1. The Business Case for Using e-Commerce Data to Manage Product Admission at International Borders
Douglas Bailey, Chair
US International Trade Data System
Product Information Committee
October 2011
US Vision to improving efficiency and effectiveness of product visibility
ITDS – forum for USDA/CPSC / FDA/ EPA/ FWS/ others
PIC created to find global solutions to US PGA efforts to manage incoming products
Two reports issued – three primary recommendations

2. Imagine Two Ports . . .
30 % OF LINE ENTRIES RELEASED IN ADVANCE OF ARRIVAL
42 % TARGETED AS POTENTIALLY HIGH RISK
ABOUT 5 % OF PRODUCT EXAMS YIELD NON- COMPLIANT PRODUCTS
85 % RELEASED IN ADVANCE OF ARRIVAL
4 % TARGETED AS POTENTIALLY HIGH RISK
CONDUCTS FEWER EXAMS AND FINDS MORE NON-COMPLIANT PRODUCTS THAN OTHER PORTS
Imagine two ports.
Government agencies at both ports take their mission of expediting trade while protecting citizens from unsafe imports seriously. Both ports see nearly the same volume and mix of imported consumer products and have nearly the same resources to target and examine incoming products. But the trade experience at each port is dramatically different.
FOR CONSUMER PRODUCTS, ASSUMING 300,000 ENTRY LINES
One port is able to pre-clear about 85 percent of the incoming toy entries, compared to about 30 percent for the other port. One port considers about 4 percent of the incoming toy products to be potentially high-risk and focuses its examination resources on these products. The other port considers about 40 percent of the incoming products to be potentially high-risk, and feels overwhelmed by the odds of trying to ferret out the truly non-compliant products from this daunting volume of containers. And the port focused on the 4 percent of incoming products as high-risk is finding more non-compliant products as the port struggling with the 40 percent target set. So not only is product movement more efficient for trade at the one port, consumer protection is more effective for citizens.

3. One Port Markedly More Efficient for Trade and Effective for Citizens
Released in Advance of Arrival
So what is the difference between these ports? Special x-ray container technology? Geo-spatial software? No, nothing like this. One port, and its participating government agencies and trade members, understands how to use e-commerce data to update the product admissions process for consumer products at international borders. And within the next 20 minutes, you too will know exactly what they know.
TOTAL ENTRY LINES 300, ,000
TOTAL NUMBER OF EXAMS , ,500
NON-COMPLIANT PRODUCTS FOUND
EXAMINATION EFFICIENCY 5.00% 50.68%
PERCENT ELIGIBLE FOR IMMEDIATE RELEASE 29.81% %
PRODUCTS ELIGIBLE FOR IMMEDIATE RELEASE , ,070
NORMAL RISK PRODUCTS SUBJECT TO DOC REVIEW , ,662
PERCENT POTENTIALLY HIGH-RISK TARGETED FOR EXAM 41.76% 3.84%
POTENTIALLY HIGH-RISK TARGETED FOR EXAM , ,507
NON-COMPLIANT PRODUCTS FOUND
POTENTIALLY HIGH-RISK TARGETED FOR EXAM , ,268

4. Why Use e-Commerce Data?
Based on global, voluntary consensus standards in public domain;
Broadly used by industry sectors;
Provides globally unique identification for products in the supply chain;
Provides structured, internationally recognized, multilingual product categorization and description; and
Uses commonly available technology.
The e-commerce data making this difference is based on global industry standards and includes both product identification and classification. Globally unique product identification is provided by the Global Trade Item Number, known as a GTIN. And a variety of global product classification code sets have been established for categorizing products depending on the product set – such as consumer products, chemical products, and agricultural products. And suppliers and buyers are already using these e-commerce data elements as a key part of today’s supply chain efficiency. Government needs to be able to consume data to be a smarter partner in supply chain.
Government leverages industry’s investment and use of e-commerce data. Business case for using e-commerce data driven by industry, not government.
PIC Approach involves THREE BASIC RECOMMENDATIONS – 2 NOW – THIRD ONE LATER

5. PIC Recommendation 1 Use Globally Unique Product Identification
Whenever possible, use Global Trade Item Numbers (GTIN) to manage product in each entry line
Company Prefix
Item Reference
Check Digit
REC 1 – USE GLOBALLY UNIQUE PRODUCT ID (GTINs)
GAME-CHANGER: Manage products at the brand and “model” level rather than at the product type level; best done using the GTIN.
One-third to one-half of all products in trade identified by GTINs

6. Use of GTINs Creates New Efficiency
Positive Identification of product brand and model allows PGAs to reuse definitive admission decisions
ENTERED JAN 5
ENTERED JAN 10
ENTERED JAN 15
ENTERED JAN 20
GTINsl allow Government TO REUSE DEFINITIVE ADMISSION DECISIONS.
Over time, entries contain INCREASING PERCENTAGE OF PRODUCTS WITH KNOWN ADMISSION HISTORY,
Allows Governments to FOCUS ON UNKNOWN PRODUCTS
= EXAMINED UPON ARRIVAL
= KNOWN BY PREVIOUS EXAMINATION

7. PIC Recommendation 2 Use Global Classification Codes
Use international product classification codes and descriptors to accurately determine jurisdiction and risk profile for each product in entry
REC 2 – USE GLOBAL PRODUCT CLASSIFICATION CODES TO EXTEND HTS PRODUCT CATEGORIES
Use publically available, international product classification system codes;
Creates a STRUCTURED FRAMEWORK for recognizing product differences;
BEST DONE using the GPC and UNSPSC.
Use product characterization information in computer-based targeting systems to make jurisdiction and admission decisions.

8. Global Classification Codes Extend Product Visibility
DESCRIPTION
STEP START WALK N RIDE
BOUNCIN BABBLES
HEROES ACTION FIGURES
HTS CODE
HTS NAME
US-CHILDREN'S TOYS
GPC CODE
GPC CODE NAME
Toys - Ride-on (Non Powered)
Dolls/Soft Toys (Powered)
Dolls/Soft Toys (Non Powered)
GPC DESCRIPTOR
Consumer Lifestage => 9 MONTHS & UP
Consumer Lifestage = >3 YEARS & UP; Power Source = BATTERY; Target Gender = FEMALE; Type of Doll/Soft Toy = BABY DOLL
Consumer Lifestage = >4 YEARS & UP; If Stuffed/Filled = NO; Target Gender = MALE; Type of Toy = ACTION FIGURE
EXAMPLE OF GPC CODES EXTENDING PRODUCT CLASS FOR TOYS
NOTE HOW BRICK AND DESCRIPTOR LEVELS EXTEND PRODUCT FEATURES

9. ABI PG RECORD SET PASSES E-COMMERCE DATA TO PGAs
-- The commercial description of the product.
Product’s GTIN code (SRV )
GPC product classification code for Toys – Ride-On (Non-Powered) (GPC )
THE PROVISION OF E-COMMERCE DATA BY TRADE IS OPTIONAL!

10. TOY AND GAME BUSINESS CASE
On Page 14
These results are particularly noteworthy because benefit WORKS FOR OTHER TYPES OF CONSUMER PRODUCTS.
Range of benefits will vary in accordance with the frequency of product repetition, the frequency of PGA product examination, and the utility of the HTS codes compared to the global product classification codes.
This approach should be evaluated by interested PGAs and trade members for other consumer products such as
-- electronics,
-- computers,
-- public health products,
-- food products, and
-- alcoholic beverages.
Consumer Product Safety Commission and Hasbro

11. FINDING – GTINS REVEALED REPETITIVE NATURE OF IMPORTED TOY PRODUCTS
Use of GTINs in pilot revealed that 75% of toy entry lines are repeating products
For major importer using HTS only, all 5,000 line entries are initially high-risk products and subject to targeting
Toy Products Subject to Targeting
Non-Repeating Entry Lines (8%)
First Occurrence of Repeating Entry Lines (17%)
Entry Lines Repeating Two or More Times (75%)
Page 21
Explain for major importer with 5000 entry lines a year
Statistically 25 exams a year (1/2 percent of all entry lines)
Pilot study of 30 containers with 44 unique case-level products showed 68% will repeat again at least once over 12 months for that importer AND average repetition is 4.23 times.
RESULT – IN first year – 75 % of 5000 entries will be repeating products
Quick note – in second year 93 % is repeating with year-to-year repetition ( %).
Leaving about 25% (1,300) as unknown, potentially high-risk products
Using GTINs, about 75% (3,700) line entries can be recognized as products with a previous admissions history – no further exam required

12. FINDING – GPC IMPROVED PRODUCT VISIBILITY
Use of GPC brick codes reduced number of potentially high-risk products by 62%
Page 19
OR a 26% reduction in potential high-risk products (111/426)

13. BENEFIT – 80% FEWER PRODUCT HOLDS AND EXAMS
Product examinations could be reduced by 80% with GTINs and GPC codes
Mid-size importers could save $30,000 a year
Products known to be low-risk by GTIN, when released in advance, will improve reliability of product flow
Government can focus on 10 to 20% of remaining products, increasing targeting efficiency with existing resources
75% from GTINS (3700*.005 = 19 exams) PLUS another 5% reduction from GPC (335 *0.005= 1.6) = 80% REDUCTION in EXAMS (20 out of 25)
20 * $1500 = $30,000

14. For TOP 50 TOY Importers Over 5 Years
NET VALUE OF $15.7 M
Page 32 – Cost and Benefits for TOP 50 toy importers OVER 5 YEARS
For TOP 50 TOY Importers Over 5 Years

15. RETURN ON INVESTMENT OF 850%
Page 31 – top 50 toy importers
If Trade includes GTIN and GPC in PG Record Set and CPSC revises targeting to manage product lines by GTIN:
$1.8 M Investment recovered in Year 1
By year 5, over $8 in benefits for every $1 invested
INTANGIBLE BENEFITS:
Prompt, Paperless Release of Known Products: Promptly release (or reject) these products in accordance with previous admissions decisions, ideally in advance as paperless releases, creates a benefit for the trade - more predictable product delivery dates for importers and receivers.
Brand Name Protection: Remove non-compliant products more effectively at the ports, keeping non-compliant products out of the supply chain.
Improvements in Consumer Safety: Efficient removal of non-compliant products reduces public exposure to health and safety hazards in consumer products, which will translate to lives saved.

16. CUT FLOWER BUSINESS CASE
On Page 34
Customs and Border Protection with USDA-APHIS and the Association of Floral Importers of Florida

17. FINDING – GLOBAL CODES ENABLED REPORT AUTOMATION
Sampling plan and import volume reports can be computer-generated when global product code included in PG Record Set
PG Record Set accommodates multiple views of product: (1) tariff assessment by stem type; (2) import volumes by product type; and (3) sampling plan by product type recognizing stem components present.
Findings –
Report shows that global codes allow automation of manually prepared reports
PG Record set has flexibility to support multiple views of product

18. BENEFIT – REDUCED INSPECTION TIME AND IMPROVED ACCURACY
Average time to inspect cut flower products can be reduced by 50 percent by eliminating manual report generation
Import volume statistics can be computer-generated and sent to APHIS using machine-to-machine process at lower cost and greater accuracy
Cost avoidance – generates soft benefits for CBP and trade
BENEFITS –
50% reduction inspection time
Import stats captured and transferred M2M

19. For TOP 50 FLORAL Importers Over 5 Years
NET VALUE OF $2.4 M
On page 53 – Costs and Benefits for Top 50 Floral Importers OVER 5 YEARS
Reduced inspection time = cost avoidance for trade and PGA
For TOP 50 FLORAL Importers Over 5 Years

20. RETURN ON INVESTMENT OF 690%
On page 52
If Trade includes UNSPSC code in PG Record Set:
-- 345K investment recovered in Year 2 by PGA
-- By year 5, nearly $7 in benefits for every $1
-- No real implementation costs for trade
INTANGIBLE BENEFITS:
Possible Reduction in Overtime Inspection Fee Charges: Trade is only charged inspection fees when the specialist has exceeded his or her 8 hour tour for the day;
Faster Release of Perishable Products into the Supply Chain: The value of the 1-hour faster release time incrementally extends the shelf life of perishable flowers for that one inspection. But also the last inspection queued for the day will be started hours earlier.
Improved Granularity and Confidence in Industry Import Volume Metrics: Both the trade and the government are totally dependent on the numbers generated by this process to understand the nature of cut flower imports entering the US.
The Impact of Air Waybills on Sampling Efficiency: Drop use of air waybills when generating Sampling Breakdown Worksheet – may reduce number of sampling units and seemingly minor efficiencies for a single entry could become significant when multiplied by the approximately 127,000 entry inspections conducted every year.

21. PIC Recommendation 3 Use Global Product Catalogs
Use GTIN to “look up” product information in secure, globally-standard electronic product catalogs – one data element unlocks all industry e-commerce product information
REC 3 – USE GLOBAL ELECTRONIC CATALOGS TO OBTAIN ACCURATE PRODUCT INFORMATION
CATALOGS ARE A WORKING REALITY TODAY!!
28 GDSN-certified data pools in operation today in 98 countries
Over 25,400 companies now use e-catalogs;
About 3.2 million products are published with 1 million added every year
USED BY INDUSTRY TO SYNCHRONIZE MASTER PRODUCT DATA IN COMPANY IT SYSTEMS for e-commerce trading
GOVERNMENT WOULD BECOME A DATA RECIPIENT, subscribing to published products with admission responsibilities

22. Using Global Codes in Catalogs
Global Catalog “Cloud”
Product Supplier 1
Product supplier authoritatively publishes product information
Importer
GPC =
GPC DESCRIPTORS
GTIN= 3
Importer places the GTIN for the product in the entry record and sends to Customs
Government downloads published product information from catalog 2
ENTRY # Line N
GTIN=
EXAMPLE OF ELECTRONIC CATALOGS IN ACTION
=Dolls/Soft Toys (Powered); Consumer Lifestage = >3 YEARS & UP; Power Source = BATTERY; Target Gender = FEMALE; Type of Doll/Soft Toy = BABY DOLL
Customs Data 4
Government matches GTIN with catalog info and makes admission decision, ideally in advance, using rich global data from catalog 5
If catalog data indicate low risk product, government can release without inspection; if high-risk, can better plan for inspection efforts
Government Agency Inspection

23. MEAT AND POULTRY BUSINESS CASE
Page 56
Validates use of industry-standard product catalog
Case involves EXPORTS, not imports
USDA-FSIS and Tyson Foods

24. FINDING – CATALOGS CAN PROVIDE COMPLEX PRODUCT CLASSIFICATION DATA
All 21 of the FSIS static meat product elements can be populated from the industry-standard product catalog
No information technology or security obstacles were identified for downloading product information from the industry-standard product catalog, as only standard Internet protocols are used
PGA’s product attributes can be deduced from product catalog classification information (although 3 elements need to be added through a change request)
-- Species of meat
-- Product cut
-- Boneless Claim
-- Non-thermal Preservation
-- Additives
-- Level of cooking
No technology issues – internet standards used

25. BENEFIT – REDUCTION IN CERTIFICATE ERRORS CREATES SAVINGS
Reducing product characterization errors on 3 export certificates a year would save one major exporter about $15,000
Trade avoids operator time to enter product information through FSIS web interface
FSIS reduces time correcting certificates and resolving admission issues at foreign ports
BENEFITS –
Assumes major exporter avoids 3 mis-documented shipments a year where product characterization involved.
3 X $ $15,000 / exporter / year
FSIS avoids time correcting certs and resolving shipment issues

26. For TOP 25 MEAT Exporters Over 5 Years
NET VALUE OF $1.4 M
On page 68 – Cost and benefits for Top 25 meat exporters OVER 5 YEARS
For TOP 25 MEAT Exporters Over 5 Years

27. RETURN ON INVESTMENT OF 557%
On page 67
Investment recovered in Year 1
By year 5, over $5 in benefits for every $1
Moderate implementation cost of $250,000 belongs to PGA
INTANGIBLE BENEFITS:
Leveraging Product Catalog Information to Improve Targeting of Imports: Same global product classification codes can also be used to improve targeting precision on imported meat, poultry, and egg products.
Protecting Valuable Foreign Markets for US Suppliers: In worst case scenarios, shipment of ineligible meat and poultry products can close an entire foreign target market to US exports with potential industry impact of millions of dollars in lost export opportunities.

28. PIC CONCLUSIONS
The ITDS Board and its members should fully support implementation efforts to use e-commerce data to improve the efficiency of cross-border trade since:
Infrastructure in place by 2012 with CBP’s Automated Broker Interface PG message set
Implementation costs are modest
All Pilots repay investment in 1 to 2 years
Pilots offer ROI from 500% to 800%
These results should encourage PGAs and interested trade members from pilot business case studies to proceed with trial implementation;

29. OPPORTUNITY IS REAL FOR TRADE AND GOVERNMENT
On Page 4 – exec summary
STRATEGIC BREAK-THROUGH IN EFFICIENCY THAT BENEFIT TRADE AND PGA
Business case is now in place to justify trial implementations in at least these three product sets and similar admission scenarios world-wide.
USE-CASE HAS VALUE WORLD-WIDE – US CAN BE EARLY ADAPTOR OR JOIN OTHERS LATER

30. NEXT STEPS FOR THE REPORT
Present the draft report to the ITDS Committee of the TSN and the entire TSN
Amend the draft report after 45-day comment period
Publish the final report by posting it on the ITDS web site and issuing a press release regarding its availability.
Present the final report to the:
Border Interagency Executive Council (BIEC);
CBP for possible inclusion in ACE cargo release requirements; and
Information Management Subcommittee of the World Customs Organization Permanent Technical Committee as requested by WCO
On Page 70 of report
Next Steps for validating this report:
-- Board acceptance of report today
-- Posting on web site and notice to trade for 45-day comment period
-- Briefings to trade
-- Summarize comments and corrections and issue in final by late November
-- Support follow-on awareness and implementation efforts nationally and internationally

31. For Additional Information e-mail: douglas.bailey@ams.usda.gov
The PIC Business Case Report is available at
Comment period closes November 30, 2011
For Additional Information