Thursday 19th Jul, 2018

INDUSTRY OPINION: Trade Facilitation versus security in a world of increasing e-commerce freight

Image: Shutterstock
Image: Shutterstock

THE world trade community gathered in Melbourne, Australia for the Global Shippers Forum organised by Freight and Trade Alliance, ICHCA and the Australian Peak Shippers Association.  Presenters included representatives from the United Nations, the World Bank, the Australian Border Force, the US Maritime Commission and the World Bank. A theme of the first day was the tension between trade facilitation and security concerns.  Two factors having an impact in this regard are the increased use of technology (positive impact) and the growth in e-commerce (negative factor).

Below we discuss some highlights from day one.

World Customs Organisation
The World Customs Organisation focused its presentation on trade facilitation.  It emphasised that the benefits of AEO programs need to extend beyond customs facilitation.  There needs to be benefits offered by other Government agencies. This is strongly felt in the Australian context with traders dreaming of a program under which they can enjoy both customs and quarantine benefits.

Another interesting concept raised by the WCO was the development of an international trader identification number.  This would be a globally adopted format which would enable customs administrations across the world to recognise trusted traders. In our view, under this system it is possible to see trusted traders in one country getting a lighter touch in another country even without mutual recognition agreements. However, such a system carries the risk that non-compliant traders may piggy back on the identification number of a trusted trader.

The WCO did highlight the risks posed by ecommerce freight.  One major problem is that there is often not a trade professional, such as a customs broker, involved in the supply chain. This means there may be no verification of information submitted to customs administrations. Due to the large volume of individual packages, it is easy to see why customs administrations are overwhelmed.  There is not a revenue justification to review ecommerce parcels – it only makes sense from a security perspective.  However, any intervention will result in extra time and cost in the supply chain.

The WCO was very cognisant of this recognising customs administrators do not want to be seen as unnecessary barrier to trade. At the same time, the WCO felt it’s not a chicken or egg question, you only can have economically successful trade if that trade is secure. Through ensuring safety, you create a framework where trade can grow the economy.

The Australian Border Force
The ABF also noted the demands placed on it by increasing volume of air cargo.  The ABF felt this risk needed to be dealt with by new border processes.  In this respect the ABF saw better data as being the key to better identifying risk.  Ways that the ABF can obtain greater modernisation and obtain better data include the Australian Trusted Trader (ATT) Program and the development of a single window.

In respect of the ATT the ABF noted that $50bn and nearly 10% of Australian two way trade now involves a trusted trader. In the 2018/19 budget it was suggested the trusted trader would receive certificate of origin benefits.  If this occurs, expect the $50bn figure to increase.

Funding for further study in a single window was also announced in the budget.  The ABF noted a single window will be developed in conjunction with private business.  The private sector will run the single window with the Government of course having access to the information.  With private sector involvement, the challenge will be ensuring that the fees charged y the private sector, do not outweigh the benefits.

WiseTech Global
Richard White of WiseTech Global provided a wide ranging presentation of the future interaction between technology and logistics.  WiseTech warned there are legacy IT systems in supply chains that simply will be unable to handle the growth in ecommerce freight.  The numbers are simply too high.  In this respect it seems extraordinary the Integrated Cargo System (the Australian Customs IT interface) is over 10 years old and has not been significantly upgraded. This underinvestment in technology infrastructure needs to be urgently addressed.  We share this concern and fear the extent to which the ICS will represent a barrier to trade efficiency and growth in the timeframe it takes to develop a single window.

Mr White explained in an ideal world a single window is not a one way process.  While it will have the role of avoiding duplication of information submitted by traders, it should also have the role of consolidating information the government would like to provide to the trader.  Rather than the trader having to first identify the regulatory issues may apply and then search for the information, under an ideal single window, when the trader provides information about the transaction the single window would identify any government regulations relevant to the transaction.  This would greatly increase informed compliance.  We commonly see non-compliance that is inadvertent and would have been avoided had the trader known of the issue.

Hunt & Hunt – Trade Facilitation and the role of the Customs Broker
Hunt & Hunt presented on how, at least in Australia, customs brokers are the unrecognised key to greater trade facilitation.  The ABF in its review into the licensing of customs brokers stated the ABF relies on licensed customs brokers to perform the role of ensuring the correct revenue is paid on imported goods and security issues are identified.  The ABF acknowledged in that report that it did not have the resources to review all goods for revenue and security issues.

It is not a ground breaking statement to recognise customs brokers as de facto regulators. However, we argued this role is not being properly recognised by either the ABF, clients or customs brokers.  Full recognition of this role would include the following:

  • It being recognised that customs brokers owe conflicting duties to the ABF and their clients;
  • That the ABF should provide customs brokers with better intelligence around potential risks. Data should not be withheld in an attempt to try catch non-compliance – rather, intelligence should be shared with customs broker to try prevent non-compliance or have it detected earlier;
  • clients and customs brokers need to see the value of the customs broker in not just duty saved but also in having a fast and predictable supply chain where the trader is not paying penalties and incurring high costs of Government audits. This takes a multi-year view and not a per consignment view.

Global trade and logistics is in a state of rapid change and events like the Global Shippers Forum are critical to managing the impact of that change on your business.

* Russell Wiese is a principal at Hunt & Hunt Lawyers

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