AAEI Board of Governors 2011
Leslie Cazas (Secretary – Treasurer) Nissan North America, Inc.Claib Cook (EC) General Motors CorporationJerry Cook Hanesbrands Inc. Michelle Forte Charter Brokerage LLCLori Goldberg (Vice Chair – Membership and Communication) Avery Dennison CorporationAaron Gothelf Tyco International Susie Hoeger Abbott LaboratoriesThomas Hughes Merck & Company, Inc.Steve Johnsen (Chair‐Elect) Bayer International Trade ServicesBruce Leeds Braumiller Schulz & Co.Robert Leo, Esq. Meeks, Sheppard, Leo & PillsburyMatt McGrath Barnes, Richardson & ColburnKathleen Murphy Drinker Biddle & ReathShanna O'Brien Eaton Corporation Julie Parks Raytheon Company Steve Pasienski Toyota Motor Sales, U.S.A., Inc.Beth Peterson BPE, Inc. Richard Salamone BASF Corporation Lee Sandler Sandler, Travis & RosenbergMel Schwechter Dewey & LeBoeuf Charlene Stocker Special Member Katherine Terricciano (Vice Chair – Education and Annual Conference) Philips Electronics N.A.Tim Van Oost (Interim Chair) BP America Inc. Matt Varner Nike Inc. Ken Weigel Alston & Bird Phyliss Wigginton (EC) Mitsui & Company (USA), Inc.Doug Zuvich KPMG LLP
AAEI Industry Leadership Council 2011
Ted Abber The Boeing CompanyPhilip Alling Ricoh Americas CorporationBarbara Appleton AGFA Sam Banks Sandler Travis Trade Advisory ServicesTom Barnes Integration Point Gail Cumins Sharretts Paley Carter & BlauveltBob DeCamp AN Deringer Diane DeJarnett Toyota Motor Sales, U.S.A., Inc.Dale Erskine Sun Chemical Peter Handal Cowie International Nancy Hiromoto N.F. Stroth & AssociatesJulie Hoeniges Caterpillar Werner Kobelt Nipkow & Kobelt Madeline Kuflik Panasonic Corporation of North AmericaMichael Laden Trade Innovations Michael Leightman Ernst & Young Mary Jo Muoio Barthco Terry Polino Thompson Coburn LLCSu Ross Mitchell Silberberg & KnuppHeather Sears DRS Norm Schenk UPS David Serko Special Member Sigmund Shapiro Samuel Shapiro & CompanyVirginia Thompson Crate & Barrel Ed Van Ek C.J. Holt Tim Van Oost (Chair Emeritus) BP America Jim Volovich FMC
AAEI 2010 Benchmarking Highlights
President’s Message
AAEI has developed the Bench
• Provide a “snapshot” of trade compliance practices;
• Assess the impact of U.S. trade policies and economic conditions on
• Elucidate trends in international trade compliance practices from year‐to‐
The best way you can contribute to this ongoing project is to participate in AAEI’s
AAEI is pleased to issue its 2010 Benchmarking Highlights which compares results from our 2009 and 2010 Benchmarking Surveys. Over the past two years, AAEI’s Benchmarking Survey has covered imports, exports, security and safety. Our Benchmarking Survey is the mostcomprehensive of its kind in reviewing international trade issues.
marking Highlights to provide trade compliance professionals and policymakers with an overview document to:
international trade; and
year.
Benchmarking Survey and provide us with feedback so that we continue to refine thequestions and have a large sampling size of respondents.
Import pecial Member
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Charlene Stocker, AAEI S
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In 2009, 35% of respondents d not know
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has been staffing consistency for the last 3 years as the number of ull‐time employees who handle US
imports still averages in the 2‐10 range. di
how many entries per headcount were processed but that number has dropped to 14% in 2010 reflecting an increased need to be knowledgeable regarding delivery of work product (Chart 1). The category of 1000‐1500 entries made a 15% increase over 2009, reflecting more work per person being done on a daily basis (Chart 1). As we compare the increased ability to monitor daily work with software available to ‘report’ that work, automation is the ey to this nformation. This, coupled with questions regarding internally developed software, shows a 17% drop in internally developed systems (Chart 2). Questions reflecting annual spending on software to support imports, reveal decrease spending levels as 12% more companies are spending less than $100,000 in 2010 versus 2009, with the next level of $100,000‐$200,000 showing littl change but also decreased (Chart 3). This probably reflect the number of outside vendors which have systems avail ble for purchase, as only 21% of companies do not utilize automation (Chart 2).
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These figures are interesting to compare with results from AAEI’s original Benchmarking Session conducted in 2002. At that time, 68% of the respondents indicated that they did not have a fully automated import process. As a result, the drop from 68% to 23% is not as dramatic as expected based on technological advances over the last decade. Moreover, comparing response data from surveys conducted in 2002, 2009 and 2010, we see the most popular response (combination of compliance, cost‐savings, head count reductions) to “What is the primary driver for automating your custom system” steadily drop from nearly half (43%) in 2002 to one‐quarter (24%) in 2010. Finally, the trade community still receives a good return on investment as the majority of respondents report that automation has “significantly” or “somewhat” improved compliance (64% in 2002 and 56% in 2010), but fewer importers are developing software internally (27% in 2002 and 19% in 2010).
In 2009 and 2010, Transportations and Logistics were both the primary functions for customs “operations” reporting through to executive management (Chart 4).
In 2010, however Finance took an 11% increase, Tax a 1% increase and Legal a 9% increase. This change may be reflecting a corporations need to tighten control in some areas. However, customs “compliance” reporting remained the same for Transportation and Logistics and Tax, but doubled for Legal and tripled for Finance (Chart 5).
Operations and Compliance staffing however are merging as in 2009 and 2010, but the number of organizations which have decreased distinguishing between the two functions has doubled (24% versus 45%). (Chart 6).
What will the data reveal this year? More tightly controlled reporting or less? Will there be more merging of these functions? Salaries for entry level positions have generally gone up with a 10% drop in levels below $40,000. In 2009, 42% of entry level personnel made between $40,000 and $60,000 but in 2010 that number jumped to 60% (Chart 7).
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Salaries for experienced personnel are generally the same for the past 2 years, with the majority of professional salaries up to $75,000 and the next highest group salaries up to $100,000 reflecting only a 3% downward trend from 2009 (Chart 8). This may be reflecting the complexity of import compliance and the acknowledgement that for experienced personnel, the salary offering must be commensurate.
Legal fees have decreased from 2009 to 2010 as 36% of respondents spent $300,000 or less
in 2009; whereas 68% spent $300,000 or less in 2010 (Chart 9).
These results may reflect this work coming in‐house, or companies choosing to involve counsel less often.
Finally, questions about audit or self‐assessment reveal a movement away from “judgmental sample” to “statistically valid” samples (Chart 10).
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Export Christine Berghofer, Global Trade Compliance
Executive
The survey asked 60 questions on export.
One of the most interesting results pointed to a change from 2009
to 2010 in the organizational location of the export function for both export “operations” and export compliance. While 63% of the respondents stated the export operations (i.e., the day‐to‐day processing of export transactions) resided in the Transportation, Logistics, Traffic function last year, that number decreased to 53% this year, with a growing number moving to the Legal Department (8% increase) or the Finance department (4% increase) (Chart 1). We see an even more dramatic shift with export “compliance” from the Transportation, Logistics, Traffic function to the Tax or Finance function. Thirty‐seven percent reported through the Transportation, Logistics, Traffic function last year while only 17 percent reported through that function in 2010 (Chart 2). Thirteen percent reported through Tax in 2009, while 11% reported through Tax in 2010. Six percent responded they reported to the Finance department last year, while 13% reported into Finance in 2010. The numbers of respondents reporting into the Legal function remained relatively the same, 25% reported through Legal in 2009 and 26% in 2010 (Chart 2).
When respondents were asked how much of their time was spent on export controls, the
responses showed a significant increase (Chart 3).
In 2009 71% of the respondents indicated they spent less than 25% of their time on export controls. This number decreased to 39% in 2010 with a corresponding increase in those who now spend over 50% of their time on export controls. Those who spend 50% to 75% of their time on export controls grew from 0% in 2009 to 11% in 2010; and those who spend more than 95% of their time grew from 6% to 12% (Chart 3).
In regards to the head of the compliance function, and how much time this person spends on export compliance, the responses were split: 12% to 21% spending more than 90% of their time, while an increase from 12% to 23% spending less than 10% (Chart 4).
The survey showed an increase in the number of respondents conducting self‐assessments of export activities. While 59% responded in 2009 that they do not conduct self‐assessments, only 12% responded in the negative in 2010. (While 13% responded in 2009 that “other internal” auditors [i.e., non‐trade compliance] conduct self‐assessments, the number decreased to 6% in 2010 (Chart 5). With the increase in companies conducting self‐assessments, the responses showed a growth in companies going to external providers to assist with the process. Twenty‐eight percent of the respondents indicated they use a combination of internal and external experts to conduct the audits, which is an increase from 19% in 2009. Still by far the majority of respondents in 2009 and 2010 use only internal resources to conduct self‐assessments (Chart 5).
With the increase in self‐assessments, came in increase in respondents who indicated they did not find any material violations (Chart 6). Sixty‐three percent did not discover any material violations, which is up from only 7% in 2009. One interesting point is that in 2010 22% of the respondents indicated that the self‐assessments resulted in a voluntary disclosure. In 2009, zero respondents reported that their self‐assessments resulted in voluntary disclosures. However, 27% uncovered material violations and chose not to disclose. The responses showed a slight increase from 6% to
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8% when asked if your company has been investigated by any government agency after filing an export voluntary disclosure (Chart 7).
Service providers were asked if their advice to clients changed regarding when (and if) to file voluntary self disclosures. The responses showed absolutely marked change between 2009 and 2010 in their responses (Chart 8).
The survey indicated an increase in the number of US export shipments with the respondents (Chart 9). In response to a question on how may US export shipments does your company make per year 54% responded they are making between 5,000
and 25,000 shipments per year. Only 37% responded they had that volume last year. Perhaps it is more of an indication that companies are now quantifying their export transactions, since last year 19% responded that they did not know how many they were making, but in 2010 only 6% responded that they did not know (Chart 9).
When asked in a typical year, how many BIS licenses your team processes per license specialist/submitter the responses remained steady for 2009 and 2010 for those who did not file any or who filed less than 25 per license specialist (Chart 10). But with those
filing 25 to 50 licenses the response declined from 20% to 9% and we see a slight increase for those filing less than 50 but a greater increase in those filing more than 50 licenses per specialist.
The survey showed a significant change in activity when respondents were asked, “On average, how many shipments per year does your company make subject to BIS licenses” (Chart 11).
Forty‐four percent responded that they made more than 200 shipments subject to BIS licenses in 2009, and only 25% had less than 50. Those numbers flipped between the two years and in 2010 65% of the respondents made less than 50 and no respondents had more than 200, with the exception of 6% that responded they made more than 400 shipments subject to BIS licenses in 2010.
In regards to OFAC licenses, 55% responded that they do not submit any OFAC license applications, while in 2010 74% responded that they do not process OFAC licenses (Chart 12).
Those companies that process 10 or less OFAC licenses also declined in 2010.
There appears to be a significant change in denied party screening practices (Chart 13). In 2009 only 6% of the participants responded that they screen all shipments, and 75% responded they screen only export shipments. That trend seems to have changed in 2010 as 37% responded
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they screen all shipments and only 22 responded they screen only export shipments (Chart 13).
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Security Karen Lobdell, Director – Global Solutions,
Integration Point The survey asked 38 questions this year with respect to security. The bulk of the questions focused on voluntary supply chain security
programs, however, a number of questions also focused on the Importer Security Filing (ISF). Of the 38 questions, 25 were directly targeted to importers/exporters and six were targeted to service providers.
As in past surveys, the majority of respondents (79%) indicated that they participate in a voluntary security program (Chart 1), with 89% of those indicating that C‐TPAT was the program of choice (Chart 2). The trend continued that heaviest participation by respondents was with larger companies (34% have revenues over $1 billion and 25% with revenues $100 million to $1 billion). However, while last year there were no responses for companies under $10 million, this year 7% of respondents fell in this category. It will be interesting to see if this number increases in the future with CBP’s desire to increase membership in C‐TPAT from 10,000 to 40,000 members.
The percentage of companies at the Tier 2 (35%) and Tier 3 (40%) levels remained consistent this year, although there has been much recent discussion on CBP raising the bar for retaining Tier 3 status. In coming years these numbers will be worth watching as it
becomes more challenging to retain Tier 3 status.
These numbers continue to support the theory that larger companies with more robust compliance programs and supportive upper management are more likely to participate in voluntary programs of this nature, as well as have the resources to achieve “best practices.”
Companies continue to show interest in participating in other country’s security programs (i.e., PIP and EU‐AEO) at the rate of 64%. However, for those companies that had been unsure in the past (32%), it appears that
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they have decided against participation as that number of “unsure” has decreased to 18%, with a corresponding increase in the number saying “no” (Chart 3). The EU‐AEO program continues to be the preferred next step with 38% stating that would be the next program they would join, and PIP following behind that with 25%.
Reasons for participation in the programs remains consistent with 39% stating “it was the right thing to do,” followed by membership providing access to the FAST lanes and designated Trusted Trader status with 27%. Only 12% joined based on the promise of fewer inspections.
Benefits of participation continue to be unclear. For participants with Tier 2 or higher status, 58% did not see an appreciable difference in benefits, and 69% felt there was no improvement in the speed of customs release. There was an increase though in those stating there was appreciable difference – 15%, which was up from 6% last year.
There was a noticeable change this year with respect to expectations in the programs. While last year 72% felt the programs met expectations, this year only 49% did.
Additionally, we saw an increase in those who felt it had fallen short – 35%, up from 22%. Despite issues on benefits and expectations, 68% still say they would join again today knowing what they know now. This is up from 53% last year (Chart 4).
The survey once again touched on the cost aspect of supply chain security programs. Participants were questioned about the annual cost to maintain status in the program. Responses indicate that the cost has come down from previous years with 42% saying the cost was under $20,000 annually (up from 6% last year) and 22% in the $50,000 to $100,000 range. Only 11% spent over $200,000 (down from 18%) (Chart 5). Most participants (53%) stated that the amount spent maintaining the supply chain security program was approximately the amount anticipated. Seventy‐eight percent of the respondents did not make changes to its supply chain to participate (up from 61% last year). And while last year it was an even split 50/50 for whether companies hired outside consultants to assist with any part of the application process, assessment, validation or revalidation, this year only 35% stated that outside consultants were used.
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Fifty percent stated the cost was worth it for the benefits received, yet 19% don’t know and 22% don’t recognize the benefits at all. The issues of costs not being worth the benefits and lack of senior management support top the list of reasons for non‐participation (21% combined).
Looking forward, responses indicate the majority (52%) feel the program should remain voluntary which is consistent with last year (Chart 6). Whether the program should encompass exporters is still questionable with 35% stating yes and an equal percentage stating it would depend on the requirements (Chart 7).
The large majority (79%) want all security programs administered by one agency. Additionally, if agencies administer their own programs, 47% acknowledge the need for mutual recognition. This thought process is consistent with the growing interest in account based management and simplified entry.
Service providers continue to play an active role; however, numbers are down slightly over last year with respect to those offering services in this area – 75% this year versus 88% last year. The larger majority (69%) are brokers and trade
consultants. Consistent with the decrease in the number offering services, there was also a decrease in the number that felt it helped grow business. A combination of hourly rates and per‐project charges is still the predominant method of structuring fees.
With respect to the Import Security Filing (ISF), now that companies have had a year to implement with graduated enforcement, it is apparent that the cost structure for filing has dropped with 54% paying less than $10 per filing, 27% paying $10 to $20 and 32% paying $20 to $50. This is a noticeable drop from last
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year (Chart 8). The broker continues to be the filer of choice at 67% (up from 50% last year).
The majority felt that ISF was somewhat difficult to implement (17% felt it was very difficult), with the overseas supplier being the most challenging component to work with towards compliance. The majority of companies spent under $10,000 to implement. Despite all the efforts in this area, 51% feel that ISF does not enhance supply chain security, while 27% feel it does and 22% don’t know.
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Safety Marianne Rowden, President & CEO—
AAEI AAEI began asking questions relating products safety in the 2009
Benchmarking Survey in 2009 when we asked 20 questions. In
2010, the Benchmarking Survey included 17 questions – again these questions were designed for importers/exporters. While the questions focus on the Consumer Product Safety Improvement Act (CPSIA), we compare the trends of the more generic safety questions in these Highlights.
As with the responses in 2009, the overwhelming responsibility for product safety falls to Quality Assurance personnel at companies (Chart 1). Indeed, it appears that any uncertainty over who has such responsibility over product safety has been settled. Whereas in 2009 22% of respondents indicated that Compliance would handle safety, only 14% of 2010 respondents identified Compliance as having safety responsibilities. In keeping with this trend, 50% of respondents in 2009 identified Quality Assurance as being responsible for safety, but in 2010 that number rose to 68%.
Interestingly, there has not been much movement concerning checklists maintained
by companies for product safety. In 2009, the Benchmarking Survey asked respondents “What types of checklists do you have in place for ensuring product safety?” (Chart 2), about 40% responded “materials specifications”, and 20% performed “random sampling” as products were manufactured. By 2010, the respondents reported that 33% had “materials specifications”, but 33% performed “random sampling” – a marked increase.
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Companies participating in AAEI’s Benchmarking Survey are still showing a wide variety of guidance choices for manufacturers concerning recalls (Chart 3). A significant percentage of companies provide no guidance to manufacturers (23% in 2009 and 30% in 2010), a consistent response on “guidance depends on manufacturer” (15% in 2009 and 15% in 2010) or product (23% in 2009 and 20% in 2010). Meanwhile, the number of respondents providing standard recall protocol (8% in 2009 and 20% in 2010) and vetting manufacturers before contract (39% in 2009 and 15% in 2010) varied, respectively.
Most remarkable is the fact that two years after passage of the CPSIA, a clear majority of respondents still do not have a solid understanding of the CPSIA requirements – 71% in 2009 and 64% in 2010 (Chart 4). Additionally, a diminishing number of the traders who participated in the Benchmarking Survey have no factory audits in place – 30% in 2009 and 15% in 2010, respectively (Chart 5). Interestingly, companies made a big adjustment on increasing annual audits based on documentation (0% in 2009 and 20% in 2010), whereas annual audits based on documentation and site verification (30% in 2009 and 25% in 2010) and random audits
with site verification (40% in 2009 and 2010), have stayed consistent (Chart 5).
What these Benchmarking trends demonstrate is that product safety compliance continues to evolve, albeit slowly.
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