The not-so-easy role of customs services is to maintain a balance between the facilitation of trade and the enforcement of laws and regulations. This harmony is necessary to ensure that goods can flow between countries while also making sure that the right duties are being paid and nothing illegal or illicit is moved. Ideally, both this enablement and enforcement must be continuously improved – but how? The answer lies within data.
What is the status of customs currently?
Today, there is no global standard when it comes to customs. It is fair to say that it is on every country's agenda to facilitate trade, but each is following different customs legislations. Back in 2009, the European Commission initiated the Multi-Annual Strategic Plan for Electronic Customs (MASP-C), to replace paper-based customs and facilitate the digitalisation of these processes by 2025. Despite this, within the EU customs are handled using a plethora of different codes , requirements and the reporting obligations. Each national administration supplements the pan-European legislation with country-specific requirements based on the characteristics of their imports/exports. Essentially, with rules and requirements still being so fragmented, the current customs ecosystem remains difficult to navigate and manage. On top of this, when looking into customs services, the digital readiness varies as well from country to country, with some being extremely mature in their use of data, and some where the availability of data is not rich, and the processes are still paper based. An example of this can be a country where customs brokers are still driving around town to carry documents from one government office (where it gets a stamp) to the next (for another stamp) to then send these via courier to the port to get stamped again, etc. In this scenario, if things don’t go well, sometimes along the way a document can get lost and then everything else gets delayed. This reality has become even more difficult during COVID-19, as suddenly human interaction was no longer possible, putting quite a lot of stress on administrative processes carried this way. In 2017, the Trade Facilitation Agreement (TFA), had all signing countries agreeing to the use of electronic copies of customs documents, but this didn’t yet completely found its place into practice.
Today, somehow there's still the belief that paper documents are more trustworthy than a digital document. But, in reality, the truth is quite the opposite, as digital documents - once the proper signing and encryption is applied - are more trustworthy, safe, and have greater longevity than paper-based documents.
As we all get used to having and storing our data online, slowly but surely, the mindset is changing.
What are digital customs?
According to the Merriam Webster dictionary the word customs typically define “duties, tolls, or imposts imposed by the sovereign law of a country on imports or exports”. The digitization of customs implies using software programs to gather, organise and manage customs duties, documents, and data to support the flow of goods within trade. Just a few days ago, at this year’s Technology Conference and Exhibition of the World Customs Organisation the importance in promoting the application of science, technology, and digital transformation within the customs sector was reiterated. But how can businesses apply this in a way that is easy and low in cost?
What does digitizing customs means? How does it work?
The key to digitising customs doesn’t lie just in the format (turning paper into something digital) but rather in having the data available in a structured way. It comes down to three key aspects: digital interoperability, reliable workflows, and actionable data. When clearing customs, businesses are required to provide supporting documents like commercial invoices and packing lists. These documents might be submitted in a PDF format, so – in theory already “in digital form”, but often they can be a picture taken of a paper document or, even if properly typed, the data on this document is not usable because it's unstructured. “Electronic documentation, automated clearance processes, and harmonized international standards all help facilitate the flow of goods across borders while ensuring their legitimacy” writes TechHQ. Because of the global lack of a unified cloud solution, the key to the digitalisation of custom services is to better organise the data so that it can populate correctly the custom systems, using smart digital solutions that are good at transforming, harmonising, and translating the data.
What are the benefits of digitalising customs?
If well managed, benefits of custom compliance can include better risk control, logistic efficiency as well as growth. Given this, what are then the benefits of digitalising customs?
- Speed: Instead of waiting for a vessel to arrive and then assess the containers that are on it, an organised and structure flow where information is being provided earlier to customs in a digital way, can help speeding up the process. This can also help if certain data is missing or if additional questions from customs arise, so that all missing/wrong data can be fixed in a timely manner without delaying the release of the container.
- Efficiency: Businesses use the same data for several documents: a bill of lading, a commercial invoice, a packing list, etc. Digitalising customs can help a brand to move from unstructured data to structured data. It allows to reuse key information instead of having to manually insert them over and over in many different papers across the supply chain. Allowing data to be processed easily, by connecting systems with each other.
- Better risk management and cost saving: Unnecessary inspections result in cost and in great delays. With digital customs there is the opportunity to give customs earlier access to more data so as to enable a more accurate risk management. This can reduce the number of ‘false positives’ and thereby reduce costs and delays.
- Accuracy: Digitalising customs gives better uniformity of data, saving from errors and discrepancies. For example, if some documents carry by mistake a different weight value for a cargo item, or if they describe a commodity in a slightly different way, businesses are at risk of sending documents to customs with data discrepancies, resulting in inspections, delays, or costly fines.
- Enhanced control: Actionable data provides a holistic, end-to-end view of the supply chain. This gives unprecedented control and enables businesses to take data-driven, real-time decisions that open new possibilities for growth.
How can businesses make the change and adapt to digital customs?
If handling their custom formality by themselves, businesses can digitalise their customs processes by implementing the latest software programs to facilitate the harmonisation and management of their documents and customs data.
Alternatively, businesses can also request the help of a logistics provider that is experienced in the digitalisation of customs. A provider can handle a business’ ocean transport, or lead logistics, and the same data can be used in other parts of the process for customs declarations, freight charges, etc. Logistics providers can help by supporting with core custom services, such as import declarations, export declarations, transit declarations - taking care of the entire customs process. On top of that, providers can also offer customs consulting services, using their operational expertise, helping businesses with covering declarations, coming up with duty optimization, making sure a business is taking full advantage of available free trade agreements, improving your duty paybacks and more. Lastly, providers can also help a business with updating their data systems to empower them towards the digitalisation of their customs.
Better management of customs, including the digitalisation of data for customs services, is an opportunity that can benefit both businesses as well as customs authorities. “The world of customs is very complex with a lot of bureaucratic hurdles, but its digitalisation can provide new solutions that simplify the way we handle customs formalities, so that companies can focus on their core business activities instead”- states Nicolas Buhmann, Head of Digital & SaaS, Maersk Customs Services. Overall, digitalising customs can revolutionise a business, reduce the administrative burdens, combat the growing customs complexities and boost the way businesses can use their customs data, in a more organised manner.