Looking to comply with U.S. Customs' 10+2 filing rule, the big manufacturer of computer cases and peripherals ends up realizing additional benefits in the form of increased drawback refunds.
Targus Group International Inc. was no different from any other business scrambling to comply with the new "10+2" import filing requirements of U.S. Customs and Border Protection. But the company's efforts to get in line with the rule ended up yielding additional benefits, in the form of streamlined processes and reduced duties.
10+2, known more formally as the Importer Security Filing (ISF) rule, calls for a dozen additional details to be provided by importers and carriers prior to the loading of cargoes bound for the U.S. For Targus, it served as the catalyst for a change in the way the company filed import entries and requested duty drawback, which is duties refunded to the importer for goods that enter the U.S. and are subsequently re-exported in some form.
Anaheim, Calif.-based Targus is a household name in the sale of carrying cases for laptop computers. It also offers a variety of accessories, including keyboards, mice, chargers and docking stations. Targus has 45 offices around the world, and distributes in more than 145 countries.
Most of its products are made in southern China, then imported into the U.S. for domestic sale. In addition, Targus takes advantage of Customs' duty drawback program by re-exporting a portion of the items to Canada and Latin America. Recently, though, the company found itself backlogged on drawback filings, with the deadline for claims looming.
Other IT-related problems were cropping up at the same time. To take full advantage of the duty drawback program, Targus had been doing its own import filing, but the system to support that process was reaching the end of its effective life. Freight forwarders had been preparing the company's ISF filings, and Targus wanted to move the task in-house, since it utilized much of the same data that was needed for self-filing. Yet none of its current software providers had a system for complying with the fast-approaching 10+2 rules, so the company faced the prospect of engaging a third IT vendor for that purpose.
One for All
The obvious solution was to find one application that could handle all of those tasks. After a review of several vendors, Targus ended up going with the TradeMaster Customs House Broker module from Westfield, N.J.-based QuestaWeb. The company's global trade-management software promised to handle multiple processes for managing imports, including drawback, import entries, in-bond, protest, reconciliation, query reporting and communication with Customs' automated system.
"Targus was very focused and knowledgeable about what it wanted to do," says QuestaWeb vice president Wayne Schlossberg. "A lot of companies are looking and learning at the same time. Targus had already learned."
There were some unexpected lessons as well. In the short term, coping with 10+2 became a secondary factor in the overhaul of the company's import processes, says Brian Couch, manager of logistics with Targus USA. Limitations in the way the factories operate in China have prevented it from taking full advantage of that module, at least for now. But Targus has reaped big savings from other aspects of the suite.
Targus now has a direct electronic interface with Customs, resulting in faster filings and more accurate data. On the drawback side, it was able to automate a labor-intensive procedure and speed up the receipt of payments. By going through a pre-approval process with Customs, it has cut down on the required documentation associated with drawback. Refunds used to take up to a year to be processed; now they're available within five weeks of filing. Those particular benefits of implementing the new software, says Couch, were "immediate."
Most major software implementations are accompanied by some degree of process change, and Targus's effort was no exception. QuestaWeb introduced the company to a drawback expert who convinced it to alter its accounting method for reporting inventory. The old software had required a first-in, first-out methodology. With the new system, Targus was able to shift to a low-to-high treatment of imports, which works better when duty rates don't vary.
More Money, Faster
Previously, says Couch, Targus might get back $7,000 on a $10,000 drawback claim. Having revised the way it calculates inventory, it now expects to see a return of more than $9,000, "paid back almost immediately." Overall, the company has boosted its success rate for receiving claimed refunds from 70 percent to nearly 93 percent.
Savings from the change amounted to six figures in the first year, the company says, adding that it expects an additional five-figure reduction in year two.
Couch says Targus intends to make further use of the Web-based system by receiving electronic data interchange messages directly from suppliers. The information can be used automatically to generate required import documentation. Not only will the change replace the manual keying of ISF data elements, it will eventually eliminate the cost of providing that service through freight forwarders.
"The system provides them with full automation of the process," says Felix Pekar, chief operating officer of QuestaWeb. As for the software vendor, it launched another GTM module last year, focusing on the use of foreign trade zones for manufacturing and distribution. FTZs represent yet another duty-saving opportunity for electronics, high-tech and automotive companies that import components into the U.S. and assemble them into a finished product.
Unlike the formation of FTZs, complying with 10+2 isn't an option. Penalties for violations have been in effect since the beginning of 2010, and a number of vendors are offering software that aids in the transmittal of required data from suppliers and carriers. "Everybody has to be up and running on it," says Schlossberg. "If they're not, they're going to figure it out real quick when Customs comes calling."
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