Diffusing the storm of global compliance

Diffusing the storm of global compliance

With the constantly changing global customs compliance landscape, is there an easier way for companies to manage cross-border trade? Ritu Rooney, Global Product Manager Freight Forwarding, Kewill, a leading provider of solutions that simplify global trade and logistics, says the management of global customs integration shouldn’t be a minefield.

Any business that trades across borders and deals with customs authorities faces a mounting barrage of compliance requirements that are continually changing. With all the regulations and legislation, it is fair to say that the management of global customs integration is becoming

more and more complex.


There are a number of obstacles for companies importing and exporting. For example, different countries have different systems, and the ports within each country have different data requirements and standards, and they all use a range of technologies.


Additionally, companies need to have an extensive knowledge of the requirements of each port that they operate in, to ensure that they keep up to date with compliance. All local customs authorities implement changes regularly throughout the year, and detailed local knowledge is required to stay on top of these changes.


It’s even worse for companies that don’t adhere to compliance regulations; fines differ by each country or port they are shipping to or from, and there are also EU fines. In addition to the financial penalties, companies run the risk of shipments being held up if customs procedures aren’t complied with, with the potentially greater cost in terms of disruption to production schedules, and the failure to stick to Service Level Agreements.


Companies also need to consider that developments in security requirements are forcing even more compliance legislation onto the supply chain.

Supply chain security is a huge issue that continues to dominate news headlines. The threat of global terrorism is still a major security risk,

and Europe is swiftly catching up with the US, where the ISF standards have been implemented to protect the US from high-risk inbound shipments. ISF (Importer Security Filing), also known as 10+2, has been in practice since early 2009. It is the standard where all importers in the United States must notify US Customs and Border Protection of any ocean freight coming into the US, so that the Department of Homeland

Security has advanced visibility of all foreign imports shipped by ocean freight, prior to the shipments leaving their Port of Lading.


Legislation introduced to counter the security threat includes ICS (Import Control System), which became mandatory for all shipments into EU customs territory at the start of 2011. ICS is a mandatory electronic Customs procedure, designed to improve security by providing advance visibility of shipments into Europe. It replaces an existing paper-based process and requires detailed information on goods to be submitted electronically, prior to arrival within the European Community, in order to facilitate near real-time risk analysis by local Customs authorities.

Fighting security threats also means that you are waging a war of attrition, as terrorists are constantly looking for new ways to attack.


The risks are constantly changing, and regulations and processes have to evolve constantly to keep up with these threats. The authorities have put various measures in place designed to help increase supply chain security, with many more electronic custom changes coming in over the next five years, including harmonised customs codes, an internationally standardised system of names and numbers for classifying traded products. But whilst these measures are vital for security, it also means that freight operators face an increase in compliance procedures and increased risks to their own supply chains.


But it doesn’t have to be such a bleak picture. There are a number of options available to companies to make this process easier. One option

is to outsource customs compliance to experts, easing the burden and making the whole process both efficient and cost effective. Alternatively, the completion of electronic submissions from the operating system can be automated, which will help avoid duplication.


And companies can take a number of steps to protect themselves against security risks. Firstly, by complying with security legislation including ICS, and introducing paperwork-led controls acting as an audit of goods under shipment (and avoiding non-compliant goods arriving in the EC community for sea freight). Also, by implementing practical measures (which are often already in place), such as cargo scanning and use of approved carrier lists, which may be more stringent depending on carriers/countries traded with (some carriers insist on more stringent procedures). Another option is to use a solution that provides regulatory compliance screening for denied/restricted parties, export licence determination, and embargoed/sanctioned countries, which can identify issues prior to accepting an order for a shipment.


The technology now available enables customs data to be transmitted from the export country, and routed to experts in the local country of destination. This minimises the internal need for local knowledge and allows companies to benefit from economies of scale.


For example, ICS data can be transmitted and received cost effectively through specialised hosted services which take over the burden of customs compliance, leaving businesses to focus on their core competencies. It’s important to remember that the issue of compliance isn’t going to go away. In fact, over the next five years, the level of legislation will increase. ICS is the first phase of a number of electronic customs and regulatory initiatives, and the fines and sanctions for non-compliance are set to become much larger.


It also seems unfair that despite a big push towards global electronic customs, the EU has not enforced consistent standards amongst member states. This means the burden of compliance still remains with companies shipping to and from each individual country. Without consistent systems and standards, each change will continue to be expensive and difficult to implement.


Even though we are trading in a challenging economic climate, opportunities do exist for growth, but in order to do this, it is imperative that export businesses keep pace with the fast-changing international legislation and increasing amount of export documentations rules

and formats.