Adaptability
Central to everything they do are Customs authorities, as any changes in Customs legislation and processes impact them. One of the clear recent examples is Brexit. When the UK left the European Union, they also left the Customs Union – which resulted in a massive increase in paperwork, declarations, inspections and regulations, both in the UK and in the EU. This in turn has led to increased delays in goods reaching the final consumer. Customs brokers have had to rapidly employ and train new staff to meet the demands.
Additionally, if they have international presence, they must adapt to the differences in how each Customs authority interprets regulations, even in a Customs Union as integrated as the EU. Take the discharge of a transit document at destination, which requires the information on the transit document to match the goods/invoices. Some Customs authorities will accept obvious human errors, such as in the transposing of digits on weights, while some will refuse to ignore them. Often, these inconsistencies exist between different Customs offices in the same territory. Correspondence to resolve these issues often reveals that the variance in acceptance is not risk-assessment driven, but simply a local interpretation of the regulations.
The cost of resolving these issues can be expensive, both financially and, in some cases, time spent for vehicles to return to origin for new documents. However, it is the inefficiency that is most troubling. Alex Lackner is a Director of LKW Walter – Europe’s leading transport organisation for full truck loads. Taking the movement of goods from the United Kingdom to Germany through France as an example, he comments: “Discharging the T1 external transit documents from the EU efficiently is still a constant challenge. Hard copies are required to be presented by drivers, and we still face the ongoing lack of synchronization between export systems and the New Computerized Transit Systems (NCTS). Although the T1 almost exactly mirrors the data on the export declaration, datasets need to be entered both in the NCTS, as well as in the export system of the export country, which takes time and creates additional failures. A unified approach by Customs authorities would be a welcome development.”
Declarations are processed by a Customs authority computer system. These are normally unique to each country, and the interfaces specific to just that system. Most Customs brokers do not develop their own software, so they must find applications that can communicate with these multiple systems. Whilst applications exist that can interface with more than one Customs system, they often have Customs declarations as a secondary focus. Furthermore, the slight differences in Customs processes are often not fully addressed, and therefore their use requires manual tweaks or interventions. This is, of course, inefficient, costly and a source of ongoing frustration.
Seamless end-to-end declaration processes may require Customs brokers to use multiple applications, often a different one in each country, or to have a highly adaptable application in the middle (often known as a “Customs Control Tower”) that can produce different data formats for each Customs system. These “Customs Control Towers”, such as ALS’s MOTA system, or AEB’s Customs software, are increasingly popular but they require constant updates for every Customs system they connect with. The additional costs of these are eventually borne by the trader or consumer.
Single Windows for Trade (known as STW’s) are increasingly being developed – they simplify the exchange of information and documents between government agencies, importers, exporters, and other stakeholders involved in cross-border trade. However, they are not yet functional in many countries, and offer limited interoperability.
A fluid declaration process needs common datasets and the interpretation of regulations to be aligned in the departure and destination countries. This is a rare occurrence at present. The WCO has an extensive Data Model and documentation, and progress on adopting this across its membership continues – however, the final stage is always a local Customs system with a unique interface that requires a bespoke connection.
AEB is a global provider of software for the logistics and supply chain, with a special focus on Customs clearance. Dr Ulrich Lison, one of AEB’s main board of directors, talks about the challenges of providing solutions that meet the requirements of different Customs territories: “We rapidly adapt to changes in Customs systems, however, these are often poorly communicated, at limited notice and with no consistent hierarchy to resolve technical queries. A stronger community approach amongst authorities would be really beneficial and welcomed. Perhaps an advisory board, via the WCO, with representatives from different Customs-related sectors, could help achieve common goals. Brokers and software providers could enhance Customs understanding of their challenges and allow authorities to actively incorporate them into their process models and rollouts.”
When co-operation succeeds and excels
War is still sadly with us in many parts of the world. Regardless of which side people are on, one of the common challenges is arranging for humanitarian aid to be made available where possible. Often the most difficult part of delivering physical aid is meeting the necessary regulatory demands of every country on the journey, including the destination. Arranging the movement and Customs clearance of humanitarian aid from the UK to Ukraine has been an important insight for Richard Catt, Director of International Relations for ALS Customs Services. With more than 40 Offices in 14 countries, ALS regularly interacts with multiple authorities.
Richard is full of praise for the authorities he has dealt with on these movements, and believes that the processes implemented could be used to improve collaboration for normal Customs processes: “My experience with France, Belgium and many other country authorities is one of delight at the way everyone found solutions quickly that normally would take much more effort and time. What became clear is that most Customs authorities value trusted trader schemes, like AEOs (Authorized Economic Operators), as being critically important to agreeing any simplifications. Trust is at the centre of all regulations, and perhaps the future focus on achieving alignment between Customs authorities could be to improve the AEO requirements, extend the approval to cover more simplifications, and ensure that non-approved operators are encouraged to meet the necessary approval standards. For example, the status of authorized consignor and consignee[2] for the transit procedure could be tied to AEO approval.”
Co-operation within and beyond Unions
Customs Unions, such as the Central American Common Market (CACM) and the European Union Customs Union (EUCU), have proved to be very successful in trade facilitation and reducing unnecessary interventions and trade distortions between their members. However, some topics, such as consistent interpretations, change management, and dispute resolution mechanisms, both for members and non-members of Customs Unions, continue to be challenging.
International supply chain stakeholders are at the heart of these challenges and are often willing to engage directly with their competitors and authorities to resolve specific challenges and improve Customs processes for everyone.
One such co-operation is the ITF (Intermediaries Task Force) – an industry-led group which was set up in 2019 to ease the Brexit transition period and which includes officials from several Customs authorities in Europe. It had a clear mission: “Fluidity and trade remains the priority, especially on application of Customs / Sanitary and Phytosanitary procedures, i.e. to be designed to assist the movement of goods, and the ITF objective is to be clear in understanding both UK and EU procedures.”
The ITF members include the UK short straits ports (Port of Dover and Channel Tunnel) and the EU border channel ports from Rotterdam down the coast to Bilbao, EU Customs officials from France, Belgium, the Netherlands, Germany, Ireland and Spain, as well as CLECAT (the European Association for Forwarding, Transport, Logistics and Customs Services), and several high-profile logistics and Customs service providers. They have continued to find and achieve improvements in many processes that are defined at Union level but require consistent implementation to be efficient.
Mark Johnson, National Director for Customs and Trade Control at Kuehne + Nagel, and a co-founder of the ITF, believes that the ITF is a notable success story of co-operation: “We bring together technical expertise from Customs intermediaries, officials, and transport and logistics associations from the UK and the EU. We collectively believe that the interests of the UK and the EU in the Brexit space are united and what is a problem to one is a problem to the others – through this great working relationship, we continue to discuss solutions for both sides of the border and endeavour to promote them and best practice through the correct channels.”
Innovation requires both technology and co-operation
Technological innovation is one of the most prominent topics being discussed in the Customs sector. In fact, the WCO is holding another one of its popular technology conferences in October 2023, in Hanoi, Vietnam. The byline is inspiring and thoughtful: “Embracing the Digital Age: Leveraging Technology, Fostering Innovation, and Nurturing the Next Generation of Customs Professionals”. Much of the agenda is focused on cutting-edge technologies, such as Artificial Intelligence and blockchain. These are the future of trade facilitation, protection of society and revenue collection.
However, from the standpoint of international Customs service providers, new technologies that affect stakeholders directly, such as blockchain, need to be integrated across multiple territories if we are to maintain the efficiencies demanded by traders and consumers.
Some of the technologies being discussed and developed help to reduce border delays. However, we need to ensure that delays and direct costs are caused only by necessary interventions (related to the fight against fraud and duty evasion) and are not the result of the need to implement a different version of the same technology in each country – a burden which exists today, but needs to be removed.
Blockchain is one of the emerging technologies that will be a fundamental part of the future of Customs processes. Immutable data and secured documents will facilitate much faster border crossing, decrease duty evasion, and potentially stop fraudulent imports. It is certainly a hot topic, and there have been some successful implementations, but they are still the exception. The struggle to implement blockchain solutions across territories is hampered by the commercial cost and inconsistent dataset requirements. Paying a different commercial blockchain provider in each territory would be an added cost to the trader, as well as increase the number of integrations and applications being used.
One current effort gaining some attention is the “Open Customs Blockchain” working group, which is part of the Open Logistics Foundation. It looks to help bridge the difficulties of cost and complexity. Their GPID (Goods Passport ID) project was featured in a previous WCO News article.[3] It focuses directly on the needs of Customs authorities, and proposes the use of open-source blockchain components and a minimal key dataset to enable authorities to compare the data from the original seller with the data submitted on a declaration. The combination of open source, minimal cost and a reduced dataset offers an opportunity to finally see the benefits of blockchain at declaration level in the border process.
International Customs brokers perceive the WCO to be the pinnacle of Customs authority collaboration. The topics covered in this article lead us towards some ideas which would involve the WCO if they were to be brought to life.
The first one deals with measuring performance and the benefits of engaging the private sector in this process. As governmental entities, Customs authorities “serve” people and society, and more directly, traders, logistics supply chain providers, Customs brokers and software suppliers. Their success should be measured against their capacity to protect and provide an efficient service for all of these entities. Could further success be achieved if the WCO were to gather and share industry views on the advances in efficiency and collaboration being made within their membership?
The private sector is often best placed to identify processes’ strengths and weaknesses and pinpoint Customs-related problems. Gathering feedback through regular questionnaires to major players would provide valuable insight into collaboration and consistency of implementing Customs regulations. This could lead to clearer regulations, better technology solutions, and real global consistency. GEA (DHL, Fedex, UPS) already publishes its internal KPIs on Customs authorities by compiling answers to internal questionnaires. An article[4] in WCO News gives full details.
Another question is: Should the WCO engage with Customs brokers directly, rather than as an offshoot of transport-related bodies, such as the International Federation of Freight Forwarders Associations (FIATA) and the International Air Transport Association (IATA)? Of course, this would need Customs brokers/intermediaries/providers across the globe to consider forming a specific body that could work directly with the WCO.
Another idea regularly discussed is the introduction of voluntary standards by Customs intermediaries – for example, on qualifications, internal compliance audits, and knowledge sources. This could lead to more compliance, where less scrupulous providers can be targeted more effectively.
Finally, could WCO Members accelerate the introduction of blockchain data in Customs processes by agreeing a minimal key dataset for basic declarations? Clearly, this would not be a comprehensive solution, but could be built upon incrementally, with feedback from all stakeholders in the supply chain.
What is undeniable is that new technologies, the globalization of commerce, and the inescapable need for security, have increased the need for consistency, transparency and efficiency across multiple Customs authorities. The role of the WCO is more important than ever.
More information
mdouglas@als-cs.com
[1] A note on terminology: Customs Broker, Customs Intermediary, Customs Service Provider, and Customs Clearance Specialist are all titles used interchangeably in this sector. The technical and legal differences are not relevant within the context of this article.
[2] The status of authorized consignor allows the authorization holder to place the goods under the Union transit procedure without presenting them to Customs. The status of authorized consignee for the Union transit procedure grants the holder of the authorization the right to receive the goods in an authorized place in order to end the procedure without the goods being presented to the Customs office of destination.
[3] Open Customs Blockchain: The missing piece to unlocking the broad application of distributed ledger technology for Customs?
[4] https://mag.wcoomd.org/magazine/101-issue_2_2023/gea-customs-capability-database/
