Customs management digitisation pays off
Following the release of a new study into the digitisation of customs processes, Iqubal Pannu, Senior Solutions Consultant, AEB (International) Ltd., examines some of its key findings.
The digitisation of business processes and supply chains is one of the most dominant trends in the global business community. In the not-so-distant future, every organisational unit will experience the transformational change of innovative information technologies and the business models they enable.
This includes enterprise customs management, which has a tangible impact on cross-border supply chains. By their nature, customs processing and customs management make excellent candidates for digitisation: They include legally prescribed procedures and work with encoded information based in part on a global standard (HS - Harmonised System).
So, will customs management become the vanguard of the digital wave? What is the current status in businesses and what are the perspectives for the coming years? How do businesses work with service providers in the area of customs and what is the impact of digitisation here?
Answers can be found in this year’s global trade management study by DHBW Stuttgart University in Germany, which investigates how innovative IT is changing the way businesses manage their customs processes and collaborate with service providers.
The role of customs in digitisation
While customs operations are not the primary focus of businesses’ digitisation plans, the study shows that they do play an important role. A full 33% of respondents report that customs digitisation is a high priority for their company, while for 40% it has medium priority.
These figures are even higher among management-level respondents, due in part to the 'Trump effect', which has unleashed a broad-based public debate on the issue of tariffs. Participants in the study identify export management and export controls as the two most important areas for digitisation.
Over 35% of respondents report that their company has already implemented at least one project to digitise customs operations. Nearly the same percentage already has such a project in the planning or implementation phase. Just under 30% have not yet had any experience at all with digitisation projects – a rather high number in the 'digital age'.
Based on these generally positive survey responses, one may assume that customs departments across businesses are replete with digitisation experts. That would be a mistake, however. In measuring the progress that participating companies have made toward digitisation, the study ranks only 11% as experts, though another 33% were classified as advanced. Most of the companies, however, have yet to begin.
Key effects and business benefits
Based on these latest survey responses, companies consider the centralisation of customs management a key effect of digitisation. In fact, most companies are already turning to centralised customs management, although larger enterprises in particular often pursue a hybrid strategy, with a centralised customs department and decentralised operating units.
They also expect digitisation to deliver on centralised archiving requirements as part of this and, in addition, expect to benefit from better visibility of decentralised transactions. Improved overall communication with customs authorities is another expected benefit.
Impacts on staffing
Due to an overall shortage of qualified customs experts – a situation which certainly is amplified by Brexit developments and raging trade wars – only 6% of companies actually plan to cut staff numbers in their customs departments in the next three years.
One of the expected benefits of digitising customs management is to manage workload requirements with existing staff, rather than actually downsize.
Digitisation obstacles
When asked what stands in the way of customs digitisation, survey respondents cite a lack of expertise and financial resources, but also a lack of support from their own management. It seems that the customs department, in competing for scarce resources against other areas of the business, such as sales or production, does not always have the best cards, at least from its own perspective.
In-house handling or outsourcing
Nearly three-fourths of respondents report that their companies communicate directly with the customs authorities and submit their customs declarations on their own. The main reasons for this are that in-house customs management is faster, cheaper and more efficient.
The remaining 27% prefer to work with customs service providers. Most consider their partnership with customs service providers as satisfactory, while only 11% are unhappy with their arrangement. However, over 60% complain of a lack of IT integration with their providers.
Some 63% communicate with their providers by email or phone, and only 26% have set up an interface to the provider’s IT system – an obvious opportunity for digitisation. The same applies to the monitoring and control of providers: Only 43% of respondents perform audits or spot checks. Over 25% don’t monitor their customs service providers at all. Given the legal responsibility of companies as the declarant, this situation is not tenable.
Impulses and takeaways
For many UK companies that currently only trade with the EU, customs management is a completely new topic. In case of a hard Brexit, these companies would face customs procedures for the very first time. Also, the overall volumes for import and export declarations, as well as the number of customs broker engagements, are expected to skyrocket after Brexit, which will also impact seasoned exporters.
So, it is key to establish solid foundations for customs management to ensure supply chain efficiency across UK borders. In the digital age and in the fast-changing environment of global trade, such foundations should be built on flexible technology that supports businesses in quickly adapting to market changes. And which way to go – self-management or broker collaboration – depends on a company’s business strategy.
Yet IT system integration – both internally with the own ERP and other relevant systems, as well as externally with customs brokers and customs authorities – is crucial in both scenarios and a key take-away for today. It increases efficiency, delivers better risk mitigation, and generates transactional savings for a business.
Also, with the ongoing spotlight on current global trade developments, be it the Trump-effect or Brexit, customs management is certainly a hot candidate for moving up on the digitisation agenda of businesses today.