Executive Briefings

10+2: A Beacon of Hope for Software Vendors and Freight Forwarders

Nothing gets software vendors more excited than new government regulations. Sarbanes-Oxley was a boon to enterprise software companies a few years ago. It allowed them to walk down the hall from the CIO's office and talk to the chief financial officer, the person who controls the company's purse strings. Similarly, TMS vendors welcomed the new Hours of Service regulations when they first went into effect in 2003. It was part of the "perfect storm" shippers and carriers were facing at the time (along with rising fuel costs and capacity constraints) that served as a catalyst for TMS sales. The latest regulation that has vendors seeing dollar signs is the Importer Security Filing (ISF) rule, better known to folks in the industry as "10+2."

Less than 24 hours after the Department of Homeland Security (DHS) announced its interim final rule on ISF, e-mails began flowing in from several technology vendors promoting solutions related to the regulation. If there's going to be a bright spot in IT spending this year, this will probably be it.

A quick background on "10+2": The regulation was first announced in January 2008, and it requires importers or their agents to submit 10 data elements to U.S. Customs 24 hours prior to vessel departure, and ocean carriers to submit two additional data elements. You can read the specifics of the rule at the DHS web site.

The biggest challenge importers face (not surprising) is data collection, according to an executive with one of the big software development companies. "You're in an environment where the 10 data elements are not in a single system or company," he says, "so the first step is enabling a way to bring this data together."

So which companies are signing up? Importers made a lot of inquiries when the new rules were first announced. However, software developers say that freight forwarders and brokers seem to be the ones signing up for IFS services. In the words of one developer, although importers are ultimately liable for compliance, they're passing this hot potato to their freight forwarders and brokers.

This shouldn't be surprising. In many ways, the requirements of "10+2" are an extension of what freight forwarders/NVOCCs are already doing to comply with the U.S. Customs Container Security Initiative, namely, submitting manifest information, including shipper details, electronically to Customs's Automated Manifest System. In fact, "10+2" information will also be submitted to Customs via AMS.

Existing freight forwarding and brokerage clients that are signing up for IFS services are turning around and private-labeling the capabilities. They'll be happy to take this hot potato from importers-for a fee, of course.

Last year, a report called The Next Big Thing in Logistics envisioned a day when companies would no longer be plagued by data quality problems, the Achilles' heel of supply chain management. The solution: the emergence of standards-based logistics communication and process execution networks-i.e., "logistics utilities" that companies can use to exchange electronic information and execute business processes with their trading partners, customs and regulatory agencies. If this vision has any chance of coming true, it needs to start with "10+2" compliance.

The Outlook

Traditional software vendors are not in the best position to cash in on this opportunity. If there's ever a business process that lends itself perfectly to a network-based solution, it has to be "10+2" compliance. This is really a data collection and connectivity challenge, and freight forwarders and network-based solution providers are in the best position to address it. What you do with the data is less important (and easier) than getting the data (timely, accurate, and complete) in the first place.

Less than 24 hours after the Department of Homeland Security (DHS) announced its interim final rule on ISF, e-mails began flowing in from several technology vendors promoting solutions related to the regulation. If there's going to be a bright spot in IT spending this year, this will probably be it.

A quick background on "10+2": The regulation was first announced in January 2008, and it requires importers or their agents to submit 10 data elements to U.S. Customs 24 hours prior to vessel departure, and ocean carriers to submit two additional data elements. You can read the specifics of the rule at the DHS web site.

The biggest challenge importers face (not surprising) is data collection, according to an executive with one of the big software development companies. "You're in an environment where the 10 data elements are not in a single system or company," he says, "so the first step is enabling a way to bring this data together."

So which companies are signing up? Importers made a lot of inquiries when the new rules were first announced. However, software developers say that freight forwarders and brokers seem to be the ones signing up for IFS services. In the words of one developer, although importers are ultimately liable for compliance, they're passing this hot potato to their freight forwarders and brokers.

This shouldn't be surprising. In many ways, the requirements of "10+2" are an extension of what freight forwarders/NVOCCs are already doing to comply with the U.S. Customs Container Security Initiative, namely, submitting manifest information, including shipper details, electronically to Customs's Automated Manifest System. In fact, "10+2" information will also be submitted to Customs via AMS.

Existing freight forwarding and brokerage clients that are signing up for IFS services are turning around and private-labeling the capabilities. They'll be happy to take this hot potato from importers-for a fee, of course.

Last year, a report called The Next Big Thing in Logistics envisioned a day when companies would no longer be plagued by data quality problems, the Achilles' heel of supply chain management. The solution: the emergence of standards-based logistics communication and process execution networks-i.e., "logistics utilities" that companies can use to exchange electronic information and execute business processes with their trading partners, customs and regulatory agencies. If this vision has any chance of coming true, it needs to start with "10+2" compliance.

The Outlook

Traditional software vendors are not in the best position to cash in on this opportunity. If there's ever a business process that lends itself perfectly to a network-based solution, it has to be "10+2" compliance. This is really a data collection and connectivity challenge, and freight forwarders and network-based solution providers are in the best position to address it. What you do with the data is less important (and easier) than getting the data (timely, accurate, and complete) in the first place.