Customs management trends

Customs: Central control, local control, out of control?

As the pace of internationalization ramps up, many companies are plagued by doubt when it comes to the right strategy for international customs management. What's the best way?

Everything is actually humming along quite well. Your parent company in Germany has a well-organized customs department. The Head of Customs and her team at corporate headquarters are acknowledged experts in their field. The foreign subsidiaries are managing their own customs processes quite well – or so you assume. At least you haven’t noticed any hiccups in their performance. And the customs brokers that the company uses are paid good money and hopefully do good work.

So everything is under control … right?

But, what issues are better managed centrally? When is it more expedient to rely on a local expert? All too often, companies lack an enterprise-wide master plan for organizing their customs. That is a missed opportunity, because customs management is also an intercompany issue: The aim is to optimize how the corporate group is organized internationally. The lack of a larger strategy tends to produce the following problems:

  • The customs departments of the parent company and subsidiaries act autonomously and are not on the same page, making a coordinated, unified customs strategy impossible.
  • The parent company cannot see the customs activities of its subsidiaries, leading to unnecessary redundancies.
  • There is no clear delineation of centralized vs. decentralized and strategic vs. operational responsibilities, which often leads to ambiguous reporting and uncertainties in operations.
  • There is no structure or culture of communications, so problems might be overlooked until they come to light during a customs audit.

The limits of centralized control

In the worst-case scenario, fragmenting your customs organization into relatively autonomous local entities leads to a lack of transparency, non-uniform processes and standards – and ultimately, inefficiency. This situation is exacerbated by the kind of system environment found in many businesses. Companies that have grown through acquisitions are most likely to have a hodge-podge of customs IT systems. But migrating to one unified solution is no trivial matter, since the customs authorities in the various countries work with different IT systems. Germany has its ATLAS system, the Netherlands uses AGS, in Belgium it’s PLDA – and so on. So given the wide variety of customs IT solutions out there, it’s not surprising that international corporations have limited visibility of their overall customs activities, even when all the players are cooperating.

Brokers: beyond control

The problems intensify if you work with different brokers from country to country. This is what it often looks like on the ground: The worker uses e-mail or a proprietary EDI connection to transmit the data needed for an export declaration, for example. The broker’s staff then diligently inputs the data from the e-mail into an IT system. If there are no questions, the export declaration can be generated. This manual input by the broker is reflected in the costs, of course. The price models of customs brokers show a cost differential of up to 50 percent between the standard transmission of data by e-mail and an integrated solution.

Integrating the broker’s system back into your own IT system is even more fraught with difficulty. The export accompanying documents and endorsements of exit are often sent by e-mail. Other documents arrive by mail or courier. This leads to data silos – or worse, paper archives – at the various locations. The Head of Customs back at corporate headquarters has a devil of a time getting the big picture and doing her job effectively.

Solutions

It’s hard to know what to do. Lean too heavily toward decentralized solutions and you run the risk of precluding a unified customs strategy and becoming enslaved by a jumble of processes running in parallel. But centralizing too heavily may mean losing the important contact to the national customs authorities. In practice, a middle path has proven effective: The nitty-gritty is handled at the local level, where the local idiosyncrasies are best understood, while issues such as AEO status, security protocols, authorizations, customs audits, and analyses are managed centrally.

To address these issues in the best possible way, customs-related data should be available on one centralized platform wherever possible. Data silos spread across various countries or held by brokers must be consolidated. This requires an IT solution that works seamlessly in both directions. Establishing a direct electronic link from the importing or exporting company to the customs office or at least to the broker is primarily about efficiency. Integrating the customs system of the customs authorities or broker back into your ERP system is also about transparency, process management, and analytical capability.

And what if you don’t know where to find such a platform? A platform that links to the systems of the customs authorities and customs brokers alike, integrates your own ERP system, can be used internationally, and automates the routine operations of your customs department? Then take a peek at this website: ICI (International Customs Integration) from AEB helps you organize your customs for the world of tomorrow.