Point of View

Effective enforcement of international trade regulations requires powerful data analytics

3 March 2023
By Publican

New regulatory frameworks are constantly being introduced by governments with the aim of ensuring that the trading of goods remains compliant with their goals. While the regulators place the onus of compliance mainly on the importers themselves, Customs are also faced with the immense responsibility of enforcing these regulations effectively without stopping the wheels of the global economy from turning. The smart use of data and technology to provide Customs authorities with the necessary knowledge and tools represents the best way forward.

Proliferation of regulations pertaining to the international trade in goods

In recent years a unique set of new challenges has arisen in relation to trade, with regulators in Europe, the USA and the global community in general implementing a variety of new measures. Some are designed to address concerns connected to exploitative labor practices in developing parts of the world, while others have been introduced as a response to geopolitical strife – WTO sanctions targeting the ongoing situation in Ukraine being a notable current example. All of these measures impact thousands of individuals and companies around the world.

Now, countries are even beginning to take their own unilateral steps; supply chain due diligence laws recently passed in France, Switzerland, the Netherlands, Norway, Germany and even California, together with the UN’s mandatory Human Rights Due Diligence Act which came into effect in late January 2023, will make companies legally more responsible for their own supply chains. These initiatives are justified and the intentions behind them are good, but in order to achieve true compliance both public and private players will need the requisite knowledge, tools and capacity to achieve real-time visibility and connect goods back to illicit practices, in order to deliver effectively on the expectations.

The sanctions surge will impact the public and private sectors alike

The role and responsibilities of importers in terms of remaining legally compliant is clear, albeit very difficult to implement. However, Customs – serving as the gatekeeper for goods moving into and out of the country – will also have a central role to play here, since they have both the mandate and the over-riding responsibility to ensure that the overall flow of trade remains compliant, safe and, ultimately, ethical. But how? Improving cooperation and knowledge exchange, and ultimately creating cooperation between the public and private sectors, will enable many new avenues to open up when it comes to achieving enforcement within the complicated maze of existing and new regulatory expectations.

Analyzing the regulators’ datasets is no longer sufficient

More than 10,000 regulatory frameworks impacting international trade were introduced in 2022 alone, and it is no longer possible to manage trade flows without taking digitalization and the powers of automation to a conceptually new level. Technology and innovation are now providing us with credible new avenues for gaining actionable insight.

However, these technological advances cannot progress solely from within; in other words, digitalization cannot rely solely on the regulators’ datasets. A novel and innovative approach to the digital inspection of goods and their origin is required, drawing on the wealth and breadth of global data which extends beyond the scope of a simple import declaration or goods manifest.

Implementation of data gathering and analysis techniques

One way forward for building Customs capacity in the area of regulatory compliance would be to implement and integrate technologies that achieve much greater supply chain visibility using real-time and up-to-date data gathering and analysis techniques on the grand scale of Big Data, as well as presenting findings in a simple and digestible way.

Analytical tools that leverage current, multi-dimensional data opportunities are fast becoming an integral and irreplaceable component of the Customs data ecosystem. But in today’s globalized world, models based only on local, historical and domestic data are limited, and therefore their use is limiting. Such models miss crucial information along the way, which hinders their ability to provide actionable insight. Global digital sources which reflect real-time market, regulatory and trade conditions are able to give rise to a new level of insight and automation.

In order to successfully maintain the delicate balance between maximizing the performance of Customs processes and ensuring their quality, Customs authorities will need to identify and integrate the right tools that leverage data, working together with the private sector to achieve this.

This joint effort between the public and private sectors will be the next step in achieving a digital, data-driven approach to Customs processes.

As we transition from 2022, the WCO’s year of digital Customs transformation and building data ecosystems, to 2023 when the focus will be on the sharing of knowledge, it is important that we fully understand how technology, which enables comprehensive data collection and analysis, can help to produce knowledge about supply chains and the related compliance issues.

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