U.S. businesses that engage in international trade are set to receive a long-awaited holiday gift this year, with U.S. Customs and Border Protection (CBP) committed to a December 2016 deadline for full implementation of its “Single Window Initiative” (SWI). The initiative, which has been on the drawing board for decades, will address a growing source of frustration within the trade community – too many overlapping paperwork requirements and no centralized system for tracking or sharing data.
SWI will essentially be an electronic filing system whereby all trade data will be submitted directly to CBP, and then funneled to all “partner government agencies” (PGAs) with jurisdiction over a particular shipment. The backbone of the SWI is the “Automated Commercial Environment” (ACE), which earlier this year became the sole electronic filing system for U.S. importers.
Why exactly is this necessary? Currently, U.S. businesses must contend with a customs process in which 47 different partner government agencies, representing ten different cabinet agencies, each have jurisdiction over different pieces of the customs process. Shippers must contend with more than 200 different customs forms, and know which affect their shipment, and provide all required information and documentation. With no centralized system in place, shippers often must enter identical information multiple times on different forms, and submit each form for review to the appropriate PGAs.
This inefficiency comes at a cost. The U.S. Chamber of Commerce reports that inefficient border procedures can add as much as 15% to a product’s cost, and negatively affect overall supply chain efficiency. The Washington, D.C.-based Wilson International Center estimates that border inefficiencies between the U.S. and Canada add about $800 to the price of every new vehicle manufactured in North America. And yet another indication of the need for customs reform -- the United States is ranked number 16 in customs efficiency by the World Bank’s 2016 Logistics Performance Index. Global leaders in this category include Singapore, Germany and the Netherlands.
Finding a way to simplify and automate the customs process has been a U.S. priority for at least three decades. Customs first took a bite at the apple with the Automated Commercial System (ACS), which at the time was an efficient method for transmitting and processing shipment data. But as technology advanced, ACS became outdated and was unable to keep pace with the demands of today’s increasingly security-focused government procedures, and the global, data-driven needs of the trade community.
In short, the government needed a system to help strengthen border security through advanced knowledge of incoming shipments, and the trade community was desperate to eliminate duplication and inefficiency in the current system – much of which still relied on handwritten documents.
In May 2002, CBP announced in a Federal Register posting that it was ready to test the first phase of its new Automated Commercial Environment (ACE), which would eventually replace ACS. Now, 14 years later, CBP has achieved its objective, with ACS rendered “obsolete” as of July 23, 2016.
The agency has introduced ACE in phases, allowing the trade community ample time to prepare, while also giving technicians an opportunity to work out the inevitable bugs and glitches that accompanied each step of the rollout. Finally, as of March 31, 2016, electronic filing of import data via ACE became mandatory, with different government agencies scheduled to come on board in the following months. The Food and Drug Administration (FDA), for example, became ACE-compliant in mid-June, meaning information that had previously been submitted via ACS, must now be transmitted directly via ACE.
CBP has announced that all agencies will be on board by December 2016, and that the Single Window Initiative, via ACE, will be fully operational at that time.
New System's Benefits
So despite its rocky development process, ACE is here, it is mandatory, and it just may be the answer U.S. importers and exporters have been waiting for. Among the system’s most significant benefits:
- Streamlined submission of all shipment information to CBP and PGAs
- Elimination of all paper documentation – everything is electronic
- Faster processing, since CBP agents are able to allocate resources based on risk assessments
- Enhanced visibility of shipment and cargo status through ACE-generated status messages
- Capability for electronic post summary corrections
- Decreased administrative costs
- 24/7 access to online records
- Capability to run more than 60 downloadable reports
- Online payment capability for duties and fees
- Enhanced border security.
Another important consideration is the impact a U.S. single window will have on our international trade capabilities, especially with our North American Free Trade Agreement (NAFTA) partners Canada and Mexico. Trade between the U.S. and Canada, which currently runs about $1.6 billion every day, has been stymied by the amount of paperwork and documentation that must pass between the two countries’ customs agents. Many times a U.S. business must provide the same exact information to the Canada Border Services Agency as it does to its U.S. counterpart. Businesses on either side of the border have been pleading for relief, and it seems that help may be on the way, in part via the single window.
The inter-related issues of enhanced U.S./Canada border security and cross border trade promotion are addressed in the 2011 “Beyond the Border Action Plan,” through which the two countries agreed to work together to eliminate administrative roadblocks and where possible, to synchronize procedures. Among the many provisions of the agreement, was a commitment by each country to create a single window for faster and more efficient processing of customs data and documentation. Canada’s initiative, which is on track for completion by early 2017, will align data requirements where possible with those of the United States.
Our other NAFTA partner Mexico has in place a single window for imports, called the Ventanila Unica Mexico. This system operates much the same as its U.S. and Canadian counterparts, with efforts underway to expand the system to allow for export capability.
Despite the obvious benefits of a single window system, developing such a system is no small undertaking. According to analysis from the World Bank, inter-departmental bureaucracy is among the biggest obstacles to overcome. Think of the U.S. single window, which will have 47 different agencies all using the same system. That’s 47 government agencies all on the same page! Each of those agencies had a role in the development process, each had to test and retest the system, and each had to give the green light to the system’s final functionality. Considered in this light, the completion of ACE and the Single Window Initiative are truly noteworthy accomplishments.
For its part, CBP notes that the trade community seems to have heeded its repeated calls to prepare for ACE. According to the most recent ACE Adoption Rate Monthly Report, by the end of July, more than 98% of shippers were filing entries via ACE. For many importers and exporters, this meant opening an account, and deciding how to access the system – either via its web-based portal or through an electronic data interchange.
Whether a business interacts with CBP directly, or chooses to rely on its customs broker or logistics provider to intercede on its behalf, every importer and exporter will bear ultimate responsibility for the information that is transmitted via ACE on its behalf. It is in a business’s best interest then, to ensure that all shipment information is accurate and thorough, and that designated internal personnel understand the implications of the new filing system.
This is especially important given that many PGA requirements have changed. Some agencies that previously did not require certain data elements have increased their information requirements in ACE, and some information that used to be optional is now mandatory. The FDA, for example, now requires that shippers include a regulated product’s Intended Use Code, Trade Name, Device Listing Number and active pharmaceutical ingredients in an ACE filing. Previously, those data points were optional.
The transition to ACE and the completion of the Single Window Initiative are true milestones in U.S. customs processing. One CBP administrator called the transition a “cultural shift,” that represented a “move toward a 21st century” supply chain. For many in the trade community, who have been hearing about ACE for the past several years, it may not be readily apparent how beneficial this electronic filing system will be.
It won’t take long though, before business start to notice how much easier the filing and recordkeeping processes have become. At that point, businesses will wonder how we ever got along without ACE, and will certainly agree that it was well worth the wait.
John Costanzo, president of Purolator International, has more than 35 years of experience in the global supply chain industry. Since becoming president of Purolator International in 2001, Costanzo took the company from a small U.S. freight forwarder to a leading provider of cross border services that offers expedited and economy Parcel and Freight Services, Transportation Management, Customs Brokerage, Warehouse and Returns Management, and more. Under his direction, Purolator International’s presence in the U.S. has grown to have operations in 33 markets in the U.S. and Canada.