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Juna Kim didn't waste time in responding to the new Importer Security Filing (ISF) rules of U.S. Customs and Border Protection. The director of import and export for Yamaha Corporation of America knew she had to move fast in order to get all of her suppliers on board with the regulation, which took full effect at the beginning of this year.
Yamaha, a maker of musical instruments as well as audio and video equipment, has a complex supply chain, with some 18 factories and nearly 40 overseas vendors. In addition, the American operation, based in Buena Park, Calif., must coordinate activities with corporate headquarters in Japan.
Kim had a number of options for complying with the ISF, also known as the 10+2 rule, which requires importers to file detailed sourcing data about all shipments 24 hours before they are loaded aboard a vessel at the port of origin. She could rely on a vendor's information system while doing the filings herself; let the vendor prepare and file entries based on supplier information she provided via electronic data interchange (EDI) or extensible markup language (XML), or outsource the whole process, from data extraction to filing.
Allowing a customs broker to do the filings was a non-starter; with transaction fees ranging from $10 to $65 per entry, the cost would be prohibitive for an importer of Yamaha's size. Doing the job in-house made sense, both from a financial and legal standpoint. After all, if an ISF filing is incorrect, it's the importer who gets blamed.
Customs brokers were already handling Yamaha's standard entries, but Kim liked the level of control she could assert by managing the ISF directly. At the same time, she wasn't about to develop her own proprietary software application. The challenge lay in finding an existing system that could conform to Yamaha's complex requirements.
Kim ended up deploying the ISF application of QuestaWeb Inc., whose global trade management software Yamaha was already using. As a result, many elements of the company's GTM processes, including product and client files, landed-cost calculation and inventory receipt, were fully automated and integrated with the enterprise resource planning (ERP) system. Now it was just a question of devising a solution that could draw accurate information from disparate suppliers on a timely basis.
QuestaWeb vice president Wayne Slossberg says Kim brainstormed with the software provider to come up with a system that created a template for each supplier. Factories and vendors are assigned unique group names, user names and passwords, with the ability to view only information that pertained directly to them. With the basic data in place, all they have to do is apply the template, select ship-to location and upload the list of Global Material Codes (GMCs). The system carries out all compliance checks, ensuring that Harmonized Tariff Schedule numbers are correct, and bill of lading numbers readily available. If any details are wrong or missing, it immediately alerts the both Yamaha U.S. and the user who created the entry. They can make necessary adjustments before filing the data with Customs via the agency's Automated Broker Interface (ABI).
Complicating matters for Yamaha is a disparity between the business processes of its American unit and Asian partners. The former relies on item codes of up to 50 alpha-numeric characters, while the latter use seven-character GMC codes. The QuestaWeb system allows each factory in Asia to upload its own codes, then automatically translates them to the U.S. code and enters the details in line with ISF requirements.
Like any big importer, Yamaha experiences a certain degree of vendor turnover. The Japanese parent gives the American division 30 days' notice when it selects a new factory, time enough for creation of a unique template with all relevant information. Each factory is required to file information on a particular shipment five days prior to loading on the vessel, says Kim, so that issues of missing or inaccurate data can be addressed in plenty of time.
Yamaha maintains a dedicated e-mail address for ISF-related communications between headquarters in Japan and the U.S. import team. So far, glitches have been minimal. The underlying system has been running without incident since it went fully live in January of this year, according to Kim.
"There are no major issues as of today," she said in late May. "All of the factories were trained last year by managers from Japan in the U.S., and have a training document and security password in place. It's going very smoothly, and we've had zero problems with Customs."
The relationship with Yamaha has given QuestaWeb a system that it can deploy on behalf of other customers, says Slossberg.
"What [Kim] and Yamaha contributed was the whole process of setting up the vendors," he adds. The capability has since been built into the standard application that QuestaWeb provides to all three of its client categories: importers and exporters, customs brokers and freight forwarders, and foreign trade zone users.
Accuracy of the data is paramount. Companies automating their filing processes for the first time can experience a rude wake-up call. Another QuestaWeb customer, a big electronics manufacturer that was relying on a services of a third-party logistics provider, discovered 300 errors on the first day it activated the system, Slossberg says. Had the revelation occurred when 10+2 was fully in effect, the company would have been subject to a $5,000 fine for each mistake.
The system has yielded benefits that extend well beyond the compliance arena. Yamaha has gained a whole new level of knowledge about its suppliers, Kim says.
She envisions further efficiencies from automation. Yamaha's U.S. division could conceivably obtain all factory data directly from headquarters in Japan, eliminating the need for separate ISF entries. "Because of ISF," Kim says, "our supply chain can be much tighter, and much more controlled."
QuestaWeb, meanwhile, is open to further ideas from customers on how to improve its GTM applications. "Our policy is, if somebody has a good idea, we program it for them," says Slossberg. "Then everybody gets it."
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