"10+2" Primer For Smooth Sailing On The High Seas: Business White Paper

BUSINESS WHITE PAPER
“10+2” Primer for

Smooth Sailing on
the High Seas
| The Descartes Systems Group Inc. | 120 Randall Drive Waterloo ON Canada N2V 1C6 | 519.746.6114 |
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Business White Paper
10+2 Primer for Smooth Sailing on the High Seas
Following the tragic events of 9/11, the U.S. Congress adopted the Trade Act of 2002. The Trade
Act mandates the filing of advanced manifest data for vessels carrying goods destined for the
U.S. One goal of the Act was to identify as early as possible dangerous goods that are being
smuggled into the country by terrorists. U.S. Customs and Border Protection (CBP) subsequently
issued regulations in their implementation of the Trade Act by creating the "24 Hour" rule for
ocean shipments. Under this rule, ocean carriers and non-vessel owning common carriers
(NVOCCs) are required to electronically file manifest data via the CBP Automated Manifest
System (AMS), at least 24 hours prior to lading on a vessel at a foreign port. Similar 24 hour
rules followed for both air and truck manifests.
While this was seen by security experts as a good first step, internal and external government
reviews determined that more complete advance shipment data could provide more accurate risk
assessments and reduce the number of erroneous identifications. As a result, on October 13th,
2006, the President signed into law the SAFE Port Act which mandated that ten additional data
elements and two new message types be submitted to CBP for all ocean shipments. The
regulations supporting this new law were published in the Federal Register Notice on January 2,
2008. This new regulation for ocean shipments has been commonly referred to as “10+2.” Many
in the industry expect that additional regulations similar to the ocean “10+2” requirements will be
introduced in the near future for other modes of transport, in particular air transport.
The ‘10’ data elements required by the new regulation (the “ISF 10”) create what is called the
Importer Security Filing (“ISF”). The ISF must be filed by the importer (i.e. the individual
determined to have the most immediate knowledge of this information) or the importer’s agent
at least 24 hours prior to lading in a foreign port. The ISF 10 are to be filed for all inbound cargo,
with the exception of freight remaining on board (FROB), goods moving on an Immediate
Exportation (IE) or Transportation and Exportation (T&E) In bond.
The data elements that make up the ISF 10 are:
1. Manufacturer name and address;

2. Seller name and address;
3. Buyer name and address;
4. Ship to name and address;
5. Scheduled container stuffing location;
6. Consolidator name and address;
7. Importer of record, FTZ applicant identification number (IRS, SSN, Customs Assigned);
8. Consignee identification number (IRS, SSN, Customs Assigned, CBP encrypted ID);
9. Country of origin where goods were manufactured, produced or grown; and
10. Harmonized tariff schedule at minimum 6-digit level.
For ocean cargo types FROB, IE and T&E, only five data elements (“ISF 5”) must be filed 24
hours prior to lading. Unlike the ISF 10, the ISF 5 must be filed by the filer of the lowest level of
Bill of Lading.
The data elements that make up the ISF 5 are:
1. Booking party name and address;

2. Foreign port of unlading;
3. Place of delivery;
4. Ship to name and address; and
5. Harmonized tariff schedule at minimum 6-digit level.
The ‘2’ part of “10+2” refers to two additional message types that are to be submitted to CBP.
These are Container Status Messages (CSMs) referencing the disposition of a container, as well
as the Vessel Stow Plan showing the physical location of cargo on a vessel. The Vessel Stow Plan
and the CSM messages are to be submitted by the ocean carrier.
On June 2, 2008, CBP released draft technical specifications for formatting and transmitting the
ISF. While this specification is still in draft form and subject to change following a period of
industry comment, we believe that it is a fairly solid representation of what the final ISF process
will be. Final specifications however, may not be released until late 2008 or early 2009.
Based on our reading of the draft technical specifications, we anticipate that the ISF 10 process
will work as follows:
1. The importer or agent files the ISF 10 24 hours prior to lading on U.S. destined vessel;
2. The importer or agent will receive the ISF 10 Confirmation number;
3. The appropriate carrier/NVOCC will receive the ISF 10 Confirmation number for the Bill of
Lading specified in the ISF 10.
In addition, we anticipate that the ISF 5 process will work as follows:

1. Carrier/NVOCC submits AMS manifest;
2. Filer of lowest level of Bill of Lading submits ISF 5 for FROB, I.E. and T&E shipments. For
IE and T&E shipments, the ISF 5 must be filed 24 hours prior to lading on U.S. destined
vessel. For FROB shipments, the ISF 5 can be filed any time prior to lading;
3. Carrier receives ISF 5 confirmation number.
In the January 2, 2008 Federal Register notice, CBP published Trade comments on the ISF
regulations. The Trade noted that these regulations may pose a significant time and financial
burden on existing business practices. For example, seller and buyer data may not be
immediately available to the ISF filer. In some instances, the seller may be the only party privy to
the manufacturer data. ISF data may need to be collected from many parties, many of which
have had no prior experience with customs compliance. Mandatory data elements may only be
available in such a way as to cause significant negative impact on existing business workflow.
In response to these comments, CBP stated that all mandatory ISF data is, even now, available
to the filer in a time frame consistent with the regulations. It does acknowledge, however, that
the Trade may have to modify existing business practices to collect this data from their data
providers.
Historically, CBP has provided some ‘phase-in’ time prior to full enforcement of new customs
compliance initiatives to allow the Trade to adjust its procedures and practices. No indication has
yet been provided that such a phase-in period will be provided, however, we anticipate that CBP
may provide a similar period after the Federal Register notice officially mandating ISF is
published.
CBP has proposed significant penalties for non-compliance with the regulation. The draft
regulation provides as follows: “If the principal fails to comply with the proposed Importer
Security Filing requirements, the principal and surety (jointly and severally) would pay liquidated
damages equal to the value of the merchandise involved in the default.” Penalties for violating
other requirements outlined in the regulation may also apply. For instance, holds may be placed
on cargo that does not comply with the proposed ISF regulations.
Descartes recognizes that the ISF requirements pose significant resource and workflow issues for
all parties required to file. At Descartes, the goal is to help organizations successfully overcome
these hurdles, while at the same time, provide an opportunity to significantly enhance existing
logistics operations.
As with other components of Descartes’ complete range of Customs Compliance solutions, the
company’s ISF solutions are designed to meet the specific needs of both small businesses and
global enterprises.
ISF Premier
ISF Premier is a complete, end-to-end ISF service, designed to facilitate the acquisition of ISF
data from the global supply chain and to maximize the efficiency of ISF workflow processes
through powerful tools that enable timely ISF compliance.
The ‘engine’ behind ISF Premier and other Descartes ISF solutions is Import2000 ISF, a
sophisticated, web accessible ‘dashboard’ from which the importer (or agent) can manage their
ISF data. Importers can enter data directly into the web interface and merge that data with
elements sent through existing electronic document data flows, including Purchase Orders,
Warehouse Advice and Shipment Notices. Additionally, importers can acquire data from third
parties, called ISF Providers. The acquisition of data from ISF Providers can be controlled and
managed by the ISF Filer through Import2000 ISF.
ISF Premier provides this control by providing the ability to:

• Capture ISF data from existing electronic document flows on the Global Logistics
Network (GLN);
• Pre-enter manufacturer or supplier parts numbers to accurately identify HS numbers in
advance of filing;
• Collect data over time in a secure environment from companies involved in the
procurement & transportation chain;
• Promptly submit ISF data to CBP consistent with data quality;
• Optionally collect key Automated Broker Interface (ABI) data to enhance existing Entry
Process;
• Extract complete ISF & ABI data once collected to import into existing in-house system;
and
• Distribute Time Sensitive ISF e-alerts to notify “owners” of missing data elements and
give them the opportunity to enter the missing elements via the web.
3rd Party
CBP
ISF App
Complete ISF
ISF Data
Import2000
El t
ISF
Other GLN GLN Incomplete

Services
Consolidated ISF
ISF+ABI
Interactive
Data
ISF e-Alerts
Descartes ISF
Filing Solutions
ISF Provider
Web or EDI
ISF Filer/Importer
Web or EDI
Additional Import2000 ISF Premier Web-Enabled Features include:
• Compliance with all CBP ISF 10 validations;

• Filer defined Reference Number to help collect ISF data in one record prior to issuance of
B/L;
• Ability to control of data acquisition from 3rd parties;
• 3rd party ISF Provider account type, to view and distribute ISF data to many ISF Filer
accounts;
• E-alert e-mail service to auto-notify 3rd party providers of delinquent data based on ISF
Filer provided deadline;
• Easily link ISF Filer and ISF Provider accounts, as determined by ISF Filer;
• Complete audit trail of changes and additions made to ISF data (source, date, time);
• White-label affinity capability for organizations that want to offer this service to their
customers under their own brand; and
• Flexible, exception based reporting of ISF Status information & ISF filing deadline (on-
screen, CSV download, e-alerts).
Depending on an organization’s specific needs, additional levels of service are available from
Descartes – from a hands-off pipeline from the user’s system into CBP to a complete, turn-key
ISF filing solution that minimizes the need for user resources.
ISF Connect
For large organizations with an existing infrastructure and ISF filing solution, the ISF Connect
Service processes this existing data via industry standard EDI or an in-house XML and securely
transmits it directly to the CBP.
ISF Preparer
This service is focused on the importer that does not want to directly manage ISF compliance
software or the submissions. ISF Filers can simply fax or email complete ISF data to the
Descartes 24x7 service center for filing directly to CBP. This service also provides real-time status
updates of the ISF submission
Summary
ISF filing requirements, as outlined in the Federal Register, may pose a significant burden on
existing business practices. Descartes can help minimize that impact by providing ISF solutions
that are designed to be integrated into existing workflow processes. Each of the three levels of
service offered by Descartes (ISF Connect, ISF Premier & ISF Preparer) help support the
requirements for the 10+2 regulations. Users can manage and file compliant ISFs and monitor
critical events both before and after submission.
Contact
For more information, please contact your Descartes Sales Representative directly or call toll free
at (877) 227-6883 ext 298 or 1-416-741-2838 ext 298. We would be happy to arrange an in
depth conversation to discuss the ISF filing requirements and how Descartes’ ISF solutions can
be best integrated into your existing workflow process to help you collect, process and provide
this mandatory data to CBP.
About Descartes
Descartes (TSX: DSG) (NASDAQ: DSGX), a leading provider of software-as-a-service (SaaS)
logistics solutions, is delivering results across the globe today for organizations that operate
logistics-intensive businesses. Descartes’ logistics management solutions combine a multi-modal
network, the Descartes Global Logistics Network, with component-based ‘nano’ sized applications
to provide messaging services between logistics trading partners, shipment management services
to help manage third party carriers and private fleet management services for organizations of all
sizes. These solutions and services help Descartes’ customers reduce administrative costs, billing
cycles, fleet size, contract carrier costs, and mileage driven and improve pickup and delivery
reliability. Our hosted, transactional and packaged solutions deliver repeatable, measurable
results and fast time-to-value. Descartes customers include an estimated 1,600 ground carriers
and more than 90 airlines, 30 ocean carriers, 900 freight forwarders and third-party providers of
logistics services, and hundreds of manufacturers, retailers, distributors, private fleet owners and
regulatory agencies. The company has more than 300 employees and is based in Waterloo,
Ontario, with operations in Atlanta, Pittsburgh, Minneapolis, Ottawa, Washington DC, Derby,
London, Stockholm, Shanghai, Singapore and Melbourne. For more information, visit
www.descartes.com.

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BUSINESS WHITE PAPER

“10+2” Primer for

The data elements that make up the ISF 10 are:

1. Manufacturer name and address;

The data elements that make up the ISF 5 are:

1. Booking party name and address;

In addition, we anticipate that the ISF 5 process will work as follows:

ISF Premier provides this control by providing the ability to:

Other GLN GLN Incomplete

Additional Import2000 ISF Premier Web-Enabled Features include:

• Compliance with all CBP ISF 10 validations;

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