Customs and IT are best integrated
Digitalisation of customs processes and the strategy of the customs department
Overseeing the digitalisation of business processes is a particularly great challenge for executives responsible for customs and foreign trade – in addition to those presented by trade wars, Brexit and sanctions, which can change on a daily basis. The influence of digitalisation on production, purchasing, distribution and logistical processes relating to customs and foreign trade law demands serious change. At the same time, digitalisation offers the chance to develop efficient and future-proof solutions.
Identify the potential of digitalisation and automation
The first step (in itself a great challenge) of digitalisation is to identify its potential for the company, decide on the approach to adopt, set priorities and plan the project accordingly. The responsibility for implementing the processes relating to customs and foreign trade usually lies with the department for customs and export controls which will cooperate with other areas of the company in this respect (especially IT and logistics). Besides sufficient financing, the other essential prerequisite for the project is an integrated, bespoke organisation.
A lack of staff may present a further hurdle, especially in the areas of customs, foreign trade and information technology. However, it is even more difficult to find staff skilled in these areas and project management. This is a common problem for companies, especially if such staff are only required on a short-term basis. For this reason, some consultancy firms have created integrated, specialised teams for this purpose.
Optimise your processes
Having organised your project, you will be able to pursue your own strategic aims and configure your processes more effectively. Taking the external aspect first (i.e. the interaction with the authorities and customs representatives), you can achieve a quick win by setting up an automated interface to transmit data relating to customs declarations from the company’s ERP systems (as declarant) to the customs clearance service provider (customs representative). In order for companies to submit customs declarations using their own software, you will have to create interfaces for transmitting relevant data from the ERP system to the customs software. This approach will ensure that companies have control over data and processes regarding their customs-related transactions and enable them to achieve significant efficiency gains and cost advantages quickly.
Combine your digitalisation and customs strategy
Free trade agreements may provide a number of options for your company’s digitalisation and automation strategies. Preferential arrangements under free trade agreements are becoming increasingly important for companies entering new markets, both strategically and financially. Subject to the conditions of such agreements, companies can expect reduced customs duties when importing goods with preferential origin. Producers and exporters can usually satisfy rules of origin by proving the products in question have acquired origin by means of a sufficient working or processing of the input materials in the contracting states.
Before entering the market or launching the product, companies should therefore ensure that the product in question satisfies the requirements of preferential origin on importation to the relevant market and whether they can prove this in terms of substantive and formal law. The required proof is provided by the bill of materials administered by ERP systems which largely refers to the preferential origin of the input materials as well as cost and pricing elements specific to the product in question. When re-calculating a product, this analysis is carried out during the process of awarding the contract for input materials. The Purchasing, Customs, Product Development and Distribution departments then determine what originating materials are needed within the area covered by the agreement to ensure that proof of sufficient working and processing is available from the start of production, thereby guaranteeing the related customs benefits. In this respect, it is important to have integrated processes since this is only way of ensuring all the departments involved in planning coordinate and make decisions together. For example, it is necessary to summarise the purchasing data in ERP systems relevant to the award of contracts (e.g. identifying the suppliers of originating materials).
During the distribution of a product, secure IT tools should be used to continuously monitor compliance with origin requirements, re-calculate preferential origin and track the proof of origin of input materials (i.e. supplier’s declarations). Using such tools may prevent civil claims by customers if the proof of preferential origin turns out to be incorrect.
In the short to mid-term, companies must digitalise and automate their process architecture to the fullest extent possible whilst complying with the legal requirements of customs and foreign trade. This architecture can help companies leverage untapped efficiency gains and cost-savings when planning relevant operations. However, this will only be possible if companies use integrated customs and IT teams in their company or those provided by consultancy services for a specific project.