Michael R. Spano & Co. gets up to speed on U.S. Customs' stricter filing requirement for importers, months before fines for non-compliance kick in.

Michael R. Spano, a New York-based customs broker and import consultant, has been in business for 25 years. So you would think he'd have no problem adjusting to yet another new filing requirement by U.S. Customs and Border Protection. But CBP's Importer Security Filing (ISF) regulation, also known as the 10+2 rule, promised to cause big difficulties for a firm that was relying heavily on manual processes.

The 10+2 rule is so-named because it requires 10 additional data elements from importers and two more from carriers. All of the information must be made available to CBP at least 24 hours prior to a vessel's departure from the foreign port of origin.

The rule was published in November, 2008 and went into effect in January 2009. For its first year, CBP did not assess penalties for non-compliance, allowing importers and carriers to come up to speed on the new requirement. The fines - up to $5,000 for each violation - kicked in at the beginning of 2010.

Spano saw the writing on the wall early. Owner of Michael R. Spano & Co. in Floral Park, N.Y., near JFK International Airport, he handles a wide variety of imports, with a specialty in fashion merchandise. On-time delivery and accurate documentation are essential to his clients' well-being, but Spano was keenly aware that his systems weren't up to the task of complying with the increasingly rigid rules of CBP.

He also knew that he lacked the in-house expertise to select the best technology. So he sought help from an outside expert, industry veteran Harry Kubetz, who has served as an executive with several major apparel companies. "He has really opened our eyes in areas that we are not educated in," says Spano.

Kubetz advised Spano on the type of system that he would need to comply with new CBP regulations. It had to be Web-driven, yet ensure complete confidentiality of information. It had to integrate easily with clients' databases. And it had to enable the smooth flow of information from freight forwarders. Importer data needs to be mapped to CBP's 10 required elements, then electronically submitted as an ISF.

Spano does thousands of such filings each year, and the number keeps on growing. What's more, merchandise classifications change frequently, in keeping with the dynamic nature of the fashion business. "We wanted to have the opportunity to update without having to recreate the wheel," he says.

Following Kubetz's advice, Spano came up with the idea of a library of information, based on keywords, that would greatly cut the time needed to process manual or relatively simple shipments. The library would provide a template that could complete at least 60 percent of the entry work, Spano says.

His choice of a provider for the ISF software was Westfield, N.J.-based QuestaWeb Inc. The vendor, which specializes in systems for global trade management, had moved quickly to develop a 10+2 module. It began addressing the issue a full year before CBP launched the ISF rule, says vice president Wayne Slossberg. "Because QuestaWeb also has an importer/exporter division," he adds, "we understood the data elements they were looking for."

"The QuestaWeb software was clearly as good as, if not better than, all of the packages we had seen," says Spano. He especially likes the application's document finder, which allows for a complete review of a document's handling by the broker.

"CFOs of companies just love that detail," he says. "They can see transactions, get reports, and have a tracking module. [QuestaWeb] really gave us a chance to have cutting-edge technology working for us."

For QuestaWeb, the challenge lay in creating a system by which customs brokers and importers could easily gather information, run it through a series of templates and carry out all necessary verifications. Spano's requirements were even more demanding; he had clients who wanted to enter their own information into the system. That raised issues of accuracy as well as security, Slossberg says.

The inability to review data for accuracy at an early stage "creates an environment where ISFs can be in a continuous state of amendment," Spano says. With the help of the QuestaWeb system, and using CBP's system of codes for proper ISF filings, he can block an importer's cargo from being loaded onto a ship if the necessary documentation isn't available beforehand, or there is a discrepancy between the product, its Harmonized System code and the bill of lading. As a result, "$5,000 mistakes won't happen."

Spano, who is also an attorney, likes being fully in the loop as a means of protecting the importer. "If you're the broker of record and you get the commercial invoice to do a secondary review, you're completely controlling the transaction from the standpoint of reasonable care," he says. Errors occurring at an early point in the process can be caught and amended in the ISF filing, well before the goods in question reach the U.S.

"That's exactly what Customs had in mind for this program," says Spano. "They're trying to create a more intelligent environment."

He began deploying the QuestaWeb module in April 2009, well before CBP would start assessing fines for non-compliance. Under the system, importers, freight forwarders and other overseas entities can access a password-protected website in order to input data. Spano checks the information for accuracy before incorporating it into an electronic ISF filing. For importers who are using Spano as their customs broker, the system creates a separate brokerage file within QuestaWeb's Customs House Broker module.

The use of standardized file formats has cut ISF processing time in half, Spano says. "The QuestaWeb program enables us to use a minimum amount of manpower for maximum effect. It also helps us to identify for our clients' sake any security aspects that we should draw their attention to."

Spano is confident that the vendor will be able to accommodate any additional compliance requirements by CBP. "QuestaWeb has done that each time it's been challenged by the government to come up with something new."

Slossberg says QuestaWeb will look to trade experts like Spano for input on additional functionality. "When you have clients with that kind of knowledge and who understand the business from the process and the legal side, those are the people who contribute to the value of QuestaWeb's technology," he says. "That's what Michael has brought to the table. He's constantly thinking about how to make things better."

Resource Links:
Michael R. Spano, www.michaelspano.net
QuestaWeb, www.questaweb.com