The Kings of ACE
When it came time to face the ACE, HW St. John bet on an automated solution that streamlines processes and deals customers a winning hand.
Achieving automated commercial environment (ACE) compliance before the mandatory deadline was of paramount importance to customs broker and international freight forwarder HW St. John, and to its shipper customers. With help from a third-party technology provider, HW St. John was able to automate electronic filings to meet looming ACE requirements, and gain improved visibility of shipping and customs for more efficient filing.
HW St. John, a family-owned business that has operated in Valley Stream, N.Y., for 112 years, wanted to make sure it was fully compliant with ACE before the first 2015 deadline.
ACE, a system implemented by U.S. Customs and Border Protection (CBP), aims to improve the movement of imports and exports into and out of the United States. In 2015, the system will introduce enhancements designed to improve the collecting, sharing, and processing of data submitted to CBP and to other U.S. government agencies. These new enhancements will also facilitate improved cargo security.
From CBP's perspective, an enhanced ACE system will streamline the import and export of goods, and serve as a single portal into U.S. government agencies associated with customs that interact with the trade community. The goal is to combine greater electronic transfer of information with higher levels of workflow automation and security, and eliminate a plethora of paper-based and manual customs processes by the end of 2016.
"We are a small and agile business," says Richard Hanel, president and CEO of HW St. John. "We have demonstrated this agility with our shipper customers in the past by embracing technology early. As one example, we implemented electronic data interchange when the requirements for electronic document transfers were first mandated.
"We believe in being aggressive in preparing our systems for compliance with ACE," he adds. "We want the system in place and working in advance of mandated deadlines. We expect to pass along the benefits of being ready and fully compliant to shippers, who must also concern themselves with meeting the new ACE requirements."
Traders and customs brokers must meet several intermediate deadlines to achieve compliance:
- May 1, 2015: The deadline for mandatory use of ACE for all electronic manifest filing.
- Nov. 1, 2015: The deadline for mandatory use of ACE for all electronic cargo release and related entry summary filing.
- Oct. 1, 2016: The deadline for mandatory use of ACE for all remaining portions of the CBP cargo process.
Early on, HW St. John had its eye on the 2015 deadlines. "Many of our shippers are Fortune 500 companies," says Hanel. "They expect comprehensive transportation and customs reporting. They want to know the customs duty costs, and the ports through which their goods are moving.
"Today's trade environment is significantly different from a few years ago," he notes. "As a small company, we have to provide the same level of reporting and service as our larger competitors do. The workforce automation and electronics document processing and forwarding that is available in today's highly automated customs systems enable us to comply with ACE and offer a high level of reporting and customer service."
To meet upcoming ACE mandates, HW St. John proactively moved to a new customs system from Kewill, a multimodal transportation management software provider with offices worldwide. Kewill's system delivers the electronic information transfers and automation ACE requires.
"We are currently in a pilot phase with the system, and we are testing it by electronically transmitting entries to customers," says Hanel. "We wanted to work out any bugs before the mandatory electronic manifest filing goes into effect to ensure a seamless and improved customs experience for shippers."
Hanel says it took HW St. John about 10 to 12 months to complete a full migration to the new system, which also involved a learning curve for employees. The company and its customers are already beginning to see the benefits of increased automation and shipment visibility.
"This system gives us a way to keep shippers well informed of transportation and customs processes," says Hanel. "We can receive an electronic report concerning the status of a ship en route, and immediately e-forward this information to keep shippers posted. With the inter-governmental agency automation ACE provides, we can also send notices and releases—such as new information about FDA requirements.
"We like to say we have full tracking capabilities," Hanel adds. "But when we can deliver additional value to customers by automatically sending out vital shipping information, it can be a strong competitive advantage."
Like other companies making the transition to ACE, HW St. John initially found that a system change also meant a significant adjustment in how the company did business.
"Implementing a new system runs a risk of business disruption, or a drop in customer service levels," notes Jay Waldron, senior vice president, logistics and customs brokerage solutions for Kewill. "Companies have to be careful about how they approach a system implementation for ACE or any other logistics technology. Their plan should include how to mitigate risks throughout the system conversion process.
"Risk management was crucial to HW St. John," Waldron adds. "The company wanted to make its automated system conversion completely transparent to customers."
"We had a specific vision of our goals and expectations when we started this project," adds Hanel. "We worked collaboratively with our systems vendor. At the beginning of the project, I thought the process was taking too long. But Kewill explained how certain processes and upgrades had to be made in order to effect a seamless migration.
"Overall, the system conversion took eight to 12 months instead of the original six to eight months I had hoped for, but we stayed within budget and I was happy with the results," Hanel says.
Hanel was especially concerned about getting his staff fully trained and comfortable with the new customs system.
"Moving to a system of this caliber creates a learning curve," he says. "Kewill provided us with one week of concentrated training. During that week, we not only came to understand the new system, but we also began to see the ease of use and efficiencies it could deliver."
Seeing Initial Results
HW St. John has its customs system in place well in advance of ACE mandated deadlines, and is anticipating performance and cost improvements.
"The computing speed alone impresses us," says Hanel. "We updated the servers in our data center, so work gets processed quicker, and we can be more responsive to shippers. In the past, it took our system nearly one hour to perform a single critical update. Now, that same update process takes five to 10 minutes."
As an early ACE adopter, HW St. John is able to pass along some of its new streamlined benefits to customers.
"There is more visibility and capability in customs transactions involving U.S. government agencies, and it improves government reporting," says Hanel.
In some ways, HW St. John doesn't see significant change in many customs processes; in other ways, the differences are noticeable.
"We see the benefit when a particular customs transaction engages many different U.S. government agencies, and the workflow needs to be integrated so it touches all these agencies," says Hanel.
"For instance, a single transaction might involve the U.S. Drug Administration, the Federal Drug Administration (USDA), and the U.S. Fish and Wildlife Service," he explains. "In the past, we didn't have a fully integrated business or system process that made this transaction straightforward. Using the old process, we first had to obtain a release from Fish and Wildlife, then we had to submit the correct documentation to customs and to the USDA. Many times, the process would stall while we waited for Fish and Wildlife to provide us with the paper certification.
"With the new electronic automation, this entire process happens right away," Hanel adds. "Turnaround is faster, which helps shippers obtain quicker release for their goods."
An expedited customs process with less margin for error is critical for shippers and their brokers/freight forwarders. Nearly 74 percent of respondents to a recent Transport Ingelligence survey say a sudden increase in costs would "impact" or "significantly impact" revenue and profitability; while 72.7 percent of respondents rate poor schedule compliance from transportation partners as "likely to have the same level of impact."
To meet this challenge, HW St. John's new customs system gives the company and its customers seamless integration with CBP's Security Filing and Additional Carrier Requirements (commonly known as 10+2), which was implemented in 2009. The rule applies to import/export cargo arriving or departing the United States by vessel, and failure to comply could ultimately result in monetary penalties, increased inspections, and cargo delays.
"After the Sept. 11, 2001, terrorist attacks, our company recognized we didn't have visibility into the cargo loaded in containers, and we needed it for security purposes," says Hanel. "On the documentation side, we are required to submit 10 pieces of information to CBP at least 48 hours before a ship departs or arrives. This information includes the shipper, container contents, and shipment origin and destination. Doing this work gives us an opportunity for a new revenue stream, but more importantly, it is a way to improve national security because it provides full visibility of what cargo is getting loaded into containers. At last report, between 85 and 90 percent of importers are now complying with the 10+2 standard."
Investing in a new customs system with enhanced automation and electronic filing capability isn't an inexpensive or trivial undertaking. It took HW St. John, which decided to slowly move to a new customs system, nearly one year of effort to effect a successful transition that didn't adversely impact customers. The company is seeing the difference in improved visibility of shipping and customs transactions, and more efficient U.S. customs document filing processes.
"It's difficult for small companies to decide to invest in technology, but three generations of our family have worked in this business, and recognize the need to continue to invest in the company," explains Hanel. "With the changing customs and security requirements, and ACE in particular, we recognized we had to improve our customs system, and revise business operations. You sometimes have to spend money to make money."
Hanel says the next step for HW St. John is implementing a new accounting system that will give the company greater insight into all aspects of the business, including ways to apply financial checks and balances to everyday business processes.