Best Practices in Import Compliance and Customs Management
Best practice in Import Compliance is a topic that is well discussed. The issue of Customs Management is another issue.
There are several major best in class global players in the area of Trade Compliance – MIC, Amber Road, Integration Point, Tradebeam – along with the ERP modules of SAP, Oracle and Microsoft. There are others players that deal with import and/or export compliance specific to their local geographies. However there are very few trade compliance solutions that are able to fully manage and automate the last mile of trade compliance – which is the Customs entry process.
The area of Customs Management is not often written about in the popular supply chain journals. However, the ability to integrate and automate Import Compliance with Custom Management is now possible with the result that importers are able to achieve dramatic hard-dollar results along with the more typical soft benefits.
This blog is the first of a 4 part series that addresses how you can develop a Best Practices automated Import Compliance and Customs Management program. The series outlines how importers (of virtually any size) can take advantage of the new technologies to achieve best-in-class trade compliance and automated customs management and as a result dis-intermediate the costs that are associated with providing a best-in-class trade compliance and customs management environment.
- Part 1 – Introduction
- Part 2 – The state of Customs Management with Traditional Customs Brokers
- Part 3 – Best Practices in Import Compliance and Customs Management – redefined
- Part 4 – Conclusions
Part 1 – Introduction
Traditionally, the import process has been managed by freight forwarders and customs brokers. This relationship, between the importer, freight forwarder, customs broker and customs has been in place since the inception of the country. The need for the relationship grew out of the complex logistics requirements and documentation management and the relative specialization that is required to deal with international suppliers, carriers and customs. The Customs Broker has traditionally filled a critical function as an intermediary between the importer and customs. The Customs Broker provides services to facilitate the filing and remittance process and support a level of objectivity that may help insulate the importer from penalties or prosecution. However, the Customs Broker does not relieves them of the ultimate responsibility for the custom’s entry filing.
Aligning Control with Responsibility
Today, importers have the opportunity to take charge of the import process and align authority with responsibility. The reality is that the importer is responsible for insuring they are compliant with customs and other government agencies involved with the regulatory control of foreign produced products into the United States. The importer, not the customs broker is liable for the regulatory entries supporting imports. What the Customs Broker provides is expertise and an arms-length authority so that if there is an infraction with a filing, there is the appearance that “reasonable care” has been exercised and the resulting penalty will be minimized.
Import compliance and the customs filing process has historically been managed by full line Customs Brokerage firms. Where large companies manage the processes internally they are usually staffed by licensed customs brokers and lawyers who oversee and manage their compliance programs and filing process. However, even in these instances, most companies still use the external services that a full time Customs Broker offers. This is what has constituted “best practices” when it comes to import compliance and customs management.
Until recently the process of managing an import compliance program with a level of comfort was beyond the reach of most import organizations for several reasons.
The Mystique of Customs
Firstly, there is a mystique around the actual process of the customs relationship and the complexity of the filing process. This leads to the belief that the Customs Broker is necessary to navigate the relationship with Customs.
Secondly, importers mostly feel they don’t have the expertise to manage the classification, compliance and custom filing processes. The belief that classifying product is difficult to manage and maintain is one of the greatest concerns of the importer. The inability to easily maintain product tariff classification within a relational data structure means that the information is not readily available to the importer to support the customs compliance requirements from both an operational and filing support level. Because of the inability to easily manage the regulatory and tariff information, managing compliance processes is virtually impossible for the importer without the services of a full line customs broker.
Thirdly, the increase in regulatory requirements, from national security and product safety, adds complexity to the import process and makes managing the process appear significantly onerous.
Fourthly, there has been a lack of tools and systems to support the interfacing with customs. Without information systems to capture, maintain, and access regulatory information, across multiple regulatory agencies, related to a product, supplier or country, simply and within the context of operations, the management of information required to execute a customs import filing is daunting.
The result is that the importer relies on the traditional full-line customs broker to manage the relationship with customs including classifying products, filing entries, etc. The customs broker extends their services to support the importer in interfacing with the government and helping insure that they are operating in a way that will be deemed to be “reasonably careful” in the import processes and provide the importer with “cover” from penalties or legal proceedings.
It is in this light that traditional best practices for Import Compliance and Customs Management is framed.