Customs management has always been a challenge. Since Babylonian times, governments have required information to tax goods coming into their territory, to protect their domestic markets and – often enough – simply to keep out foreign competition.
Modern customs management uses new methods but the purpose is much the same. Customs controls are, fundamentally, an information gathering exercise. Governments demand information about products in a customs declaration to tax goods, protect domestic markets and – often enough – keep out foreign competition.
Digital technology, however, promises radical change. While the purpose of customs remains the same, the ability to share verifiable, automated data in real time changes the nature of information exchange at the border – and the level of trust authorities can have in it.
The consultancy, Deloitte, points out that most customs service providers “communicate… mainly via email and telephone… the result of a lack of digitalization among customs officials and logistics companies…” As companies “facilitate data exchange and reconfigure their interfaces, this is likely to change dramatically in the coming years and produce considerable efficiency gains.”
Digital customs processes promise improved compliance with rules and regulations, lower cost information gathering, fewer errors and better risk management.
E-commerce and globalisation continue to increase the volume and speed of shipments. Demand and customer expectations drive requirements for traceability and transparency. As each increases the volume and availability of data, so digital tools will enhance efficiency – streamlining everything from supply chain management to customs clearance.
The most significant goal of digitised customs management – as it was in Babylonian times – is to make the exchange of information between parties quicker, clearer and more reliable.
In this article, we’ll explore how digitalisation is driving the evolution of customs management and procedures.
Automating processes improves efficiency, streamlines the flow of information. It also reduces errors and cost caused by the need to create customs declarations in multiple systems, manual validation of declarations, and so on. For example:
Today, email and telephone systems are the two most common forms of communication between customers and customs service providers. Combine that with the need for manual entry into ERP systems and you have a situation rife with inefficiency, inaccuracies, and data transmission errors.
How will process automation get around these issues?
Automation allows computer algorithms to ingest and analyse data from source systems. Systems can then process information based on rules created by customs service providers or national customs authorities. Data entry and the creation of customs declarations become automatic, requiring no time and greatly reducing the chance for errors.
Automation doesn’t remove the need for human inspection and customs officers – it simply serves the right information to the right officers at the right time, enabling them to do their job better.
You don’t need to look far to see other examples of improved connectivity and systems integration today. Your personal smartphone is a great example. Chances are you have an iPhone or an Android device, and it is populated with apps developed by Apple or Google, but also many third parties. All of these apps must play together and with the overall operating system.
Connectivity and systems integration are increasingly the norm. Consider the proliferation of apps and data sharing in response to the COVID pandemic.
Let’s take a closer look at the world of customs and how digital technology is affecting it.
Customer Expectations: Today, customers expect customs service providers to offer electronic data interchange (EDI) services to facilitate better data transfer from the customer to the service provider. They make it simpler to enter information into the service provider’s system. As those expectations grow, which they will, customs service providers will have to respond.
Error Reduction: Manual information transfer from the customer to the customs service provider to the customs agent/organisation is inherently fraught with errors. In fact, manual entry is the single most common cause of errors in the shipping process. And errors mean delay, cost, lost product and unhappy customers.
EDI provides a means to reduce those errors, saving time, money, and stress, as well as reducing the incidental costs involved with shipping and customs clearance.
Fraud Detection and Reduction: Digital technology has been used to detect fraud in international shipping for years. Artificial intelligence (AI) will increase the ability of customs officials to identify “outliers” and spot suspicious transactions.
As globalisation has made international fraud and trafficking more attractive, governments must find tools to combat the increase. Digital solutions offer new, lower cost and less disruptive ways to respond, compared to traditional stop and search options. Expect to see more – from deep data analysis to facial recognition technology.
Interface Design: Fostering better EDI is not simple. It requires a user interface that is at once simple and intuitive and that plays well with other software on the market.
Data must be transferred from the customer to the customs service provider, which requires a data interface between these two systems. There are two choices. One, an interface that allows customers to provide required data – sometimes called ‘self-declaration’ or ‘self-service’. Or, two, an interface that allows both parties to change and update data – sometimes called ‘multi-filing’.
Of the two, the latter is the better option. It offers greater flexibility and addresses customer expectations, while also improving efficiency for the customs service provider. It also ensures that changes required during the customs process can occur in real-time, helping to avoid some common custom violations, such as prematurely opening cargo holds.
The interface can be specific to the customs service provider, or it can be integrated into the customer’s ERP system. This offers additional benefits, as integration further improves efficiency, reduces time constraints, and eliminates the need for the customs service provider to create and maintain their own interface. For businesses that only work with one customs service provider for customs processing, this makes most sense.
Today, companies face multiple challenges – the need to improve transparency, speed, and efficiency.
For customs service providers, the availability of this data offers opportunities to deliver improved services and better solutions. At present, systems are often not able even to ensure the accuracy and completeness of information before submitting a customs declaration. They do not account for the need to attach other information, such as the time slot for unloading the cargo and the unloading point.
Very few are adapted to the new processes for handing EU-UK trade across the English Channel, where the UK Government has developed the Goods Vehicle Matching Service (GVMS) system and France has the SI Brexit system.
Digitisation of the supply chain allows multiple actors to attach multiple pieces of information to particular objects. For instance, multi-filing allows parties along the supply chain to provide information that can then be carried forward and automatically populated to streamline subsequent customs management processes.
This dovetails with another trend in the logistics, manufacturing, and warehousing industries – the role of sensors. Today, sensors are used extensively to provide information to automate decision-making. That includes supply chain and logistics management services, shippers, agents, importers and exporters. Again, transparency is the watchword. Transparent flows of data enhance efficiency, reduce mistakes, and eliminate bottlenecks in the import and export clearance process.
Digitisation will drive the expansion of solutions offered by customs services providers. Self-declaration is currently a complicated and expensive process. Customs documents must be handled correctly, and many goods – not least food products – require permits and certificates. So most businesses rely on a freight forwarder or customs agent, with really understanding what they do.
As systems improve and business confidence with trade rules grows, self-declaration – and the commercial software to facilitate it – will expand. The UK’s departure from the EU creates a huge new market of businesses for exactly these services.
Organizations dealing with unusual products, such as drugs or weapons, refuse or hazardous waste need accurate permits and licences. This requires them to stay up to date with changes to importing and exporting regulations for every nation to which they export. That burden can be reduced through central management and cloud-based services.
Food, plant and animal products are the standout example. Sanitary and phytosanitary (SPS) control measures apply to trade in products of animal origin. These measures include Export Health Certificates (EHCs) and attestations. Very few customs agents are used to handling them. They will either have to recruit specialist staff, which is expensive, or make use of digital technology to increase productivity. Given the shortage of relevant skills, the second option is inescapable.
All this requires investment. As well as technology, businesses will need to invest time and money in training employees to manage new processes. Businesses like clearBorder will help them adjust and optimise for the new world.
Custom borders are now a crucial consideration for any major business in the UK and EU. Brexit is likely to drive efforts to simplify customs rules for some types of products. But that will not apply across the board, and not immediately. It also does not address some of the key challenges customers continue to encounter – mistakes in data entry, delays at the border due to inaccurate or missing information, etc.
System integration and improved information flow between customers, customs services providers, suppliers and governments are critical ingredients for progress on digitisation. Eventually manual data entry will vanish.
In the meantime, organisations such as clearBorder offer specialist solutions to increase businesses’ knowledge, optimise systems and prepare for the future. Our on-demand, modular and interactive training will fill knowledge gaps and give teams confidence to import and export successfully.
Customs processes may be as old as civilisation itself but digital technology is poised to transform the industry. Each new capability will open up further possibilities for services to streamline import and export processes, cut costs, and improve efficiency.
Forward-looking customs services providers will be preparing for that now. And forward-looking importing and exporting business will be using expert insights to future-proof their cross-border supply chain processes.