Prepare for complexity

MM&D MAGAZINE, SEPTEMBER-OCTOBER 2010: As anticipated, electronic Customs filing mandates are proliferating throughout the world. Like the U.S. and Canadian federal governments, the European Union (EU) has introduced regulations to standardize and automate its Customs filing process. With the EU continuing to be the world’s most important exporter and the second most important importer (according to an October 2008 report from the European Commission), its move to address the security and automation of trade shipments through electronic Customs initiatives will ripple across the global supply chain.

While the EU’s Import Control System (ICS) and Export Control System (ECS) processes and requirements to file Customs manifests are expected to be comparable to initiatives in the US and Canada, there are additional complexities to consider. Most notably, the EU is made up of 27 countries operating in many languages. For trade participants to ensure the continuity of goods when the regulations come into effect, they will need to handle the specifications for 27 countries.

ICS legislation on inbound cargo will come into effect on December 31, 2010 as part of the European Commission’s Multi Annual Strategic Plan. Since the Import Control System will have an impact on all inbound shipments into the EU from non-EU countries of despatch; this will present a number of process change requirements for Canadian exporters and carriers.

By way of explanation, ICS requirements mandate carriers bringing shipments from non-EU destinations into the EU to lodge Entry Summary Declaration (ENS) information with the Customs office of the first EU port of entry. Filing the ENS will allow Customs authorities to perform risk assessment before the arrival of the cargo. The responsibility for lodging the ENS lies with the carrier, although this can be performed by a designated third party under the carrier’s direction.

The intent of ENS is to transition Customs from a post-clearance process to a pre-arrival model. As part of this, the European Commission has defined time limits for ENS compliance depending on the mode of transport. For example, for deep sea container shipments, the ENS must be filed 24 hours before loading  the container at the port of departure. For long-haul flights, pre-filing should take place at least four hours before arrival at the first EU airport.

Not only will this new EU requirement have a significant effect on existing business processes for exporters and carriers, but failing to comply with ICS requirements will lead to delays, rejection of the cargo upon receipt in the EU and in some cases, penalties set by individual EU member states. This is very much in line with compliance enforcement policies in the US, China and Canada.

To prevent delays at the EU border upon arrival, it is important that complete and accurate information be provided about the shipment in a timely manner to comply with stipulated ENS timelines. Collecting, re-using and sharing information electronically throughout the supply chain will become increasingly more important to streamline this new process and comply with the new EU legislation.

To ensure compliance, carriers must be ready to provide the following ENS information:

• The unique consignment reference, container numbers, seal numbers, goods description,  shipping marks and commodity codes;

• The names of the consignor, consignee, carrier, person filing or lodging the ENS;

• Identification of the consignee and AEO (Authorized Economic Operator) status; and

• Route details into, across and out of the EU per transaction.

This information is used by EU Customs authorities to conduct a risk assessment of the transaction based on pre-established criteria, including commodity, point of origin and trading partners, among others.

A critical challenge faced by carriers is having access to accurate data on a timely basis. In many cases, they only have partial data, and rely on importers, exporters and freight forwarders to supply the missing pieces such as AEO status, commodity and dangerous goods codes, consignors, contents, methods of payment, etc. The complexity of the information required, combined with the fact that each EU country uses different data formats, business logic, communication protocols and certification processes, will make it extremely challenging for exporters to meet ICS requirements in a timely and efficient manner.

To collect and transmit the data efficiently and accurately, carriers will require access to sophisticated technology solutions that address all member state requirements and can easily convert and distribute master data in any required format, regardless of the member state. This will ensure all filing and compliance requirements are met prior to distributing the ENS.

With ICS deadlines looming, exporters need to ensure that their carriers have the resources in place to support their compliance efforts, and minimize the risk of errors, delays and penalties. This need will only continue to grow as more legislation is introduced in the interests of improving global supply chain security.

Stefan Busselot is product manager for ICS at Descartes Systems Group.