they’re the only ones who have access to the ACAs and the manifest data, and then the trade folks have have access to the entry summary and the release filing. So why am I telling you all of this one? Because I love to talk about systems. It’s, it’s what I’ve been doing for. You know, 25 years. It interests me. However, why it’s important now is the move from that type, 86 to an o1 entry, when you think about that data flow, the manifest at the house airway Bill level for a type 86 shipment contained where it was coming from, and the ultimate consignee. And the ultimate consignee was needed to ensure that those continents did not exceed the $800 per person per day rule that section 321 has so that information flowed it flowed into a cast. It flowed into ISF, it flowed into the manifest, so that the officers could target that suddenly, type 86 goes away, and these importers are now in a situation where they have a business to business transaction coming into the United States, and the manifest simply shows Big Bucks retailer to Big Bucks retailer in the United States, and there’s no additional information that the officers see before the goods arrive. This has created some issues, because the officers have been used to getting this for several years now that individual consignee level data the marketplaces and some of the companies that participate very heavily in the E commerce environment have moved to that, oh, one entry change their whole entire transaction structure. So it’s a business to business sale, and then after the goods arrive, an entry is made, then there’s a subsequent sale to the consignee, but that information is not required to be filed on the shipment itself, unless it’s on the entry so as we know the fine line, officers have access to this entry. Specialists centers have access to the entry level information, so now they don’t have access to that rich targeting data that they did before, until after the goods actually arrive, so customs feels like they’re somewhat blinded by all of the information that they need to effectively target. So that’s why it’s important to know how the information flows from the trade to customs and the access that they have there so that you can help your clients, or if you’re participating in E commerce, you can contemplate how best to send that information, even though it’s not required. It may be what you want to do. You may want to ensure that you have line level hold data, which means you need that line level information on the manifest. So with that, I hope you don’t feel like you’re dancing with your hands tied any longer, and you understand the data flows a little bit better. We’ll see you next.