Executive Briefings

Ocean Transportation: Why You Should Have Been Ready for '10+2'

Analyst Insight: A December 2009 study reveals that as few as 22 percent of companies are ready for the January 26, 2010 mandate date for full Importer Security Filing (ISF) "10+2" compliance. The economic recovery may foretell huge fines for these companies.

In the post-9/11 era, no issue is more important to the future of ocean transportation than security. Shipping containers pose a devastating risk both of physical and economic loss should a weapon be smuggled into a port. In response to these risks the U.S. Department of Homeland Security and U.S. Customs & Border Protection (CBP) has enacted a new regulation known as the "10+2" rule. On November 25, 2008, the CBP released this rule on importer security filings (ISF) and as of January 26, 2010 the penalty phase will begin.  The "10+2"  rule makes for a more complicated filing because it is a two-party process that requires: 1) importers to provide CBP with 10 data elements about ocean shipments inbound to the U.S. at least 24 hours prior to vessel departure, and 2) ocean carriers to provide 2 data messages at least 48 hours prior to vessel departure.

This rule applies to all maritime cargo loaded at a foreign port that is destined for direct discharge at or transiting through a U.S. port, and companies will face significant fines if they are not in compliance with the new regulation. Penalties include liquidated damages equal to the value of a shipment for failure to file the ISF, and importers may also face potential charges for inaccurate or missing data.

In Aberdeen's December 2009 study, Supply Chain Visibility Excellence: Reduce Pipeline Inventory and Landed Cost, there were 174 importers surveyed and only 22 percent said they had visibility to the 10 required elements and only 48 percent of them are confident their carriers are prepared to supply the remaining 2 elements.

The Outlook

In 2010, compliance issues will become even more important. According to the monthly Port Tracker (by the National Retail Federation and IHS Global Insight, November 2009), import container volume at the nation's major retail container ports in February 2010 is expected to increase 16 percent over February 2009.  This represents a break from a 31-month string of year-over-year declines. The NRF is hopeful that this is a sign of economic recovery, but companies should be mindful that increased shipments with noncompliance to "10+2" could lead to significant economic penalties, impounded cargo and delays.

In the post-9/11 era, no issue is more important to the future of ocean transportation than security. Shipping containers pose a devastating risk both of physical and economic loss should a weapon be smuggled into a port. In response to these risks the U.S. Department of Homeland Security and U.S. Customs & Border Protection (CBP) has enacted a new regulation known as the "10+2" rule. On November 25, 2008, the CBP released this rule on importer security filings (ISF) and as of January 26, 2010 the penalty phase will begin.  The "10+2"  rule makes for a more complicated filing because it is a two-party process that requires: 1) importers to provide CBP with 10 data elements about ocean shipments inbound to the U.S. at least 24 hours prior to vessel departure, and 2) ocean carriers to provide 2 data messages at least 48 hours prior to vessel departure.

This rule applies to all maritime cargo loaded at a foreign port that is destined for direct discharge at or transiting through a U.S. port, and companies will face significant fines if they are not in compliance with the new regulation. Penalties include liquidated damages equal to the value of a shipment for failure to file the ISF, and importers may also face potential charges for inaccurate or missing data.

In Aberdeen's December 2009 study, Supply Chain Visibility Excellence: Reduce Pipeline Inventory and Landed Cost, there were 174 importers surveyed and only 22 percent said they had visibility to the 10 required elements and only 48 percent of them are confident their carriers are prepared to supply the remaining 2 elements.

The Outlook

In 2010, compliance issues will become even more important. According to the monthly Port Tracker (by the National Retail Federation and IHS Global Insight, November 2009), import container volume at the nation's major retail container ports in February 2010 is expected to increase 16 percent over February 2009.  This represents a break from a 31-month string of year-over-year declines. The NRF is hopeful that this is a sign of economic recovery, but companies should be mindful that increased shipments with noncompliance to "10+2" could lead to significant economic penalties, impounded cargo and delays.