A global Customs broker’s insights into the profession’s challenges, successes, and best practicesBy Dana L. Lorenze, Senior Vice President, Global Customs, Expeditors
As enhanced trade facilitation and refined Customs risk management strategies make possible the opportunity for common Customs frameworks and modernization efforts, such as regional Single Window initiatives, it is critical to educate both the public and private sector on the benefits available through active support and participation. Only through such awareness can we hope to succeed in bringing together the myriad political, operational and legal innovations necessary to capitalize on this opportunity.
Trade compliance and trade facilitation success are more likely to be enhanced when Customs brokers, multinational traders, Customs administrations, and participating government agencies have a strategic framework for these initiatives to take hold. Professional Customs brokers have a unique perspective given their broad exposure to all parties engaged in the supply chain, their operational experience, and their exposure to various systems and tools to manage Customs declaration complexity in multiple countries. As one such broker, it is Expeditors’ pleasure to share some insight into the profession’s challenges, successes, and best practices in this regard.
Expeditors is a global logistics company employing over 15,300 trained professionals in over 331 locations across six continents. The company satisfies the increasingly sophisticated needs of international trade through customized solutions and seamless, integrated information systems. Its services include Customs brokerage, the consolidation and forwarding of air or ocean freight, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing, distribution and customized logistics solutions.
Multinational traders face the challenge of meeting compliance and service obligations while maintaining the cost required to deliver value to the market. Global security concerns, economic uncertainty, and varying Customs and other government agency approaches and processes represent true business challenges. A drive toward a more common Customs framework and process across the global economy would make it easier for the private sector to manage global trade compliance and risk through clear, consistent and common rules.
Automation is an important part of the development of a common Customs process, and makes it possible to establish common rules that are easily understood. Automation can greatly contribute to a targeted risk management approach that facilitates trade, and improves revenue collection, compliance and security.
To make the business case for the investment required to participate in modernization efforts, the private sector will need to demonstrate quantifiable returns. Such returns will likely include reduced manual resources and administrative costs occasioned by consistent processes. In addition, common Customs processes should contribute to consistent and predictable release cycles that help traders reduce inventory carrying costs and working capital needs, and ultimately, improve profitability.
Traders should recognize that modernization efforts will take time, and that they should utilize a staged approach. A patient, staged approach will enable them to validate over time that the Customs process has been simplified, and that inefficiencies or variables that were previously manual are not amplified through automation.
From a public sector perspective, the benefits of a common Customs framework and modernization efforts are relatively manifest. For effective border coordination, Customs is seen as a nation’s indispensable border control authority for managing international trade, and for processing import and export activities at a nation’s border.
Customs is often the governmental “single window” for receiving and distributing data and information related to importations and exportations. Customs administrations may benefit from modernization and the use of a common framework for automation, both allowing for earlier risk assessment, effective capacity building, and improved revenue collection.
To further a common Customs framework and modernization efforts, we will need a shared strategy for consistent, uniform, and limited data models across regions. A common data standard and structure would minimize redundancy. We will also need knowledgeable resources from the private and public sector to address policy, regulatory concerns, programming requirements, business analysis, training, outreach, troubleshooting, process change, and communication at all levels.
Single Window and trusted trader programmes require change, and implementation takes commitment in time and resources from all parties to be effective. Success is more likely when the framework allows for implementation in stages, where stakeholders test, analyse, and review progress at each step. When private and public participants work together, the outcome should lead to release time predictability and consistency, improved compliance and security, better revenue collection, reduced supply chain costs, and improved performance overall.
From the public perspective, there should be a clear, unambiguous, and sincere mandate from governments. For improvements to take hold, we will also need a practical path for escalation and resolution, and a clear and practical work programme with key milestones aligned with appropriate resources.
To work through potential obstacles, it is important to understand that technology development may sometimes move faster than policy, regulation, or stakeholder preparedness. Stakeholders will need to align policy, regulations, data, and system functionality early and continuously at multiple levels.
When disagreements arise regarding the hierarchy of data, holds or timing, inconsistent communication among stakeholders can add to the cost and time required for implementation. A particular challenge exists when there are competing policies and missions among stakeholders, or when resources are not aligned or are not a priority.
In sum, we believe there are several preconditions to the success of global and regional modernization efforts among the public and private sectors:
- the imperative for change must exist;
- there must be interagency cooperation, along with a governmental mandate to collect and share data between Customs and other participating government agencies;
- as described above, there must be considerable public and private sector cooperation;
- all stakeholders must recognize the need for investing in modern technology;
- stakeholders should develop a flexible and staged approach;
- ensure that the technology is reliable;
- there must be an alignment of policy, regulations, process, and technology at all levels in trade, and in the public sector.
To be sure, risk management efforts may not always coincide with smooth processes, and technology does not solve all problems. Cargo holds happen due to system mismatches. System holds cannot be easily rectified when few know how to solve complex system or process issues, or if there is no deeper understanding of the root cause of the actual problem.
Stakeholders will need to hold back from blaming the new system as the cause of a problem that previously existed, but which was solved manually prior to the transition, such as the manual border agency processes in many countries. In addition, the public sector will need to support process mapping at a country and agency level before systems can be implemented.
Unfortunately, there is no uniform acceptance of the need for a more common Customs framework. There is a lot of work to do in tying up all the moving parts together, but it is work worth pursuing. We must review, pilot and test the policy, regulations, process, and technology at each stage in a controlled manner across regions and government agencies to ensure that the technology is seen as an improvement.
Professional and highly qualified Customs brokers are uniquely positioned to help with Customs modernization efforts due to their intersection between the public and private sectors, and their corresponding understanding of Customs’ responsibilities and processes, as well as the operational and supply chain issues affecting trade. We believe that this unique perspective is imperative for the success of any common Customs framework and modernization efforts.
Interested readers may obtain source references relating to this article directly from the author, Dana L. Lorenze.