Archive | August 2016

Of Blockchain, ISF And Future Possibilities

So much has been written about internet shopping and consumer habits, but trends in the way we purchase goods continue to evolve at such a rapid pace I am certain this topic will continue to be discussed for the foreseeable future.

Living in North Carolina and graduating high school at the tail end of the Reagan years, I had a vision of how I wanted to live. I imagined myself walking out to my massively hulking, gas-guzzling Oldsmobile Rocket 88 with a saddle bag over my shoulder. A modern-day cowboy, I would chuck the bag into the backseat, slide behind the wheel, fire the engine and just head out west.

I didn’t own a saddlebag. I did not even think very clearly of how to get one. I vaguely remember happening into an equestrian gear store and inquiring about it only to learn that they had no such item but could probably special order one. But there weren’t even any catalog pictures to see. This was long before the birth of the “man purse” phenomenon.

So I filed it away in the back of my mind until one day around 1997 or 8 I happened to be Christmas shopping in a Sharon Luggage  store when lo and behold, they had one. It was around $125 and with all the gifts I still needed to buy I had no way of purchasing it then. But I scraped and saved and about a month later went back…and it was gone. Feeling forlorn, I to asked one of the sales associates about it. She said, “give me a minute.” She went to the back for what seemed an agonizing length of time but when she reappeared, she had it in her hands. She literally said, “I think this has your name on it, seems like it’s been here forever and no one was interested in it. They were planning on sending it back to our vendor for a credit toward something else.” I plopped my money down and left with the bag a happy man.

Fast forward another couple of years and I landed a traveling job as a purchaser. Over the next 5 plus years I journeyed back and forth along a tremendous amount of the continental US, touching at least 42 states. Long gone was the gas guzzling Oldsmobile. Instead, a massive cargo van became my mode of transit. The saddle bag went with me on each and every trip.

That’s a very personal story but the real point is this: other than a house, a car, boat or similar major purchase, would anyone wait so long to buy a desired item with the access to information and online commerce we have today? A quick Google search for saddlebags nets me at least 2 dozen excellent options without even really digging very much.

With the internet, today’s savvy shoppers can research the products they want infinitely faster and more cost efficiently than ever before. No longer do we have to go from store to store in search of that perfect item when online browsing is available from a smart phone. Additionally, something I find fascinating is still the vital importance of word of mouth. Many a time in recent years I have had friends, co-workers and family give me incredibly detailed reasons for why they purchased this product over that one. (This often occurs in social settings when I have not asked for advice about the product in question.) With so many choices at our fingertips we are able to make incredibly well-educated decisions about the products we buy.

Still, do we research where all the products we purchase actually come from? As much as I cherish the saddlebag I waited so long for, I couldn’t tell you where it was produced. As consumers, I don’t think anyone would admit that they want to purchase items produced in a sweatshop. But truthfully, we simply either don’t have time to meticulously research provenance thoroughly or, if it’s something we want badly enough, we’ll buy it regardless. Only later do we wonder, where this was made and by whom?

Till now, we have had to rely on either government or independent non-profit agencies to monitor where and how products are made. These amazing agencies have made substantial inroads regarding labor rights. Among them are:  The Bureau of International Affairs,  within the US Department of Labor, International Organization for Standardization (ISO) and the Institute for Global Labour and Human rights, to name just a few.

But current-day supply chains can adapt quickly. Companies that source their products from overseas can often expediently change the manufacturer. With the downturn in the Chinese economy late in 2015 and early 2016, the competition for production has been immense not just in China but all over Southeast Asia. In addition, major retailers like Wal-Mart continue to work with distributors. These distributors may source the product from many different manufacturers.

Knowing this, and with the importance of National Security, Customs Border Protection implemented ISF (Import Security Filings) in November 2008. ISF is a mandatory Homeland Security sponsored program that all importers to the United States must adhere to when shipping goods into the USA. ISF informs U.S. Customs of all details of an import shipment, including origin, before it arrives within the borders of the USA. This program is mandatory for all inbound ocean shipments to the United States.

There are 10 data elements that have to be provided and confirmed by the importer and 2 data elements that the steamship line is responsible for providing.  The Importer is responsible for providing the following:

  1. Seller – Name and address of the last known entity by whom the goods are sold or agreed to be sold. If the goods are to be imported otherwise than in pursuance of a purchase, the name and address of the owner of the goods must be provided. The seller information is generally available on the commercial invoice.
  2. Buyer – Name and address of the last known entity to whom the goods are sold or agreed to be sold. If the goods are to be imported otherwise than in pursuance of a purchase, the name and address of the owner of the goods must be provided. The buyer information is generally available on the commercial invoice. If the goods are sold in transit and the buyer information changes, the ISF must be amended.
  3. Importer of Record number/FTZ Applicant ID number – The IRS number, EIN, Social Security number, or Customs assigned importer number of the entity liable for payment of all duties and responsible for meeting all statutory and regulatory requirements incurred as a result of importation. For Foreign Trade Zone shipments, the IRS number of the party who files the documentation must be reported. If the importer of record on the entry is not the same as the importer that files the ISF, any ISF penalty would be against the party whose bond is posted for the ISF.
  4. Consignee number – The IRS number, EIN, Social Security number, or Customs assigned imported number of the individual or firm in the U.S. on whose account the merchandise is shipped.
  5. Manufacturer (or supplier) – Name and address of the entity that last manufacturers, assembles, produces, or grows the commodity. OR the name and address of the party supplying the finished goods in the country from which the goods are leaving. Remember that for textiles, the broker must have the actual manufacturer for entry purposes.
  6. Ship to party – Name and address of the first deliver-to party scheduled to physically receive the goods after the goods have been released from Customs custody. Customs believes this information will give predictability to targeting. If the ship to party is unknown, the facility where the goods will be unladen (e.g., pier) can be reported. If there are multiple delivery stop offs, only the first one is reported.
  7. Country of origin – Country of manufacture, production, or growth of the article, based upon the import laws, rules and regulations of the U.S. This is the same information declared on the Customs entry.
  8. Harmonized Tariff Schedule number – Tariff number under which the article is classified in the HTSUS. The final rule requires 6 digits, but Customs will accept 8 digits or the full 10 digit HTS number. This means all goods will need to be pre-classified.
  9. Container stuffing location – Name and address(es) of the physical location(s) where the goods were stuffed into the container. For break bulk shipments, the name and address(es) of the physical locations(s) where the goods were made “ship ready” must be provided. A “scheduled” stuffing location will be acceptable, but once the actual stuffing location is known, the ISF must be amended prior to arrival. The broker does not need to report which container was stuffed where (the container number is not required to be reported with the ISF).
  10. Consolidator (stuffer) – Name and address of the party who stuffed the container or arranged for stuffing of the container. For break bulk shipments, the name and address of the party who made the goods “ship ready” or the party who arranged for the goods to be made “ship ready” must be provided.

Lastly, the steamship line is responsible for providing the vessel stow plan and handling any container status messages.

Importers often perceive the ISF process as being one more regulatory piece of red tape that has to be handled in order to get their goods into the U.S. Freight Forwarders and Customs Brokers have used it as an additional service they can provide and produce extra revenue. But the great benefit to the American consumer is that each imported good purchased can be backtracked accurately to the factory from which it was produced. Not only that, but information about vendors, co-loaders, freight forwarders and other key elements of the supply chain can also be made available. Think of the monumental amount of data that ISF alone has generated over the last 8 years!

So this leads me to think that ideally, Import Security Filings and other pertinent Supply Chain data could greatly benefit from Blockchain technology. Per Blockchain Revolution :

“Blockchain is the technology behind crypto currencies like Bitcoin, and it is ushering in nothing less than the second era of the Internet. Blockchains establish the rules—in the form of globally distributed computations, heavy-duty encryption, and mass collaboration—that ensure the integrity of the data traded among billions of devices without going through a trusted third-party. Trust is hard-coded into the platform. It acts as a ledger of accounts, a database, a notary, a sentry, and clearing house, all by consensus, thereby allowing us to exchange things of value directly. No untrustworthy middlemen. That’s why we call it the Trust Protocol.

Although many opportunities for the blockchain require a digital currency, Bitcoin is only one application of this great innovation in computer science. The blockchain can hold any legal document, from deeds and marriage licenses to educational degrees and birth certificates. Call it the World Wide Ledger. It enables smart contracts, decentralized autonomous organizations, decentralized government services, and transactions among things. The Internet of Everything needs a Ledger of Everything: the blockchain is a truly open, distributed, global platform that fundamentally changes what we can do online, how we do it, and who can participate.”

It will be interesting to see if ISF can be incorporated with Blockchain technology, allowing us to always be able to make conscientious choices about the products we purchase along with where and how they were produced. Blockchain technology basically was not even available when ISF was introduced. So changing to a blockchain format could be time-consuming and expensive. But I think it would probably be worth it as the information could be made readily available at the point of purchase.

For an additional excellent article about how Blockchain is transforming Supply chain, please refer to Adam Robinson’s article: What Is Blockchain Technology, and What Is Its Potential Impact on the Supply Chain?

 

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