Automated Customs Management

Control & Compliance: The Future of Customs Automation

Grant Sernick
July 10, 2024
min read
Control & Compliance: The Future of Customs AutomationControl & Compliance: The Future of Customs Automation

When we talk about automating the customs process, we are really talking about international shippers and beneficial cargo owners (BCOs) gaining control of their organizational customs process. The ability to control data and operational processes — and having the technology to support these two activities —  will result in control and compliance, which, in turn, will eliminate potential fines and ensure the timely final delivery of goods.

This article highlights key insights from a recent webinar, Revolutionize Your
Customs Process With Automation
, hosted by Grant Sernick, 3rdwave’s head of sales and marketing.

Be sure to visit our website to view the complete webinar and to contact us for more information.

Goals of Customs Compliance

It is the importer’s responsibility to ensure that information filed with the customs authority (Customs Border and Protection here in the U.S.) is done timely, correctly, and consistently every time a shipment is imported — and that’s what makes this task so complex.

To do this, a deep understanding of the regulations and the related data requirements is essential. So, too, is the ability to assign products to the appropriate harmonized tariff schedule (HTS) code. If not done correctly, importers may face delays and potential fines.

Challenges in Customs Compliance

To achieve compliance goals, all documentation needs to be accurate, complete, and readily available, especially if or when the customs authority or a partner government agency (PGA) comes knocking on the door and requests supporting documentation.

It’s highly likely a customs broker is used, on behalf of the importer, to submit information to the customs agency using information from the importer. If so, the importer needs to ensure the broker has done their work correctly and that what the customs agency has on file, accessible via the ACE portal in the US, for example, reflects what the importer expected its broker to file on its behalf.

By conducting regular audits, the importer can ensure the customs broker is accurately converting trade information into the language and format that the customs agency understands.

But audits can be tricky, particularly when the source of the data required for calculations needs to be converted to meet customs requirements. Trade data from a commercial invoice, for example, does not match up with a customs entry.

So, how do you convert trade data into customs language?

Indeed, it is tricky and is among the challenges facing importers. Other challenges include:

  • Identifying and controlling the data.
  • Controlling operational processes.
  • Having the technology backbone to support activities required for a customs operation.
  • Issues with managing large volumes of data and classifications.

Common Issues Faced by Importers

In addition to customs compliance challenges,  importers face a deluge of other daily operational challenges. Issues such as reconciliation programs or concerns about anti-dumping or countervailing duties might not be managed correctly, or a mistake may be made when filing a customs entry.

More than likely, importers’ spreadsheets are also creating daily headaches. Spreadsheets are often used to manage data needed for customs entries and are shared with various team members, including the customs broker who does the filing on behalf of the importer.

However, the more data there is, the bigger the spreadsheet becomes and the more difficult it is to share with team members. In addition, room for error increases as team members make additions to spreadsheets without notice or management control.

Key Categories of Compliance Challenges

Control is the name of the game, but as mentioned previously, challenges exist, such as centralizing and controlling HTS codes and related product data.

In addition, making sure customs entries are submitted correctly and on time may be a challenge if there is little to no communication with the customs broker.

Lastly, technology support is needed. Enterprise resource planning systems (ERP) are not designed to handle all the customs and trade data. An ERP touches the world when a purchase order is issued and generally doesn't touch the world again until a warehouse receipt is issued and consumed. Trade compliance exists between those two points.

So, different technology is needed to support the activities of international transportation compliance. Check out the various global trade management (GTM) systems available on the market, such as Oracle GTM or SHGTS. Depending on whether it is an Oracle or SAP system, these can be added to an ERP. Third-party GTM solutions are also available.

Role of Customs Brokers

The primary role of customs brokers is to submit customs entries to the customs agency. But what does that really entail? Well, before they can submit an entry, they have to do a series of conversions and calculations, such as merchandise processing fees (MPF), harbor maintenance fees (HMF), and other duties that have to be paid.

The problem is that the customs broker is doing all these calculations in a “black box”’ off-system, which creates uncertainty about whether the importer is paying the correct duties and taxes.

Not knowing whether it's right or not causes problems. It creates work. So, the importer must audit the customs broker’s work.

Audits create risk for the organization — the importer is probably not sufficiently auditing or auditing as much as needed, and he can't be certain that he’s selecting the entries that have errors.

There’s uncertainty and no visibility into the process of how the entry is made to understand, from a timing perspective, if things are being done on time.

Delays create costs for organizations.

Benefits of Automating Customs

Automation helps create controlled processes, controlled data, and controlled documents. It also reduces the workload, allowing for training and more time to work with stakeholders.

Automation offers organizations a validated data set that could potentially eliminate the need for a customs broker or at least provide a reliable data set for the broker to use to submit customs entries.

More importantly, this validated data set provides an organization with the most complete view of its supply chain, a better understanding of what’s going on, and helps reduce potential risks.

It’s Time to Take Control: Automate Your Customs Process

Controlling the customs process is key to mitigating potential delivery delays and lowering costs. However, voluminous data, complex operational processes, and insufficient technology are challenges surrounding the successful support of these two activities.

3rdwave has spent the past 30 years developing its robust Shipment Execution Platform™ to solve those challenges. Automating the customs process helps importers gain control, but the ability to continuously improve compliance operations is equally important.

For more detailed insights, be sure to check out 3rdwave’s webinar, Revolutionize Your
Customs Process With Automation

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