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In preparing for US Customs ACE program, will the Gain exceed the Pain?

Here we go again. With the imminent rollout of ACE (Automated Commercial Environment), the US Customs & Border Protection agency (CBP) has found a new way to test the patience and persistence of C...

Here we go again. With the imminent rollout of ACE (Automated Commercial Environment), the US Customs & Border Protection agency (CBP) has found a new way to test the patience and persistence of Canadian carriers and exporters.

This time around, however, there may be more method to the madness. In simple terms, CBP has now formally assigned the task of transmitting security-related shipment data to carriers and cargo- clearing data to customs brokers. Carriers must electronically transmit data aligning drivers, equipment and basic cargo information to CBP at least one hour before trucks arrive at the border. If the data is late or inaccurate, CBP can inspect, stop and turn back trucks or fine carriers.

Compliance will reward carriers with swift passage across the border as well as opening the door to the ever expanding benefits of e-commerce that include eliminating paperwork, improving business processes and streamlining information storage, analysis and transmission.

Under ACE, CBP will ultimately serve as a supply chain information hub. In the first phase, various partners can send data directly to CBP citing the cargo’s unique shipment control number, which will enable CBP agents to consolidate it all into a single file as the truck pulls up in front of the booth. In the past, Customs preferred having all of the information coming from one source on the same document..

In other words, ACE is another exercise in short-term pain for long-term gain. For some, the initial uncertainty is very frustrating. “Many carriers are scrambling to get ready,” says Carol Beaul, Toronto-based president, Intelli Trade Inc. “They are trying to understand what is required and make rational business decisions. But it is not easy, since detailed CBP information about ACE and how to meet the new regulations is not readily available.”

Moreover, ACE may not affect all carriers the same way. “LTL (less than truckload) may face additional challenges because they have to deal with more cargo information from various shippers going to different consignees,” says James May, Richmond Hill, Ont.-based business development manager, CrimsonLogic (North America) Inc. “On the other hand, TL (truck load) carriers often only get the complete cargo information after the truck is loaded.”

However, this much is clear. ACE compliance involves two major concerns. One is IT infrastructure, particularly software that must come from CBP-approved vendors. The second is process. CBP discussions with carriers over the form and substance of the required practices and procedures are still going on. The official ACE launch is expected before the end of 2006, after which time both sides will face a learning curve regarding a consistent interpretation and implementation of the new rules as ACE-ready border stations are opened at all major US entry points.

“During that trial period,” says Mark Nanni, Toronto-based account manager, international business development, MSR eCustoms Inc., “I believe that non-compliant carriers will initially have their trucks turned back at the border. But after that, CBP will apply monetary penalties starting at US$5,000 per infraction. In addition, repeat offenders will attract more attention from CBP for subsequent crossings. At the very least, this attention will take the form of more frequent stops and searches.”

The implementation choices open to carriers are limited. First is the do-it-yourself approach. Large-volume carriers can set up their own reporting system and deal directly with CBP. To do so, they need to partner with ACE-certified vendors and deploy ACE-approved software. “The electronic messaging software is fairly straightforward,” says Adrian Gonzalez, Dedham, Mass.-based director, ARC Advisory Group. “It’s based on EDI over VANs (value-added networks) or the Internet with XML. E-commerce software developers such as Descartes Systems Group Inc. and Sterling Commerce have experience linking firms with major customers such as Wal-Mart.”

A stickier issue is achieving CBP ACE-certification. “US Customs has not responded quickly to test results from our internally developed software trials,” says Karen Richards, Cambridge, Ont.-based certified customs inspector, Challenger Motor Freight Inc. “It can take up to three weeks for answers rather than a couple of days as promised. That slows everything down because we cannot go on to test the next phase until the earlier one has been approved.”

For others it was smoother sailing. “We were the first Canadian software developer to be ACE-certified,” says CrimsonLogic’s May. “We worked closely with CBP for six months as their ‘guinea pig’.”

Another certified developer, MSR, extended its reach by partnering with Oakville, Ont.-based transportation management software vendor Freight Logix Inc. Since the MSR component is completely embedded in the software, carriers can use the MSR ACE solution with little or no additional IT requirements.

The second option is to outsource the reporting to an ACE-certified third-party service provider. These can be software vendors as well as other service providers that already have electronic links with CBP such as customs brokers or other solutions such as MSR e-Manifest Gateway solution and those from CrimsonLogic and ViaSafe. Since some brokers are already sending pre-clearance information to the US Food & Drug Administration for carriers, for additional fees they can look after ACE transmissions as well.

For many carriers, this may be the simplest solution since it is the least disruptive. Using just a browser, they can fill in the boxes on the service provider’s web page and have them transmit it to CBP.

Finally, CBP has established a portal through which carriers can transmit the necessary data. Although it is designed for smaller firms with only occasional cross-border loads, it is open for all carriers to use. But According to Nanni of MSR, all carriers should become familiar with its operation. “It can serve as the default or back-up link to Customs,” he says. “It will take more time and effort. But it will get the job done.”

At present, most carriers already capture ACE-required information. For drivers, if they are FAST-approved, the registration number is enough. Otherwise, carriers need drivers’ birth certificate registration or if available, passport numbers. Equally important, all passengers in the cab must be similarly identified. Next is the tractor and trailer vehicle identification numbers (VINs) along with the licence plate numbers. For cargo, it’s a general description rather than parts numbers or HS codes.

Consequently, some carriers are well along in their preparations. ” It’s been lots of work requiring time, money and attention,” says Mike Ludwick, Winnipeg-based vice-president information systems, Bison Transport Inc. “Complying with ACE is a priority because it’s the law. But there will be efficiencies because it will reduce paperwork and help eliminate unnecessary business processes.”

Others are looking for the silver lining as well. “We’re trying to develop an automatic information flow for our in-house system,” says Dom Vetere, Toronto-based director of safety & compliance, XTL Transport Inc., “so that we can reduce the need for human intervention and the possibility of error. Once ACE is up and running, we are expecting to enjoy productivity gains.”

But other challenges remain. “We need to wake up the shipper community about how these changes will affect them,” says Ron Cameron, Ayr, Ont.-based project and systems analyst, Liberty Linehaul Inc. “If they aren’t being ready to load when trucks show up, that could lead to problems at border crossings and result in extra costs, especially after new hours of service rules are introduced in 2007.

“In fact, it’s already happening. Recently, owing to inaccurate data from the shipper – the FDA wanted a sample of the product for testing – we had a truck turned back at the border. For the past two weeks, the load has been sitting in a Hamilton w
arehouse. We had to charge the shipper an extra $1,800.”

As they struggle to comply with ACE, all carriers are hoping the gain will exceed the pain.

Veteran technology expert Ken Mark has covered supply chain management since it was called distribution and has documented its legitimization as a critical business function. He holds an MBA from York U.

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