CAIE Report
What are your Customs Strategies?
Over the last couple of decades modes of transportation and logistics strategies for getting goods from origin to destination have vastly improved. New markets around the world have opened up and goods are literally now being sourced from around the globe. Companies have subsequently profited and ultimately the end customer has benefited as well. Through the use of advanced technologies greater efficiencies have been gained in the movement and tracking of goods. One area, however, that has historically received little attention in the overall scheme of supply chain strategy has been customs. The integration of customs in the overall supply chain has never been more important than it is today.
The terrorist attacks of last September have not simply faded to the back pages of history books. There still remains a grave concern by governments that a company’s supply chain could be used for a terrorist’s purposes. Therefore, Customs authorities in Canada, the United States and elsewhere around the world are tightening the controls over what crosses its borders. As Canadian companies continue to source their goods from more and more countries abroad the need for a company to have a well planned in-house customs strategy is critical to its success in this new world of international trade.
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In a previous article I had highlighted the direction that the Canada Customs and Revenue Agency (CCRA) was taking. This direction was towards an environment where Customs data would have to be provided to the CCRA electronically on a pre-arrival basis. Depending upon the mode of transportation, the goods would have to be reported for admissibility to Canada from a couple hours prior to arrival to a couple of days prior to arrival of the goods. Whether this new requirement will or will not be an issue to a Canadian importer will depend upon a number of factors and some of the key factors will be who your supplier is, where they are located and whether their processes meet the new CCRA requirements.
In Canada, the CCRA has had a Partners in Protection program for a number of years now. This program had been created to curb illicit trade and had received the buy-in and support of a number of commercial carriers. Whether this program now gets modified to more closely resemble the U.S. Customs Trade Partnership Against Terrorism (C-TPAT) program remains to be seen. Why the concern? Well, under the U.S. C-TPAT program an importer in effect agrees to having their supplier comply with the security requirements laid out in this program. It may be a challenge for large multinational corporations to place these new security demands on their offshore suppliers but it may be an almost insurmountable challenge for some smaller and mid-sized Canadian companies to exact those kinds of requirements of their offshore suppliers.
Whether your offshore suppliers can provide customs data to you electronically will be one question but whether your international suppliers are willing and able to meet CCRA’s new requirements in order for you to be able to demonstrate to the CCRA that you are a good corporate citizen and that your goods are secure will be a totally different question. Effective integration of a company’s supply chain partners has historically always been problematic and a challenge but this new world of increased security will start putting demands upon your international suppliers which they will not likely be able to meet.
The larger the number of international suppliers a company has, the greater responsibility it will have as it imports goods from these companies. The factors for consideration will now not only be whether the supplier can produce quality, low-cost goods that can be delivered when and where you need them, provide the customs data in the format required. They will also need to, in effect, “guarantee” that everything that is involved in their sourcing, manufacturing and shipping operation is secure. If you are sourcing materials from lesser-developed countries some of these new Customs requirements will be next to impossible to meet.
The challenges moving forward will be greater for companies involved in international trade. These new Customs security initiatives will take some time to be fully implemented. They will start off as being programs those companies can voluntarily participate in. However, moving forward, the expectation is that voluntary Customs programs will to a certain extent become mandatory programs. What can the Canadian company that is sourcing abroad expect? Well, the most obvious is higher cost, from each partner in the supply chain, which will be added to the end cost of the imported products. Furthermore, if a Canadian company is exporting any of their products to the United States, they will be required to meet the new security requirements as laid out in the U. S. Customs C-TPAT program if their U. S. customers are C-TPAT participants.
Although international trade has created tremendous opportunities for Canadian companies, these opportunities will only be able to remain as opportunities and not hindrances if a company has been able to incorporate an adequate customs strategy into their supply chain process. If you move goods across borders, having a customs strategy will no longer be optional but will be a critical component of whether your business will succeed or fail.